Opening Statement from the
March 3, 2004
Department of Housing and Urban Development
before the Committee on Appropriations
Subcommittee on Veterans Affairs and
Housing and Urban Development, and
U.S. House of Representatives
Chairman Walsh, Ranking Member Mollohan, Distinguished Members
of the Committee:
Thank you for the invitation to join you this morning. I am honored
to outline the Fiscal Year (FY) 2005 Budget proposed by President
Bush for the U.S. Department of Housing and Urban Development (HUD).
I am pleased to be joined by my colleagues, Commissioner Weicher
and Assistant Secretary Liu.
The programs funded within the $31.3 billion HUD budget will create
new opportunities for those who seek affordable housing and the
American Dream of homeownership, while generating stability and
prosperity for our communities. The key priorities it addresses
are central to the President's plan to help make America a more
secure, more prosperous, and more hopeful country.
Housing, of course, is central to our national prosperity and remains
the lynchpin of our economy. The housing market generated robust
activity throughout the 2001 recession, and today, housing continues
to fuel the ongoing economic recovery. Bolstered by historically
low interest rates, home sales and new housing construction have
repeatedly outperformed expectations. Homeownership last year reached
an all-time high of 68.3 percent, and fourth quarter 2003 statistics
revealed that for the first time, a majority of minority households
own a home of their own.
The Administration's FY 2005 budget request for HUD will empower
the Department to build on these successes, as we seek to increase
homeownership through the American Dream Downpayment Initiative
and two new mortgage products, promote decent affordable housing
through the newly proposed Flexible Voucher Program, end chronic
homelessness, encourage the participation of faith-based and community
organizations in HUD grant programs, and embrace the highest standards
of ethics, management, and accountability.
INCREASING HOMEOWNERSHIP OPPORTUNITIES
Americans place a high value on homeownership because of its benefits
to families, communities, and the nation as a whole are so profound.
Homeownership creates community stakeholders who tend to be active
in charities, churches, and neighborhood activities. Homeownership
inspires civic responsibility, and owners are more likely to 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.
Homeownership's 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.
Due in part to a robust housing economy and Bush Administration
budget initiatives focused on promoting homeownership, the homeownership
rate was higher in 2003 than at any time in this nation's history
and, as I said earlier, a majority of minority households are homeowners
for the first time. That fact, however, masks a deep "homeownership
gap" between non-Hispanic whites and minorities; while the homeownership
rate for non-Hispanic whites is nearly 76 percent; it is slightly
above 50 percent for African-Americans and Hispanics, and 55 percent
for Native Americans.
The Administration is focused on giving more Americans the opportunity
to own their own homes, including minority families. In June 2002,
President Bush announced an aggressive homeownership agenda to remove
the barriers that block American families from achieving homeownership,
in the hope of creating at least 5.5 million new minority homeowners
by the end of this decade. The Administration's homeownership agenda
is dismantling the financial 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. More than 1.53 million new minority homeowners
have been created in the United States since the initiative was
Through "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. 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
Additionally, we propose several new or expanded initiatives in
FY 2005 to continue the increase in overall homeownership, which
will help improve minority homeownership rates.
As a first step, the Administration proposes to fund the American
Dream Downpayment Initiative at $200 million in FY 2005. President
Bush signed the American Dream Downpayment Act into law on December
16, 2003, creating homeownership opportunities for thousands of
Americans who had been unable to cross the most significant obstacle
to homeownership: high downpayments and closing costs. The Initiative
will help approximately 40,000 low-income families with the downpayment
on their first home.
The Administration is proposing a new mortgage insurance product
to help first-time homebuyers purchase a home by allowing zero downpayment
loans. Currently, the Federal Housing Administration (FHA) requires
a minimum downpayment of three percent. To cover the higher risk
involved, premiums will be increased in the short term for these
borrowers. This program will be implemented at no cost to the government
or the American taxpayer. This new Zero Downpayment program is expected
to serve 150,000 families per year, generating about $19 billion
The Administration is also proposing a new sub-prime loan product
called Payment Incentives to offer FHA insurance to families that,
due to poor credit, would be served either by the private market
at a higher cost or not at all. Borrowers would 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
(MMI) mortgage loan program is expected to serve 60,000 families
per year, and generate an additional $7.9 billion in endorsements.
