Oxley, Ranking Member Frank, Distinguished Members of the Committee:
you for the invitation to join you this morning. I am honored
to outline the Fiscal Year (FY) 2004 Budget proposed by President
Bush for the U.S. Department of Housing and Urban Development
has achieved measurable success since 2001 in carrying out its
mission and meeting the many challenges confronting a Cabinet-level
Department. Today, HUD annually subsidizes housing costs for approximately
4.5 million low-income households through rental assistance, grants,
and loans. It helps revitalize over 4,000 localities through community
development programs. The Department provides housing and services
to help homeless families and individuals become self-sufficient.
HUD also encourages homeownership by providing mortgage insurance
for more than 6 million homeowners, many of whom would not otherwise
qualify for loans.
by HUD's proposed $31.3 billion FY 2004 budget, this important
work will continue. Housing remains a critical component of both
the President's plan to promote economic growth and his focus
on meeting the common challenges faced by Americans and their
President does not intend to change his 2004 Budget based on the
program or agency levels included in the 2003 Omnibus bill the
Congress adopted in mid-February. The President's 2004 Budget
was developed within a framework that set a proposed total for
discretionary spending in 2004, and each agency and program request
reflected the Administration's relative priority for that operation
within that total. While we recognize that Congress may believe
there is a need to reorder and adjust some of these priorities,
the Administration intends to work with Congress to stay within
the 2004 overall amount.
HUD's proposed budget offers new opportunities for families and
individuals - and minorities in particular - seeking the American
Dream of homeownership.
offers new opportunities for renters by expanding access to affordable
housing free from discrimination.
provides new opportunities for strengthening communities and generating
renewal, growth, and prosperity - with a special focus on ending
our budget creates new opportunities to improve HUD's performance
by addressing the internal management issues that have long plagued
place a high value on homeownership because its benefits for families,
communities, and the nation as a whole are so profound.
creates community stakeholders who tend to be active in charities
and churches. Homeownership inspires civic responsibility, and
owners vote and get involved with local issues. Homeownership
offers children a stable living environment that influences their
personal development in many positive, measurable ways - at home
and in school.
potential to create wealth is impressive, too. For the vast majority
of families, the purchase of a home represents the path to prosperity.
A home is the largest purchase most Americans will ever make -
a tangible asset that builds equity, credit health, borrowing
power, and overall wealth.
in part to a robust housing economy and Bush Administration budget
initiatives focused on promoting homeownership, more Americans
were homeowners in 2002 than at any time in this nation's history.
The national homeownership rate is 68 percent. That statistic,
however, masks a deep "homeownership gap" between non-Hispanic
whites and minorities: while the homeownership rate for non-Hispanic
whites is nearly 75 percent, it is less than 50 percent for African-Americans
Administration is focused on giving more Americans the opportunity
to own their own homes, especially minority families who have
been shut out in the past. In June 2002, President Bush announced
an aggressive homeownership agenda to increase the number of minority
homeowners by at least 5.5 million by the end of this decade.
The Administration's homeownership agenda is dismantling the barriers
to homeownership by providing down payment assistance, increasing
the supply of affordable homes, increasing support for homeownership
education programs, and simplifying the homebuying process.
"America's Homeownership Challenge," the President called on the
real estate and mortgage finance industries to take concrete steps
to tear down the barriers to homeownership that minority families
face. In response, HUD created the Blueprint for the American
Dream Partnership, an unprecedented public/private initiative
that harnesses the resources of the Federal Government with those
of the housing industry to accomplish the President's goal.
HUD is proposing several new or expanded initiatives in FY 2004
to continue the increase in overall homeownership while targeting
assistance to improve minority homeowner rates.
a first step, HUD proposes to fund the American Dream Downpayment
Initiative at $200 million. First introduced in FY 2002, this
program targets funding under the HOME program specifically to
low-income families wanting to purchase a home. The FY 2003 appropriations
provided for $75 million for this initiative, which will be sufficient
to begin the program. The FY 2004 budget provides funding to assist
approximately 40,000 low-income families with down payment and
closing costs on their homes.
HOME Investment Partnerships Program (HOME) plays a key role in
addressing the shortage of affordable housing in America. As reflected
in this year's program assessment, the HOME program is successful
because it is well managed and its flexibility ensures local decision-making.
In 2004, a total of $2.197 billion is being provided to participating
jurisdictions (states, units of local government, and consortia)
to expand affordable housing, which represents a 10-percent, or
$200 million, increase for HOME from the 2003 enacted level. The
funds dedicated to expanding and improving homeownership will
be spent rehabilitating owner-occupied buildings and providing
assistance to new homebuyers. Based on historical trends, 36 percent
of the homeownership-related funds will be used for new construction,
47 percent for rehabilitation, and 14 percent for acquisition.
of HOME funds have substantial discretion to determine how the
funds are spent. HOME funds can be used to expand access to homeownership
by subsidizing down payment and closing costs, as well as the
costs of acquisition, rehabilitation, and new construction. To
date, HOME grantees have committed funds to provide homebuyer
assistance to more than 288,000 low-income households.
promote the production of affordable single-family homes in areas
where such housing is scarce, the Administration is proposing
a tax credit of up to 50 percent of the cost of constructing a
new home or rehabilitating an existing home. This new tax credit
targets low-income individuals and families; eligible homebuyers
would have incomes of not more than 80 percent of their area median.
is committed to helping families understand the homebuying process
and how to avoid the abuses of predatory lending. Housing counseling
has proven to be an extremely important element in both the purchase
of a home and in helping homeowners keep their homes in times
of financial stress. The FY 2004 budget will expand funds for
counseling services from $40 million in FY 2003 to $45 million.
This will provide 550,000 families with home purchase and homeownership
counseling and about 250,000 families with rental counseling.
FY 2004 budget strengthens HUD's commitment to the Self-Help Homeownership
Opportunity Program (SHOP). SHOP provides grants to national and
regional non-profit organizations to subsidize the costs of land
acquisition and infrastructure improvements. Homebuyers must contribute
significant amounts of sweat equity or volunteer labor to the
construction or rehabilitation of the property. The FY 2004 budget
request for $65 million triples the funding received in 2002,
reflecting President Bush's commitment to self-help housing organizations
such as Habitat for Humanity. These funds will help produce approximately
5,200 new homes nationwide for very low-income families. Funds
are provided as a set-aside within the Community Development Block
Federal Housing Administration (FHA) is the Federal Government's
single largest program to extend access to homeownership to individuals
and families who lack the savings, credit history, or income to
qualify for a conventional mortgage. In 2002, FHA insured $150
billion in mortgages for almost 1.3 million households, most of
them first-time homebuyers, which represents a 21 percent increase
over the previous year. Thirty-six percent were minority households.
offers a wide variety of insurance products, the largest being
single-family mortgage insurance products. FHA insures single-family
homes, home rehabilitation loans, condominium loans, energy efficiency
loans, and reverse mortgages for elderly individuals. Special
discounts are available to teachers and police officers who purchase
homes that have been defaulted to HUD and who promise to live
in their homes in revitalized areas.
is proposing legislation for a new mortgage product to offer FHA
insurance to families that, due to poor credit, would either be
served by the private market at a higher cost or not at all. It
is anticipated that borrowers will be offered FHA loan insurance
under this new initiative that will allow them to maintain their
home or to purchase a new home. The new Mutual Mortgage Insurance
Fund (MMI) mortgage loan program is expected to generate an additional
$7.5 billion in endorsements for 62,000 additional homes.
its mortgage-backed securities program, Ginnie Mae helps to ensure
that mortgage funds are available for low- and moderate-income
families served by FHA and other government programs such as VA
and the Rural Housing Service of the U.S. Department of Agriculture.
Fiscal Year 2002, Ginnie Mae surpassed a total of $2 trillion
in mortgage-backed securities issued since 1970. Reaching this
milestone means that more than 28.4 million families have had
access to affordable housing or lower mortgage costs since Ginnie
Mae's inception. HUD is proud of Ginnie Mae's accomplishments
and its important role in helping to support affordable homeownership
for low- and moderate-income families in America. HUD's role in
the secondary mortgage market provides an important public benefit
to Americans seeking to fulfill their dream of homeownership.
FY 2004 budget supports five HUD programs that help to promote
homeownership in Native American and Hawaiian communities.
Native American Housing Block Grants (NAHBG) program provides
funds to tribes and to tribally designated housing entities for
a wide variety of affordable-housing activities. Grants are awarded
on a formula basis that was established through negotiated rulemaking
with the tribes. The NAHBG program allows funds to be used to
develop new housing units to meet critical shortages in housing.
Other uses include housing assistance to modernize and maintain
existing units; housing services, including direct tenant rental
subsidy; crime prevention; administration of the units; and certain
Title VI Federal Guarantees for Tribal Housing program provides
guaranteed loans to recipients of the Native American Housing
Block Grant who need additional funds to engage in affordable-housing
activities but who cannot borrow from private sources without
the guarantee of payment by the Federal Government. Because the
grantees have not applied for all funds appropriated in prior
years, the amount of subsidy required in FY 2004 is reduced from
$2 million to $1 million, and the loan amount supported is reduced
from $16.6 million to $8 million. Prior-year funds remain available
Indian Housing Loan Guarantee (Section 184) program helps Native
Americans to access private mortgage financing for the purchase,
construction, or rehabilitation of single-family homes. The program
guarantees payments to lenders in the event of default. In FY
2004, $1 million is requested in credit subsidy for 100 percent
federal guarantees of approximately $27 million in private loans.
Hawaiian Homelands Homeownership Act of 2000 established the Native
Hawaiian Home Loan Guarantee Fund, which is modeled after Section
184. The FY 2004 budget will provide $1 million in credit subsidy
to secure approximately $35 million in private loans.
after the NAHBG, the Native Hawaiian Housing Block Grant (NHHBG)
was authorized by the Hawaiian Homelands Homeownership Act of
2000. The FY 2004 budget will provide $10 million. Grant funds
will be awarded to the Department of Hawaiian Home Lands and may
be used to support acquisition, new construction, reconstruction
and rehabilitation. Activities will include real property acquisition,
demolition, financing, and development of utilities and utility
services, as well as administration and planning.
DECENT AFFORDABLE HOUSING
homeownership would be an option for everyone, but even with its
new and expanded homeownership initiatives, the Administration
recognizes that many families will have incomes insufficient to
support a mortgage in the areas where they live. Therefore, along
with boosting homeownership, HUD's proposed FY 2004 budget promotes
the production and accessibility of affordable housing for families
and individuals who rent. This is achieved, in part, by providing
states and localities new flexibility to respond to local needs.
has three major rental assistance programs that collectively provide
rental subsidies to approximately 4.5 million households nationwide.
The major vehicle for providing rental subsidies is the Section
8 program, which is authorized in Section 8 of the U.S. Housing
Act of 1937. Under this program, HUD provides subsidies to individuals
(tenant-based) who seek rental housing from qualified and approved
owners, and also provides subsidies directly to private property
owners who set aside some or all of their units for low-income
families (project-based). Finally, HUD subsidizes the operation,
maintenance, and modernization of an additional 1.2 million public
is proposing a new initiative - Housing Assistance for Needy Families
(HANF) - under which the funding for vouchers, which has been
allocated to approximately 2,600 public housing authorities (PHAs),
would be allocated to the states. States, in turn, could choose
to contract with PHAs or other entities to administer the program.
The funding for both incremental and renewal vouchers will be
contained in the HANF account.
are a number of advantages to providing the voucher funds to the
states. The allocation of funds to states rather than PHAs should
allow for more flexibility in efforts to address problems in the
underutilization of vouchers that have occurred in certain local
markets. The allocation of funds to the states will be coupled
with additional flexibility in program laws and rules, to allow
states to better address local needs and to commit vouchers for
program uses that otherwise would go unused. In the former Housing
Certificate Fund, more than $2.41 billion has been recaptured
over the last two years from the Housing Choice Voucher program.