Helping families learn about the loan products and services available
to them and how to identify and avoid predatory lending practices
is critical to increasing homeownership. 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 2005 Budget will provide a record $45 million to
support 550,000 families with home purchase and homeownership counseling
and about 250,000 families with rental counseling. Counseling would
be required for all families buying homes through the Zero Downpayment
A new proposal for FY 2005 - the Flexible Voucher Program - will
provide new flexibility to Public Housing Authorities (PHAs) by
allowing them to offer downpayment assistance or monthly homeownership
subsidies to families. In addition, through the Flexible Voucher
Program, the Department will award performance-based bonuses to
PHAs that participate in homeownership activities. The Flexible
Voucher Program proposal calls for funding the Housing Choice program
as a flexible voucher grant, giving a set sum of money to public
housing authorities (PHA's), rather than promising to fund a certain
number of units. Using a dollar-based approach rather than a unit-based
approach, combined with performance measures, will give incentives
to PHA's to streamline administrative costs and provide more housing
opportunities for the money they receive. Additionally, incentives
will be provided to PHA's to encourage work and to emphasize vouchers
as a bridge to self-sufficiency, not an entitlement or an ongoing
handout for housing needs.
The Self-Help Homeownership Opportunity Program (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 2005 budget request of $65 million more than doubles the funding
received in 2004, reflecting President Bush's continuing 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.
To promote the production of affordable single-family homes in
areas where such housing is scarce - and to help revitalize distressed
communities - a tax credit of up to 50 percent of the cost of constructing
a new home or rehabilitating an existing home would be provided.
Eligibility for this new tax credit would be limited to homes that
are affordable to lower-income households (purchasers whose incomes
are below 80 percent of local median income).
The HOME Investment Partnerships program plays a key role in addressing
the shortage of affordable housing in America. In FY 2005, a total
of $2.1 billion - which includes $200 million for the American Dream
Downpayment Initiative - is being proposed for participating jurisdictions
(states and local governments) to expand the nation's supply of
affordable housing. Participating jurisdictions have substantial
local discretion to determine how to spend these funds. In addition
to homeownership assistance, HOME funds can be used to help renters,
new homebuyers, or existing homeowners through rehabilitation of
substandard housing, acquisition of standard housing, new construction,
or tenant-based rental assistance. To date, HOME grantees have committed
funds to provide homebuyer assistance to more than 294,000 low-income
households. Based on historical trends, 36 percent of HOME funds
will be used for new construction, 47 percent for rehabilitation,
14 percent for acquisition, and 3 percent for rental assistance.
Through its mortgage-backed securities program, the Government
National Mortgage Association - or 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 those under
the Department of Veterans Affairs and the Rural Housing Service
of the Department of Agriculture. The FY 2005 budget requests $200
billion in new loan guarantee limitations.
During FY 2003, Ginnie Mae marked its 35th anniversary and guaranteed
a record $215.8 billion in mortgage-backed securities. Since its
inception in 1968, Ginnie Mae has guaranteed more than $2 trillion
in mortgage-backed securities and helped more than 27 million families
gain access to affordable housing or lower mortgage costs. HUD's
role in the secondary mortgage market provides an important public
benefit to Americans seeking to fulfill their dream of homeownership.
The Administration has proposed broad reform of the supervisory
system for Government-sponsored enterprises (GSEs) in the housing
market. As part of this reform, the Administration has proposed
that HUD have the ability to set an enforceable goal encouraging
the purchase of first-time homebuyer mortgages. While part of their
charter, the GSEs significantly lag the market for all first-time
homebuyers regardless of race or ethnicity. This portion of the
reform is designed to ensure that Fannie Mae and Freddie Mac lead,
not lag behind, the market.
In addition, the FY 2005 Budget would assess GSEs an additional
$6.25 million for the expected cost of the HUD Secretary's responsibilities
under this Act and amendments as outlined in recent Administration
proposals. These responsibilities include establishing and enforcing
affordable housing goals for GSEs, ensuring GSE compliance with
Fair Housing laws, and providing consultation to the safety and
soundness regulator on the GSEs' new activities.