These large recaptures have resulted in a denial of appropriated
housing assistance for thousands of families, which will be avoided
under HANF. The administration of the HANF program should run
more smoothly, with HUD managing fewer than 60 grantees compared
to approximately 2,600 today.
of the funds to the states should allow for more coordinated efforts
with the Temporary Assistance for Needy Families (TANF) program,
and the One-Stop Career Center system under the Workforce Investment
Act, successfully administered by the states, to support the efforts
of those now receiving public assistance who are climbing the
ladder of self-sufficiency.
proposes that FY 2004 be a transition year in which PHAs would
continue to receive voucher funds directly while states ramp up
in preparation for administering the HANF program. Up to $100
million would be made available to assist states with this effort.
In addition, states could apply for incremental vouchers if they
are ready to do so, and could request waivers that would assist
in the implementation of their programs.
HANF account would contain $13.6 billion in funding for voucher
renewals and incremental vouchers. This would include funding
for up to $36 million in incremental vouchers for persons with
disabilities, additional incremental vouchers to the extent that
funding is available, $252 million for tenant protection vouchers
to prevent displacement of tenants affected by public housing
demolition or disposition of project-based Section 8 contract
terminations or expirations, and $72 million for Family Self-Sufficiency
FY 2004, the Administration proposes separate funding for vouchers
under the new HANF account. The Project Based Rental Assistance
Account will retain funding for renewals of expiring project-based
rental assistance contracts under Section 8, including amounts
necessary to maintain performance-based contract administrators.
An appropriation of $4.8 billion is requested for these renewals
in FY 2004, which is a $300 million increase over the current
fiscal year. In addition to new appropriations, funds available
in this account from prior-year balances and from recaptures will
augment the amount available for renewals and will be available
to meet amendment requirements for on-going contracts that have
depleted available funding, as well as a rescission of $300 million.
is anticipated that approximately 870,000 project-based units
under rental assistance will require renewal in FY 2004, an increase
of about 50,000 units from the current fiscal year, continuing
the upward trend stemming from first-time expirations in addition
to contracts already under the annual renewal cycle. The HANF
account funds an estimated 30,300 units in subsidized or partially
assisted projects requiring tenant-protection vouchers due to
terminations, opt-outs, and prepayments.
Housing is the other major form of assistance that HUD provides
to the nation's low-income population. In FY 2004, HUD anticipates
that there will be approximately 1.2 million public housing units
occupied by tenants. These units are under the direct management
of approximately 3,050 PHAs. Like the Section 8 program, tenants
pay approximately 30 percent of their income for rent and utilities,
and HUD subsidies cover the remaining costs.
is programmatically and financially committed to ensuring that
the existing public housing stock is either maintained in good
condition or is demolished. Maintenance is achieved through the
subsidy to PHAs for both operating expenses and modernization
costs. Legislation to implement a new financing initiative is
included and enhanced in the FY 2004 budget. This will allow for
the acceleration of the reduction in the backlog of modernization
requirements in public housing facilities across the nation.
formula distribution of funds through the Public Housing Operating
Fund takes into account the size, location, age of public housing
stock, occupancy, and other factors intended to reflect the costs
of operating a well-managed public housing development. In FY
2004, HUD will increase the amounts provided for operating subsidies
from $3.530 billion to $3.559 billion, plus $15 million to fund
activities associated with the Resident Opportunities and Supportive
Services (ROSS) program.
Public Housing Capital Fund provides formula grants to PHAs for
major repairs and modernization of its units. The FY 2004 budget
will provide $2.641 billion in this account. This amount is sufficient
to meet the accrual of new modernization needs in FY 2004.
the funds made available, up to $40 million may be maintained
in the Capital Fund for natural disasters and emergencies. Up
to $30 million can be used for demolition grants - to accelerate
the demolition of thousands of public housing units that have
been approved for demolition but remain standing. Also in FY 2004,
up to $40 million will be available for the ROSS program (in addition
to $15 million in the Operating Fund), which provides supportive
services and assists residents in becoming economically self-sufficient.
address the backlog of capital needs, the Department is including
a legislative proposal in its 2004 budget called the Public Housing
Reinvestment Initiative (PHRI) that will allow PHAs to use their
Operating Fund and Capital Fund grants to facilitate the private
financing of capital improvements. This initiative also will encourage
development-based financial management and accountability in PHAs.
These objectives would be achieved by authorizing HUD to approve,
on a property-by-property basis, PHA requests to convert public
housing developments (or portions of developments) into project-based
voucher assistance. The conversion of units to project-based vouchers
will allow the PHAs to secure private financing to rehabilitate
or replace their aging properties by pledging the property as
collateral for private loans for capital improvements.
FY 2004 budget enhances this proposal, which was made in last
year's budget request, by also proposing a guarantee of up to
80 percent of the principal of loans made to provide the capital
for PHRI. There was substantial interest by PHAs and others in
last year's budget proposal; the loan guarantee should greatly
facilitate the involvement of private lenders. The budget includes
$131 million in subsidy for this guarantee, which would allow
the guarantee of almost $2 billion in loans and significantly
accelerate the improvement in public housing conditions.
PHRI reflects our vision for the future of public housing.
10 years, the HOPE VI program has been the government's primary
avenue for funding the demolition, replacement, and rehabilitation
of severely distressed public housing. With $2.5 billion already
awarded but not yet spent, and an additional $1 billion to be
awarded in 2002 and 2003, HOPE VI will continue to serve communities
well into the future.
HOPE VI was first created, it was the only significant means of
leveraging private capital to revitalize public housing properties.
But that is no longer the case. Today, HUD has approved bond deals
that have leveraged over $500 million in the last couple of years.
PHAs can mortgage their properties to leverage private capital.
In Maryland, PHAs are forming consortiums to leverage their collective
resources and assets to attract private capital. Cities such as
Chicago are committing hundreds of millions of dollars of their
own money to revitalize public housing neighborhoods. HUD is also
seeking additional tools from Congress such as the Public Housing
VI has served its purpose. Established to revitalize 100,000 of
the Nation's most severely distressed public housing units, the
program has funded the demolition of over 115,000 severely distressed
public housing units and the production of over 60,000 revitalized
dwellings. There are also more effective and less costly alternatives.
The average cost per rebuilt HOPE VI unit is approximately $120,000,
compared to $80,000 in HUD's HOME program. Only 20,000 new HOPE
VI units have been completed to date. On average, five years pass
between the time a HOPE VI award is made and a new unit is occupied.
In contrast, during the same period, HUD's HOME program produced
70,000 new rental units with an average construction time of about
2 years. It is time to look to the future and pursue new opportunities,
such as those I have noted, which can more effectively serve local
HUD's other rental assistance programs, FHA insures mortgages
on multifamily rental housing projects. In FY 2004, FHA will reduce
the annual mortgage insurance premiums on its largest apartment
new construction program, Section 221(d)(4), for the second year
in a row - from 57 basis points to 50 basis points. With this
reduction, the Department estimates that it will insure $3 billion
in apartment development loans through this program, for the annual
production of an additional 42,000 new rental units, most of which
will be affordable to moderate-income families, and most of which
will be located in underserved areas. Additionally, because this
program is no longer dependent on appropriated subsidies, FHA
avoids the uncertainty and the suspensions that have plagued the
program in prior years. When combined with other multifamily mortgage
programs, including those serving non-profit developers, nursing
homes, and refinancing mortgagors, FHA anticipates providing support
for a total of some multifamily 178,000 housing units.
addition to the extensive use of HOME funds for homeownership,
the HOME program has invested heavily in the creation of new affordable
rental housing. The program has, in fact, supported the building,
rehabilitation, and purchase of more than 322,000 rental units.
Program funds have also provided direct rental assistance to more
than 88,000 households.
Native American Housing Block Grant (NAHBG) and Native Hawaiian
Housing Block Grant (NHHBG) are also used for a wide variety of
affordable-housing activities. Several other HUD programs contribute
to rental assistance, although not as a primary function. For
example, the flexible Community Development Block Grant (CDBG)
program can be used to support rental housing activities.
barriers on the state and local level have an enormous impact
on the development of rental and affordable housing. HUD is committed
to working with states and local communities to reduce regulatory
and institutional barriers to the development of affordable housing.
HUD plans to create a new Office of Regulatory Reform and commit
an additional $2 million in FY 2004 for research efforts to learn
more about the nature and extent of regulatory obstacles to affordable
housing. Through this office, researchers will develop the tools
needed to measure and ultimately reduce the effects of excessive
barriers that restrict the development of affordable housing at
the local level.
HUD is committed to preserving America's cities as vibrant hubs
of commerce and making communities better places to live, work,
and raise a family. The FY 2004 budget provides states and localities
with tools they can put to work improving economic health and
promoting community development. Perhaps the greatest strength
of HUD's economic development programs is the emphasis they place
on helping communities address locally determined development
priorities through decisions made locally.
mainstay of HUD's community and economic development programs
is the CDBG program. In FY 2004, total funding requested for CDBG
is $4.732 billion. Funding for the CDBG formula program will increase
$95 million from the FY 2003 enacted level, to $4.436 billion.
Currently, 865 cities, 159 counties, and 50 states plus Puerto
Rico receive formula grant funds.
is analyzing the impact of the 2000 Census on the distribution
of CDBG funds to entitlement communities and states. Based on
this review, revisions to the existing formula may be proposed
so that funds are allocated to those communities that need them
the most and will use them effectively. Any proposals will, of
course, consider measures of need and fiscal capacity, as well
as other factors.
the $4.732 billion in FY 2004, $4.436 billion will be distributed
to entitlement communities, states, and insular areas, and $72.5
million will be distributed by a competition to Indian tribes
for the same uses and purposes. This budget presumes legislative
changes proposed in FY 2003 to fund CDBG grants to insular areas
as part of the formula, and to shift administration of the Hawaii
Small Cities program to the State. The remaining $224 million
is for specific purposes and programs at the local level and is
distributed generally on a competitive grant basis.
it did in FY 2003, the FY 2004 budget again proposes $16 million
for the Colonias Gateway Initiative (CGI). The CGI is a regional
initiative, focusing on border states where the colonias are located.
Colonias are small, generally unincorporated communities that
are characterized by substandard housing, lack of basic infrastructure
and public facilities, and weak capacity to implement economic
development initiatives. The FY 2004 funds will: provide start-up
seed capital to develop baseline socio-economic information and
a geographic information system; identify and structure new projects
and training initiatives; fund training and business advice; and
provide matching funds to develop sustainable housing and economic
development projects that, once proven, could be taken over by
the private sector.
participates in the privately organized and initiated National
Community Development Initiative (NCDI). The FY 2004 budget will
provide $30 million for the NCDI and Habitat for Humanity, in
which HUD has funded three phases of work since 1994. A fourth
phase will emphasize the capacity building of community-based
development organizations, including community development corporations,
in the economic arena and related community revitalization activities
through the work of intermediaries, including the Local Initiatives
Support Corporation and the Enterprise Foundation.
FY 2004 budget provides $31.9 million to assist colleges and universities,
including minority institutions, to engage in a wide range of
community development activities. Funds are also provided to support
graduate programs that attract minority and economically disadvantaged
students to participate in housing and community development fields
funds are awarded competitively to work study and other programs
to assist institutions of higher learning in forming partnerships
with the communities in which they are located and to undertake
a wide range of academic activities that foster and achieve neighborhood
FY 2004 budget requests $65 million for the Youthbuild program.
This program is targeted to high school dropouts ages 16 to 24,
and provides these disadvantaged young adults with education and
employment skills through constructing and rehabilitating housing
for low-income and homeless people. The program also provides
opportunities for placement in apprenticeship programs or in jobs.
The FY 2004 request will serve more than 3,728 young adults.