HUD has taken bold steps to comprehensively reform the homebuying
process and make it far less complicated and less expensive for
consumers. New disclosure requirements proposed by the Administration
under the Real Estate Settlement Procedures Act (RESPA) call for
full, upfront disclosure and explanation of all fees that buyers
pay at settlement, making it clear to the borrower what options
are available for financing a home and what they might cost. They
also facilitate industry packages with a guaranteed price. This
will make its easier for consumers to shop for mortgages. By empowering
the consumer, this competition is expected to reduce the average
initial cost of buying a home by $700.
HUD's new regulations would expand homeownership by making the
homebuying process less complicated, the paperwork less demanding,
and the mortgage process less expensive. The Department issued a
proposed rule covering RESPA reform in FY 2002 and anticipates a
final rule in FY 2004.
The FY 2005 Budget supports five HUD programs that help to promote
homeownership in Native American and Hawaiian communities.
Native American Housing Block Grants (NAHBG) provide $647 million
in funding to federally-recognized 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 model activities.
The 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. The Department's budget proposes to continue funding
this program at last year's level, which will provide $17.9 million
in loan guarantee authority.
The Indian Housing Loan Guarantee (Section 184) program helps tribal
members and their families 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 2005, $1 million is requested in credit subsidy for
100 percent federal guarantees of approximately $29 million in private
Under the Native Hawaiian Home Loan Guarantee Fund (Section 184A)
program, loan guarantees will be used primarily to secure private
financing to purchase, construct, or rehabilitate single-family
homes on Hawaiian Home Lands. This makes possible the financing
of construction loans and home mortgages by private financial institutions
that would otherwise not be possible due to the unique status of
Hawaiian Home Lands. The FY 2005 Budget will provide $1 million
in credit subsidy to secure approximately $37.4 million in private
Modeled after the NAHBG, the Native Hawaiian Housing Block Grant
program recognizes the documented housing needs of native Hawaiians
who are eligible to reside on, or who already live on, Hawaiian
Home Lands. Native Hawaiians experience the worst housing conditions
in the state and constitute nearly 30 percent of the homeless population.
The FY 2005 Budget will provide $9.5 million. Grant funds will be
awarded to the Department of Hawaiian Home Lands and may be used
to support the acquisition, new construction, reconstruction, and
rehabilitation of affordable housing. Activities include real property
acquisition, demolition, financing, and development of utilities
and utility services, as well as administration and planning, housing
management services, crime prevention, and safety activities.
Promote Decent Affordable Housing
The FY 2005 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.
HUD 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). Currently, HUD subsidizes operation, maintenance,
and capital improvement of 1.2 million public housing units. In
total, these programs will provide approximately $23.2 billion in
new funds each year to support rental costs for low-income individuals
and families; total rental assistance accounts for approximately
74 percent of the total budget for the Department in FY 2005.
The FY 2005 Budget continues to fund Section 8 tenant-based and
project-based rental assistance through the Housing Certificate
Fund. In addition, public housing is subsidized through the Public
Housing Operating Fund and the Public Housing Capital Fund.
HUD also helps to provide affordable rental housing through the
HOME program, the Native American Housing Block Grant, FHA mortgage
insurance, and the Community Development Block Grant (CDBG) program.
In addition, HUD meets the specialized housing needs of the elderly
and individuals with disabilities through grants for the development
and operation of supportive housing projects for these target populations.
The Budget includes a new Flexible Voucher Program (FVP) that would
replace the Housing Choice Voucher Program and improve the delivery
of rental and homeownership subsidies for low-income families. The
current system fails to support families making the transition from
public assistance to self-reliance and work, and in doing so reduces
the number of families that could be helped for a given amount of
money. Under the reform, the Voucher program would be a means for
families to transition to a better life, and more of them will be
helped. The ease of administration for HUD and PHAs is the means
to that policy end, and a bonus for doing the right thing for families.
Some of the key features of the new FVP include greater PHA discretion
in meeting local housing needs and serving more families, steady
and predictable funding levels, and rewards for PHAs that are good
managers. HUD will also provide performance-based incentives to
maximize the benefits of available funds and will hold PHAs accountable
for poor performance. High-performing PHAs that meet national objectives,
such as increasing the number of participants that use the voucher
assistance on a transitional (not permanent) basis, increasing homeownership,
and efficiently assisting families would be eligible for performance
and incentive bonuses.