Community Renewal Tax Relief Act of 2000 authorized the designation
of 40 Renewal Communities (RCs) and nine Round III Empowerment
Zones (EZs), and provided tax incentives which can be used to
encourage community revitalization efforts. Private investors
in both RC and EZ areas are eligible for tax benefits over the
next ten years tied to the expansion of job opportunities in these
locations. These programs allow communities to design and administer
their own economic development strategies with a minimum of federal
involvement. No grant funds have been authorized or appropriated
for RCs or Round III EZs. Round II Empowerment Zone communities
have received grant funding in the past, but after four years
of funding, still have balances of unused funds available. Of
course, all of the tax and other benefits associated with Zone
designation remain intact. Also, both HOME and CDBG funds can
be used for the same activities.
Administration is deeply engaged in meeting the challenge of homelessness
that confronts many American cities. Across the scope of the federal
government, funding for homeless-specific assistance programs
increases 14 percent in the FY 2004 budget proposal. We are fundamentally
changing the way the nation manages the issue of homelessness
by focusing more resources on providing permanent housing and
supportive services for the homeless population, instead of simply
providing more shelter beds.
is leading an unprecedented, Administration-wide commitment to
eliminating chronic homelessness within the next 10 years. Persons
who experience chronic homelessness are a sub-population of approximately
150,000 individuals who often have an addiction or suffer from
a disabling physical or mental condition, and are homeless for
extended periods of time or experience multiple episodes of homelessness.
For the most part, these individuals get help for a short time
but soon fall back to the streets and shelters. Research indicates
that although these individuals may make up less than 10 percent
of the homeless population, they consume more than half of all
homeless services because their needs are not comprehensively
addressed. Thus, they continually remain in the homeless system.
As a first step, the Administration reactivated the U.S. Interagency
Council on Homelessness. Reactivating the Council has provided
better coordination of the various homeless assistance programs
that are directly available to homeless individuals through HUD,
HHS, VA, the Department of Labor, and other agencies. $1.5 million
is earmarked within the Homeless Assistance Account for the operations
of the Council in FY 2004.
and its partners are focused on improving the delivery of homeless
services, which includes working to cut government red tape and
make the funding process simpler for those who provide homeless
services. The FY 2004 budget continues to provide strong support
to homeless persons and families by funding the HUD homeless assistance
programs at the record level of $1.528 billion.
changes to the program are being proposed that will provide new
direction and streamline the delivery of funds to the local and
non-profit organizations that serve the homeless population.
FY 2004 budget includes funding for a new program to address the
President's goal of ending chronic homelessness in 10 years: the
Samaritan Initiative. Funded by HUD at $50 million, the Samaritan
Initiative will provide new housing options as well as aggressive
outreach and services to homeless people living on the streets.
This program is part of a broader, coordinated federal effort
between HUD, HHS, VA and the Interagency Council on Homelessness.
order to significantly streamline homeless assistance in this
nation and increase a community's flexibility in combating homelessness,
HUD will propose legislation to consolidate its current homeless
assistance programs into a single program.
Administration is also proposing legislation that would transfer
intact the Emergency Food and Shelter Program (EFSP) that was
administered by FEMA to HUD. The transfer of this $153 million
program would allow for the consolidation of all emergency shelter
assistance - EFSP and the Emergency Shelter Grant program - under
one agency. EFSP funds are distributed to a National Board, which
in turn allocates funds to similarly comprised local Boards in
eligible jurisdictions. Eligibility for funding is based on population,
poverty, and unemployment data. The Board will be chaired by the
Secretary of HUD and will include the American Red Cross, Salvation
Army, and the United Way, as well as other experts.
addition to funding homeless supportive services, the FY 2004
funds services benefiting adults and children from low-income
families, the elderly, those with physical and mental disabilities,
victims of predatory lending practices, and families living in
housing contaminated by lead-based paint hazards.
two million households headed by an elderly individual or a person
with disabilities receive HUD rental assistance that provides
them with the opportunity to afford a decent place to live and
oftentimes helps them to live independent lives.
FY 2004 budget will provide the same level of funding for Housing
for the Elderly and Housing for Persons with Disabilities as was
requested for FY 2003. The effectiveness of the Housing for the
Elderly program was evaluated this past year using the Office
of Management and Budget's new Program Assessment Rating Tool
(PART), and received low performance scores. The Administration
recognizes the need to improve delivery of housing assistance
to the elderly (Section 202) and will examine possible policy
changes or reforms to strengthen performance. Funding for housing
for the elderly is awarded competitively to non-profit organizations
that construct new facilities. The facilities are then provided
with rental assistance, enabling them to accept very low-income
residents. In FY 2004, $773 million plus $10 million in recaptures
will be provided for elderly facilities. Many of the residents
live in the facilities for years; over time, these individuals
are likely to become frailer and less able to live in rental facilities
without some additional services. Therefore, the program is providing
$30 million of the grants for construction to convert all or part
of existing properties to assisted-living facilities. Doing so
will allow individual elderly residents to remain in their units.
In addition, $53 million of the grant funds will be targeted to
funding the services coordinators who help elderly residents obtain
needed and supportive service from the community.
budget for FY 2004 proposes to separately fund grants for Supportive
Housing for Persons with Disabilities (Section 811) at $251 million.
The disabled facilities grant program will also continue to set
aside funds to enable persons with disabilities to live in mainstream
environments. Up to 25 percent of the grant funds can be used
to provide Section 8-type vouchers that offer an alternative to
congregate housing developments. In FY 2004, $42 million of the
grant funds will be provided to renew "mainstream" Section 8-type
vouchers so that, where appropriate, individuals can continue
to use their vouchers to obtain rental housing in the mainstream
rental market. The Housing for Persons with Disabilities program
also received low performance scores when it was evaluated using
the PART. The Department proposes to reform the program to allow
faith-based and other nonprofit sponsors more flexibility in using
grant funds to better respond to local needs. In addition, the
reformed program would recognize the unique needs of people with
disabilities at risk of homelessness, and give priority to serving
this group as part of the Administration's Samaritan Initiative
to end chronic homelessness.
of the targeted uses of new incremental vouchers under the Section
8 program is for non-elderly disabled individuals who are currently
residing in housing that was designated for the elderly. Disabled
individuals are provided Section 8 vouchers to continue their
subsidies elsewhere. If a sufficient number of applications for
these vouchers are not received, the PHAs may use them for any
other disabled individuals on the PHAs' waiting lists. In FY 2004,
the Department will allocate $36 million for the non-elderly disabled
to fund approximately 5,500 vouchers.
will also provide $297 million in FY 2004 in new grant funds for
housing assistance and related supportive services for low-income
persons with HIV/AIDS and their families. This is an increase
of $5 million over the FY 2003 level and is based on the most
recent statistics prepared by the Centers for Disease Control
and Prevention. Although most grants are allocated by formula,
based on the number of cases and highest incidence of AIDS, a
small portion are provided through competition for projects of
national significance. The program will renew all existing grants
in FY 2004 and provide new grants for an expected three new jurisdictions.
Since 1999, the number of formula grantees has risen from 97 to
an expected 114 in FY 2004.
Lead-Based Paint Program is the central element of the President's
program to eradicate childhood lead-based paint poisoning in 10
years or less. In FY 2004, funding for the lead-based paint program
will increase to $136 million from $126 million provided in the
President's request for FY 2003. Grant funds are targeted to low-income,
privately owned homes most likely to expose children to lead-based
paint hazards. Included in the total funding is $10 million in
funds for Operation LEAP, which is targeted to organizations that
demonstrate an exceptional ability to leverage private sector
funds with Federal dollars, and funding for technical studies
to reduce the cost of lead hazard control. The program also conducts
public education and compliance assistance to prevent childhood
lead poisoning. The President's budget requests an additional
$25 million for a new, innovative lead hazard reduction demonstration
program to eliminate lead-based paint hazards in homes of low-income
children, funded under the HOME program. This new program will
provide creative ways of identifying and eliminating lead-based
paint hazards - methods that will serve as models for existing
lead hazard control programs, such as replacing old windows contaminated
with high levels of lead paint dust with new energy-efficient
included is $10 million for the Healthy Homes Initiative, which
is targeted funding to prevent other housing-related childhood
diseases and injuries such as asthma and carbon monoxide poisoning.
Working with other agencies such as the Centers for Disease Control
and the Environmental Protection Agency, HUD is bringing comprehensive
expertise to the table in housing rehabilitation and construction,
architecture, urban planning, public health, environmental science,
and engineering to address a variety of childhood problems that
are associated with housing.
is requesting $17 million in FY 2004 to meet the expanded costs
of its Manufactured Housing Standards Program. This is a $4 million
increase over the current fiscal year. These funds will meet the
costs of hiring contractors to inspect manufacturing facilities,
make payments to the states to investigate complaints by purchasers,
and cover administrative costs, including the Department's staff.
Fees have been set by regulation to support the operation of this
EQUAL OPPORTUNITY IN HOUSING
this land of opportunity, no one should be denied housing because
of that individual's race, color, national origin, religion, sex,
familial status or disability. The Administration is committed
to the fight against housing discrimination, and this is reflected
in HUD's budget request for FY 2004.
is the primary Federal agency responsible for the administration
of fair housing laws. The goal of these programs is to ensure
that all families and individuals have access to a suitable living
environment free from discrimination. HUD contributes to fair
housing enforcement and education by directly enforcing the Federal
fair housing laws and by funding state and local fair housing
efforts through two programs: the Fair Housing Assistance Program
(FHAP) and the Fair Housing Initiatives Program (FHIP).
FY 2004 budget will provide $29.7 million - an increase of $4
million above the FY 2003 level - under FHAP to support state
and local jurisdictions that administer laws substantially equivalent
to the Federal Fair Housing Act. The increase will provide: (1)
an education campaign to address persistently high rates of discrimination
against Hispanic renters (as identified by the 2000 Housing Discrimination
Study); (2) funding for a Fair Housing Training Academy to better
train civil rights professionals and housing partners in conducting
fair housing investigations; and (3) additional funding for expected
increases in discrimination cases processed by state and local
fair housing agencies as a result of increased education and outreach
activities. The Department supports FHAP agencies by providing
funds for capacity building, complaint processing, administration,
special enforcement efforts, training, and the enhancement of
data and information systems. FHAP grants are awarded annually
on a noncompetitive basis.
FY 2004 budget will provide $20.3 million in grant funds for non-profit
FHIP agencies nationwide to directly target discrimination through
education, outreach, and enforcement. The FHIP program for FY
2004 is structured to respond to the finding of the 3-year National
Discrimination Study and related studies, which reflect the need
to expand education and outreach efforts nationally as a result
of continuing high levels of discrimination.
predatory lending is an important activity for FHIP agencies,
as reports continue to show that abusive lenders frequently target
racial minorities, the elderly, and women for mortgage loans that
have exorbitant fees and onerous conditions.
outreach is a critical component of HUD's ongoing efforts to prevent
or eliminate discriminatory housing practices. HUD will continue
its work to make individuals more aware of their rights and responsibilities
under the Fair Housing Act. A major study titled "How Much Do
We Know" emphasized the continuing need for public education on
fair housing laws; in FY 2004, FHIP organizations throughout the
country will continue to fund a major education and public awareness
campaign in support of study findings.
colonias have many barriers to fair and affordable housing
in both rental and homeownership. Many of the residents are recent
immigrants unaware of their rights under the Fair Housing Act.
Funds will be targeted to FHIP agencies that provide education
and enforcement efforts in those areas. FHIP-funded fair housing
organizations with grants targeted to the colonias will provide
residents with information on the Fair Housing Act and substantially
equivalent laws and respond to allegations of discriminatory practices.
FHIP program will continue to emphasize the participation of faith-based
and community partners. Recognizing the tremendous impact that
education has on the implementation of fair housing laws, virtually
any entity (public, private, profit, and non-profit) that actively
works to prevent discrimination from occurring is eligible to
apply for funds under this initiative.
and community-based partnerships in FHIP will empower citizens
by: (1) encouraging networking of state and local fair housing
enforcement agencies and organizations; (2) working in unison
with faith-based organizations; and (3) promoting a fair housing
presence in places where little or none exists today. HUD will
emphasize partnerships with grassroots and faith-based organizations
that have strong ties to those groups identified in the 2000 Housing
Discrimination Study as being most vulnerable to housing discrimination,
particularly the growing Hispanic population.
the fair housing rights of persons with disabilities is a Departmental
priority and will remain an important initiative within FHIP.