The FVP will simplify program requirements and avoid the "one size
fits all" program design. The FVP provides local and state PHAs
with greater administrative flexibility to meet the overall program
objective of providing temporary and transitional housing assistance
for low-income families. As is current practice, the FVP will be
administered by PHAs. The FVP would include administrative costs
as part of the total grant.
For FY 2005, Project Based Rental Assistance will continue to
provide funding for renewals of expiring project-based rental assistance
contracts under Section 8, including amounts necessary to maintain
performance-based contract administrators. In addition to new appropriations,
funds existing in this account from prior-year balances and from
recaptures will augment the amount available to meet amendment requirements
for on-going contracts that have depleted their funding.
It is anticipated that approximately 896,000 project-based units
under rental assistance will require renewal in FY 2005, an increase
of about 25,000 units from the current fiscal year. This continues
the upward trend stemming from first-time expirations in addition
to contracts already under the annual renewal cycle.
Public Housing is the other major form of assistance that HUD
provides to the nation's low-income population. In FY 2005, 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 3,100 PHAs. Tenants pay 30 percent of
their income for rent and utilities, and HUD subsidies cover much
of the remaining cost.
HUD is 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 capital needs. Through its regulatory authority, HUD will ensure
that housing that is no longer viable will be removed from the inventory.
It will encourage voluntary removal of decaying units when it makes
economic sense to do so. Many of these decisions will be made at
the local level, and HUD will work with PHAs to allow greater local
The formula distribution of Public Housing Operating Funds 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 2005, the Department's budget
provides approximately $3.6 billion in funding for the Public Housing
This Public Housing Capital Fund program provides formula grants
to PHAs for major repairs and modernization of units. The FY 2005
budget will provide $2.7 billion in this account. This amount is
sufficient to meet new capital improvement needs in FY 2005.
Of the funds made available, up to $50 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 2005, up to $55 million
will be available for the Resident Opportunity and Self-Sufficiency
(ROSS) program, which provides supportive services and assists residents
in becoming economically self-sufficient.
HUD will introduce a demonstration program in 2005 designed to
improve public housing. The Freedom to House Initiative will maximize
the ability of local PHAs to make decisions affecting their tenants,
while simultaneously serving essentially the same numbers of low-income
families. It will grant to participating demonstration PHAs the
ability to combine the use of capital and operating funds, to set
locally determined rent structures, and to free themselves from
many of the administratively burdensome requirements of federal
reporting. This demonstration will also allow HUD and PHAs to shift
to an asset-based management practice.
HUD's Moving to Work Program has shown that residents and PHAs
have benefited from increased local flexibility. These PHAs are
convinced that their reforms have encouraged residents to seek work,
work more hours, and pursue opportunities to increase their incomes.
Freedom to House will continue this experiment in an environment
that will allow for measurement and comparative evaluation.
Up to 50 PHAs will be identified to participate in the demonstration,
while up to 50 others will serve as a control group following current
public housing laws and regulations. Annual assessment of the PHAs
will be based on parameters of financial health and physical safety
and soundness. Performance assessment results and other pertinent
data will be provided on an annual basis and will provide policymakers
with the ability to review current practices against increased PHA
flexibility in order to guide future policy decisions.
HUD will also continue to promote affordable rental housing through
FHA's multifamily mortgage insurance programs. In FY 2005, FHA will
reduce the annual mortgage insurance premiums on its largest apartment
new construction program, Section 221(d)(4), for the third year
in a row - from 50 basis points in FY 2004 to 45 basis points in
FY 2005. This is the lowest premium that FHA has ever charged for
multifamily insurance, and we are able to do so because the program
is being run on a financially sound and prudent basis. With this
reduction, the Department estimates that it will insure $3.1 billion
in apartment development loans through this program in FY 2005,
producing more than 41,000 additional new rental units. Most of
these units will be affordable to moderate-income families, and
most of them will be located in underserved areas.