Fair Housing Act accessibility design and construction training
and technical guidance is being implemented through Project Fair
Housing Accessibility First (formerly called the Project on Training
and Technical Guidance). The project, which is now in its second
year, will provide training at 48 separate venues to architects,
builders, and others on how to design and construct multifamily
buildings in compliance with the accessibility requirements of
the Fair Housing Act. During that same period, Project Fair Housing
Accessibility First will maintain a hotline and a website to provide
personal assistance to housing professionals on design and construction
THE PARTICIPATION OF FAITH-BASED AND COMMUNITY ORGANIZATIONS
Center for Faith-Based and Community Initiatives ("the Center")
was established by Executive Order 13198 on January 29, 2001.
Its purpose is to coordinate the Department's efforts to eliminate
regulatory, contracting, and other obstacles to the participation
of faith-based and other community organizations in social service
Center will continue to play a key role in FY 2004 in facilitating
intra-Departmental and interagency cooperation regarding the needs
of faith-based and community organizations. It will focus on research;
law and policy; development of an interagency resource center
to service faith-based and community partners; and expanding outreach,
training, and coalition building. Additionally, the Center will
participate in the furtherance of HUD's overall strategic goals
and objectives-particularly as they relate to partnership with
faith-based and community organizations.
December 12, 2002, the President issued Executive Order 13279,
"Equal Protection of the Laws for Faith-Based and Community Organizations."
Its intent is to ensure that faith-based and community organizations
are not unjustly discriminated against by regulations and bureaucratic
practices and policies. The Order directs the Center to: (1) amend
any policies that contradict the Order; (2) where appropriate,
implement new policies that are necessary to further the fundamental
principles and policymaking criteria set forth in the Order; (3)
implement new policies to ensure collection of data regarding
the participation of faith-based and community organizations in
social service programs that receive federal financial assistance;
and (4) report to the President the actions it proposes to undertake
to implement the Order.
compliance with Executive Orders 13198 and 13279, the Center will
continue to participate in implementing HUD's strategic goals
and objectives, as well as the following key responsibilities:
conduct an annual Department-wide inventory to identify barriers
to participation of faith-based and community organizations in
the delivery of social services; initiate and support efforts
to remove said barriers; widen the pool of grant applicants to
include historically excluded groups; identify and reach out to
faith- and community-based organizations with little or no history
of working with HUD; work with HUD program offices to strengthen
and expand their faith-based and community partnerships; and educate
HUD personnel and state and local governments on the faith-based
and community initiative.
HIGH STANDARDS OF ETHICS, MANAGEMENT, AND ACCOUNTABILITY
Improving the performance in HUD's critically needed housing and
community development programs begins at home in the Department,
by embracing high standards of ethics, management and accountability.
The President's Management Agenda is focused on how we can better
manage to fulfill our mission by addressing the Department's longstanding
major management challenges, high-risk program areas, and material
management control weaknesses. Accountability begins with clarity
on the Department's goals, priorities and expectations for performance
results. We have integrated the goals of the President's Management
Agenda with our budget, our annual management operating plans,
and our management performance evaluation processes, to better
assure accountability and results.
key focus of the President's Management Agenda is to address deficiencies
in HUD's management of its financial and information systems and
human capital, which have hindered the Department's ability to
properly control and mitigate risks in the rental housing assistance
and single family mortgage insurance programs. There are no quick
fixes for these longstanding problems, but we continue to pursue
a deliberate and methodical improvement process that is clearly
demonstrating progress in improving HUD's program delivery structure
and performance results.
Management and Information Systems
primary focus of the past two years has been on addressing the
Department's most significant financial management systems deficiencies
in the FHA, and on stabilizing and enhancing HUD's existing core
financial management systems operating environment. The FHA Subsidiary
Ledger Project is proceeding on-schedule as a multi-year, phased
effort to replace FHA's commercial accounting system with a system
that fully complies with federal requirements, including budgetary
accounting and funds control and credit reform accounting. A major
project milestone was accomplished with the successful implementation
of the new FHA general ledger system in October 2002. Enhanced
funds control capabilities of the new system are scheduled for
implementation in 2004, and FHA will continue to adapt and further
integrate its 19 insurance program feeder systems over the next
several years to achieve full systems compliance by 2006.
FHA awaits the completion of these systems improvements, they
have been working with the HUD Chief Financial Officer on a Department-wide
effort to improve HUD's funds control. HUD's handbook on policies
and procedures for the administrative control of funds had not
been updated since 1984. We updated and strengthened these policies
and procedures in a new Administrative Control of Funds Handbook
issued in December 2002.
respect to HUD's core financial management system, the HUD Central
Accounting and Program System (HUDCAPS), we have been focused
on stabilizing and enhancing systems operations to support the
accelerated preparation and audit of HUD's consolidated financial
statements. We eliminated two reportable conditions from the OIG's
FY 2000 financial statement audit related to: 1) the reliability
and security of HUD's critical financial systems, and 2) controls
over fund balance with Treasury reconciliations. We prepared mid-year
financial statements in FY 2002 and have begun the preparation
of quarterly statements in FY 2003. Our year-end audit and reporting
process was accelerated by one month for FY 2002, and we have
plans for further acceleration the next two years to meet the
OMB mandate for issuance of our FY 2004 audited financial statements
by November 15, 2004.
has received unqualified audit opinions on the Department's consolidated
financial statements for the last three consecutive years-a strong
indicator of financial management stability and accountability.
However, the audit of our FY 2002 financial statements was not
trouble free. It contained 3 material weakness and 10 reportable
conditions. Addressing these remaining internal control deficiencies
is a high priority for the Department.
HUD's core financial management system, HUDCAPS, is substantially
compliant with federal financial management systems requirements,
it is inefficient and expensive to maintain. We initiated the
HUD Integrated Financial Management Improvement Project (HIFMIP)
to study options for the next generation core financial management
system to replace HUDCAPS. Previous HUD systems integration improvement
efforts failed to fully meet their intended objectives due to
inadequate planning and commitment. HUD is taking the time to
properly plan this project. A HIFMIP Executive Advisory Committee
was convened in January 2003 -- with representation from the Principal
Staff of HUD's major organizational components, including FHA
and GNMA, and an advisory role has been provided for the HUD OIG.