When combined with other multifamily mortgage programs, including
those serving non-profit developers, health care facilities, and
refinancing mortgagors, FHA anticipates providing support for over
250,000 new units.
In addition to the extensive use of HOME funds for homeownership,
the HOME program has invested heavily in the creation of new affordable
rental housing. Since its inception, the HOME program has supported
the building, rehabilitation, and purchase of more than 334,000
rental units. Program funds have also provided direct rental assistance
to more than 100,000 households.
Native American Housing Block Grants provide a flexible source
of funding to federally recognized tribes or tribally-designated
housing entities and is used for a wide variety of affordable housing
activities. Authorized uses include both rental housing and homeownership.
The block grant is funded at $647 million in FY 2005.
The Native Hawaiian Housing Block Grant is modeled on the NAHBG,
and provides funding to the Department of Hawaiian Home Lands for
a wide variety of eligible affordable housing activities, including
the construction, rehabilitation, and acquisition of rental units
for native Hawaiians who are eligible to reside on, or who already
live on, Hawaiian Home Lands.
Several other HUD programs contribute to rental assistance, although
not as a primary function. For example, the flexible Community Development
Block Grant can be used to support rental-housing activities. The
CDBG program is celebrating its 30th year in 2004, having provided
over $108 billion in much-needed resources to states, rural communities,
inner cities, suburban communities, as well as counties to benefit
low- and moderate-income persons.
The Department believes that regulatory barrier removal must be
an essential component of any national housing strategy to address
the needs of low- and moderate-income families. Therefore, HUD is
committed to working with states and local communities to reduce
regulatory barriers to the development of affordable housing.
In FY 2003, the Department established "America's Affordable Communities
Initiative: Bringing Homes Within Reach through Regulatory Reform."
This major new initiative is a Department-wide effort charged not
only with developing new approaches and incentives that can encourage
efforts at the local level, but also reviewing and reforming HUD's
own regulations that may be barriers to expanded housing affordability.
To support this effort, HUD will conduct research and dissemination
efforts to learn more about the nature and extent of regulatory
obstacles to affordable housing. Current research underway includes
developing a methodology for "housing impact" analyses. This new
tool will assist HUD and other federal agencies, as well as state
and local governments, to measure the impact of any proposed new
regulation on housing affordability. Through such an expanded research
and dissemination effort, HUD will develop the tools and approaches
needed by state and local governments to address the many barriers
that restrict the development of affordable housing.
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 2005 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 development priorities through local decision making.
The flagship of HUD's community and economic development programs
is the Community Development Block Grant (CDBG) program. In FY 2005,
total funding for the CDBG account will be $4.6 billion. CDBG funds
go to 1,160 grantees in 944 cities, 165 counties, and 50 states,
plus Puerto Rico.
CDBG's popularity is based on the fact that funds may be used for
a broad range of housing revitalization and community and economic
development activities, thereby increasing state and local capacity
for economic revitalization, job creation and retention, neighborhood
revitalization, public services, community development, renewal
of distressed communities, and leveraging of non-federal resources.
Of the $4.6 billion in FY 2005, $4.3 billion will be distributed
to entitlement communities, states, and insular areas, and $71.6
million will be distributed by a competition to recognized tribes
for the same uses. The remaining $215 million is for specific purposes
and programs at the local level and is distributed generally on
a competitive grant basis. Principal among these initiatives in
FY 2005 are the Development Challenge Pilot Program, the National
Community Development Initiative, the University Partnership Grant
program, and Youthbuild.
The FY 2005 Budget proposes an interagency effort to test ways
to better coordinate, target, and leverage existing federal community
and economic development programs. Under the $10 million Development
Challenge Pilot Program, competitive grants will be awarded to a
limited number of communities to develop and implement clear and
measurable community development goals. The results of this initiative
are intended to provide valuable information on how performance
measurement can be made an integral part of CDBG and other community
and economic development programs.
HUD participates in the privately organized and initiated NCDI.
The FY 2005 budget will provide $25 million for the NCDI, 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. In addition, the budget includes
funding for capacity building activities for Habitat for Humanity
($4.5 million) and Youthbuild USA ($2 million).
The FY 2005 Budget provides $33.8 million through the University
Partnership Grant program 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 of study.
The FY 2005 Budget requests $64.6 million for the Youthbuild program.
Youthbuild is targeted to high school dropouts aged 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 2005 request
will serve more than 3,728 young adults.
The Administration continues to work to meet the challenge of homelessness
that confronts many American cities. The President has made an unprecedented,
Administration-wide commitment to eliminating chronic homelessness.
The Administration is also 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.
HUD is an active member of the U.S. Interagency Council on Homelessness
in its work to coordinate the efforts of 18 federal agencies that
address the needs of homeless persons. HUD and its partners are
focused on improving the delivery of homeless services, which includes
working to cut government red tape and simplifying the funding process.
The FY 2005 Budget continues to address the housing needs of homeless
individuals and families by funding targeted homeless programs at
$1.5 billion. Three initiatives 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.
The FY 2005 Budget includes the Samaritan Initiative to address
the President's goal of ending chronic homelessness by 2012 and
includes $50 million for HUD and $10 million for HHS and VA. Persons
who experience chronic homelessness are a sub-population of approximately
150,000 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. These individuals,
for the most part, get help for a short time but soon fall back
to the streets and shelters. Thus, they continually remain in the
The Samaritan Initiative will fund promising local collaborative
strategies to move chronically homeless individuals from the streets
to safe permanent housing with supportive services. It will provide
new housing options as well as aggressive outreach and services
to homeless people living on the streets. HUD will continue other,
current interagency efforts to end chronic homelessness including
the joint initiative with the Department of Labor to link housing
and employment services in local communities through One-Stop Career
HUD proposes to consolidate its three competitive homeless assistance
programs into a single program. The consolidation will provide more
consistent funding from year to year, expand eligible activities
- including prevention - across programs, eliminate multiple match
requirements, and simplify the competition and award process.
The Administration again proposes legislation that would transfer
the Emergency Food and Shelter Program (EFSP) from the Federal Emergency
Management Agency to HUD. The transfer of this $153 million program
in its current form would allow for the consolidation of emergency
shelter assistance - EFSP and the Emergency Shelter Grants program
- under one agency. EFSP funds are distributed through a National
Board (a public-private partnership) which in turn allocates funds
to similar 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 nonprofit agencies that currently constitute the National Board.
In addition to funding homeless supportive services, the FY 2005
Budget 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.
The FY 2005 Budget will provide $773 million in funding for the
Supportive Housing for the Elderly (Section 202) program. In the
Section 202 program, funding for housing for the elderly is awarded
competitively to non-profit organizations that construct new facilities.
The facilities are also provided with rental assistance subsidies,
enabling them to accept very low-income residents. Many residents
live in the facilities for years; over time, these people often
become frail and less able to live without some additional services.
Therefore, the program is providing up to $30 million of the grants
to fund the conversion of all or part of existing properties to
assisted-living facilities, enabling these elderly residents to
remain in their units. In addition, up to$53 million of the grant
funds will be targeted to funding the service coordinators who help
elderly residents obtain supportive services from the community.
The FY 2005 Budget proposes to fund capital advances of $249 million
for Supportive Housing for Persons with Disabilities (Section 811).
The Section 811 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 2005, up to $50 million of the grant funds will
be used to renew "mainstream" Section 8-type vouchers so that individuals
can continue to use their vouchers to obtain rental-housing vouchers
in the mainstream rental market.
In 2005, HUD will provide $295 million in new grant funds for housing
assistance and related supportive services for low-income persons
with HIV/AIDS and their families through the Housing Opportunities
for Persons with AIDS (HOPWA) program. Although most grants are
allocated by formula, based on the number of cases and highest incidence
of AIDS, a small portion is provided through competition for projects
of national significance. The program will renew all existing grants
in FY 2005 and provide new formula grants for an expected two additional
jurisdictions. Since 1999, the number of formula grantees has risen
from 97 to an expected 119 in FY 2005.
A compassionate nation must ensure that those Americans served
by HUD - many of whom are struggling families, or individuals facing
a trying time in their lives - live in a healthy and secure environment
and have access to tools and opportunities that will help them move
toward self-sufficiency. HUD's basic programs contribute to this
goal by providing individuals and families with the housing and
services that allow them to focus on recovery, job-related skill
development, and obtaining work or increasing income.