A new Assistant CFO for Systems was hired in October 2002, and
Project Manager was hired for HIFMIP in February 2003. The HIFMIP
Vision is scheduled for completion by January 2004, and feasibility
studies with a systems recommendation by July 2004.
overall FY 2004 information technology (IT) portfolio will benefit
from our continuing efforts to improve the IT capital planning
process, convert to performance-based IT service contracts, strengthen
IT project management to better assure results, extend the data
quality improvement program, and improve systems security on all
platforms and applications. HUD is also continuing to pursue increased
electronic commerce and is actively participating in the President's
"E-Government" projects to better serve our citizens and realize
cost-efficiencies through standardized systems solutions in common
areas of information and processing need.
staff, or "human capital," is its most important asset in the
delivery and oversight of the Department's mission. Effective
human capital management is the purview of all HUD managers and
program areas, and improvements have been geared towards meeting
HUD's primary human capital management challenges. HUD has taken
significant steps to enhance and better utilize its existing staff
capacity, and to obtain, develop and maintain the staff capacity
necessary to adequately support HUD's future program delivery.
Building upon the REAP and TEAM management tools, a new staff
resource estimation and allocation system implemented in 2002,
HUD will complete a Comprehensive Workforce Analysis in 2004 to
serve as the main component to fill mission critical skill gaps
through succession planning, hiring and training initiatives in
a Five-Year Human Capital Management Strategy.
is working to determine where application of competitive sourcing
to staff functions identified as commercial would result in better
performance and value for the government. We have worked with
OMB to ensure the appropriate amount and mix of competitive sourcing
opportunities, taking into account the workforce we have inherited,
including the significant downsizing and extensive outsourcing
of administrative and program functions over the past decade.
HUD's Competitive Sourcing Plan identifies some initial opportunities
for consideration of possible outsourcing, in-sourcing or direct
conversion studies to realize the President's goals for cost efficiency
savings and improved service delivery. HUD will continue to assess
its activities for other areas where competitive sourcing studies
might benefit the Department.
Controls Over Rental Housing Assistance
considerable efforts to improve the physical conditions at HUD-supported
public and assisted housing projects are meeting with success.
HUD and its housing partners have already achieved the original
housing quality improvement goals through FY 2005 and are raising
the bar with new goals. However, HUD overpays hundreds of millions
of dollars in rental housing subsidies due to the incomplete reporting
of tenant income and the improper calculation of tenant rent contributions.
Under the President's Management Agenda, HUD's goal is to reduce
rental assistance program errors and resulting erroneous payments
50 percent by 2005. HUD has established aggressive interim goals
for a 15 percent reduction in 2003 and a 30 percent reduction
achieve our erroneous assistance payments reduction goal, we have
taken steps to reestablish an adequate HUD monitoring capacity
in the field to oversee intermediary performance. Field staff
is conducting intense, on-site monitoring reviews to detect and
correct income verification and subsidy calculation errors. We
are also working to provide intermediaries with improved program
guidance and automated tools to more efficiently and effectively
administer the rental assistance programs. Program simplification
proposals are also under consideration, along with a pending legislative
proposal for increased authority to perform more effective computer
matching with tenant income data sources to enable intermediaries
to perform upfront verifications of income used in rent and subsidy
calculations. Updated error measurement studies will be performed
on program activity in 2003 through 2005 to assess the effectiveness
of our efforts to reduce program and payment errors.
FHA's Single Family Housing Programs Risk Management
manages its single-family housing mortgage insurance program area
in a manner that balances program risks with the furtherance of
program goals, while maintaining the financial soundness of the
Mortgage Mutual Insurance (MMI) Fund that supports these programs.
The MMI Fund is financially sound and the single-family housing
programs are contributing to record homeownership rates, with
a focus on homebuyers that are underserved by the conventional
market. Nevertheless, overall program performance and the condition
of the MMI Fund could be further improved if all lenders, appraisers,
property managers and other participants in FHA's program delivery
structure fully adhered to FHA program requirements designed to
reduce program risks and further program goals.
the past two years, FHA has initiated or completed numerous actions
to improve the content, oversight and enforcement of its program
requirements, including consideration of alternative business
processes. FHA developed 16 rules to address deceptive or fraudulent
practices. This includes the new Appraiser Watch program, improvements
to the Credit Watch program that will identify problem loans and
lenders earlier on, new standards for home inspectors, a final
rule to prohibit property "flipping" in FHA programs, and rules
to prevent future swindles like the 203(k) scam that threatened
the availability of affordable housing in New York City. These
reforms, and the greater transparency they ensure, will make it
more difficult for unscrupulous lenders to abuse borrowers. The
HUD budget ensures that consumer education and enhanced financial
literacy remain potent weapons in combating predatory lending.
addition, FHA continues to enhance its staff capacity for administering
this program area, and continues to achieve favorable property
disposition results through its performance-based management and
marketing (M&M) contracts. M&M contracts have resulted in a steady
decline in FHA's property inventory, from 36,000 homes at the
end of FY 2000 to 30,113 at the end of FY 2002. The loss per claim
on insured mortgage defaults has been cut from 37 percent to 29.5
we implement our proposed FY 2004 budget, we will also judge our
success by the lives and communities we have helped to change
through HUD's mission of compassionate service to others: the
young families who have taken out their first mortgage and become
homeowners, the homeless individuals who are no longer homeless,
the neighborhoods that have found new hope, the faith-based and
community organizations that are today using HUD grants to deliver
social services, and the neighborhoods once facing a shortage
of affordable housing that now have enough homes for all.
by the resources provided for and supported by HUD's proposed
budget for Fiscal Year 2004, our communities and the entire nation
will grow even stronger. And more citizens will come to know the
American Dream for themselves.
would like to thank each of you for your support of my efforts,
and I welcome your guidance as we continue our work together.