The Voluntary Graduation Incentive Bonus recognizes PHAs that experience
higher rates of families that transition out of the public housing
program. This will be the first initiative in over twenty years
to affirm that public housing's primary mission is to help low-income
families gain access to housing for a temporary period while on
the road toward economic freedom. Public housing should not be managed
as a permanent housing solution for the poor. HUD will allocate
$15 million in operating fund monies to those PHAs that exceed a
baseline transition rate.
In FY 2005, the Department is introducing the concept of performance-based
bonuses to PHAs in the Flexible Voucher Program. Potential performance
standards would be successfully helping families, including elderly
and disabled individuals, move toward independent living, economic
self-sufficiency, and homeownership. PHAs that successfully achieve
this goal will be awarded performance-based bonuses.
The Department's objectives emphasize the outcome of the self-sufficiency
efforts and will measure the changes in the number of households
no longer needing assistance, with an increase in the number of
families involved in the Family Self-Sufficiency (FSS) program whose
predominant source of income is work. PHAs will be rewarded for
achieving these objectives through an incentive bonus. The bonus
funding can be used by PHAs for a variety of activities, including
payment of FSS staff salaries to ensure coordination with state
agencies, faith-based organizations, and other non-profit providers
of supportive services; job training, vocational, and educational
activities; and counseling services.
The Department will provide $55 million in funds to support the
Resident Opportunity and Self-Sufficiency (ROSS) program for residents
of Public and Indian Housing. The main purpose of the funds is to
provide a link between residents and services that can help them
HUD's Lead-Based Paint program is the central element of the President's
effort to eradicate childhood lead-based paint poisoning. In FY
2005, funding for the lead-based paint program will increase to
$139 million from the $136 million requested by the President for
FY 2004. Grant funds are targeted to low-income, privately owned
homes most likely to expose children to lead-based paint hazards.
The program conducts public education and compliance assistance
to prevent childhood lead poisoning. New estimates from the Centers
for Disease Control and Prevention (CDC) show that the program has
helped to reduce the number of children at risk by 50 percent, but
that nearly half a million children still have too much lead in
Included in the request for this program 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. The President's Taskforce Report notes
that asthma alone costs the nation over $6 billion each year. Working
with other agencies such as the CDC 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.
Ensuring Equal Opportunity in Housing
As the primary federal agency responsible for the administration
of fair housing laws, HUD is committed to protecting the housing
rights of all Americans, regardless of race, color, national origin,
religion, sex, age, familial status, or disability. This commitment
is reflected in HUD's budget request for FY 2005.
The goal of HUD's fair housing programs is to ensure that all families
and individuals have access to a suitable living environment free
from unlawful 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).
The FY 2005 Budget will provide $27 million through FHAP for state
and local jurisdictions that administer laws substantially equivalent
to the Federal Fair Housing Act. The Department supports FHAP agencies
by providing funds for capacity building, complaint processing,
administration, training, and the enhancement of data and information
systems. FHAP grants are awarded annually on a noncompetitive basis.
Activities funded by this program play a pivotal role in increasing
the overall national homeownership rate, which we believe will add
5.5 million new minority homeowners by the end of the decade.
Targeted Education and Enforcement Follow Up on Housing Discrimination
Studies is one of the activities supported through FHAP. This education
campaign combats discriminatory activities, including those against
African-Americans, Hispanics, Asians, Pacific Islanders, American
Indians, Alaskan Natives, native Hawaiians, and persons with disabilities.
FHAP also supports the Fair Housing Training Academy, which will
serve all FHAP agencies and provide continuing professional fair
housing training and certification for current and future FHAP staff.
The curriculum will cover training needed to ensure quality and
timely investigations of fair housing complaints and includes case
processing, conciliation skills, compliance monitoring, and testing.
The Department expects increases in discrimination cases processed
by state and local fair housing agencies as a result of increased
education and outreach activities. The FY 2005 FHAP budget request
supports this increase.
The FY 2005 Budget will provide $20.7 million in grant funds for
non-profit FHIP agencies nationwide to directly target discrimination
through education, outreach, and enforcement. The FHIP program for
FY 2005 is structured to respond to the finding of the three-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.
Promoting 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 are an integral part of the Fair
Housing Accessibility First Project. Bringing about industry-wide
acceptance of accessibility as the way to design housing will depend,
to a significant degree, on easy access to consistently accurate
and helpful information and guidance on compliance. An extension
of the current program for at least an additional one to three years
is necessary to achieve this goal.
This project provides training to architects, builders, and others
on how to design and construct multifamily buildings in compliance
with the accessibility requirements of the Fair Housing Act. Therefore,
the Department is requesting $1 million for the first year of a
new three-year contract to continue the Fair Housing Accessibility
First education and outreach training. Fair Housing Accessibility
First will maintain a hotline and a website to provide personal
assistance to housing professionals on design and construction problems.
Promoting the Participation of Faith-Based and Community Organizations
HUD's 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 programs.
To help returning prisoners rebuild their lives, find work, and
avoid crime, the FY 2005 President's Budget proposes a four-year,
$300 million Prisoner Re-Entry Initiative to be carried out through
the collaborative efforts of HUD and the Departments of Labor and
Justice. Harnessing the resources and experience of faith-based
and community organizations, the Prisoner Re-Entry Initiative will
help ex-offenders find and keep jobs, secure transitional housing,
and receive mentoring. HUD's FY 2005 Budget includes $25 million
for this initiative.
The 2005 Budget also requests $5 million for a faith-based pilot
for a multi-city program aimed at increasing the participation of
faith-based and community based organizations in the cities' community
The Center will continue to play a key role in FY 2005 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 partnerships with
faith-based and community organizations.
On December 12, 2002, the President issued Executive Order 13279,
"Equal Protection of the Laws for Faith-Based and Community Organizations."
The intent of the Executive Order is to ensure that faith-based
and community organizations are not unjustly discriminated against
by regulations and bureaucratic practices and policies.
In FY 2005, in compliance with Executive Orders 13198 and 13279,
the Center will focus its work on the following key responsibilities:
ensuring that the new regulations on faith-based organizations are
implemented and reflected in all HUD policies; outreach to faith-based
and community groups through technical assistance, the Center's
website, interagency summits, and other efforts; establishing innovative
pilot and demonstration programs to increase the participation of
faith-based and other community organizations in Departmental initiatives;
and educating government personnel on the faith-based and community
Progress on these efforts will be tracked as part of the President's
Management Agenda (PMA).
Embracing High Standards of Ethics, Management, and Accountability
HUD is committed to improving performance in its critically needed
housing and community development programs, and producing these
improvements in a manner that reflects the highest standards of
ethics, management, and accountability.
The PMA is designed to improve the overall efficiency and effectiveness
of the federal government and to address significant management
deficiencies at individual agencies. HUD fully embraces this sound
management agenda and is on-target with the necessary plans and
actions to meet the challenging goals set by the President. To sustain
the focus needed to achieve these goals, they have been engrained
in HUD's strategic and annual performance and operating plans.
The PMA includes five government-wide and two HUD-specific initiatives
that are tracked and scored in terms of both baseline goal accomplishment
and the adequacy of plans and progress towards achieving established
goals. At HUD, these initiatives are addressing longstanding management
problems that will require action over a period of years in order
to achieve the President's goals.
In addition, the Department expects to build upon its continuing
efforts to improve field management and Headquarters support to
the operation and management of HUD's extensive field structure.
In particular, the Office of Field Policy and Management will continue
to work toward the effective integration of HUD's programs at the
After many years of downsizing, HUD faces a large number of potential
retirements and the loss of experienced staff. HUD's staff, or "human
capital," is its most important asset in the delivery and oversight
of the Department's mission. HUD has taken significant steps to
enhance and better use its existing staff capacity, and to obtain,
develop, and maintain the staff capacity necessary to adequately
support HUD's future program delivery. During FY 2003, HUD completed
the Department's Five-Year Strategic Human Capital Plan with implementation
plans, and in FY 2005 will complete comprehensive workforce analyses
and plans focusing on its core business functions. During FY 2005,
HUD will implement its comprehensive Departmental workforce plan
to ensure its workforce is aligned efficiently, skill gaps are assessed
and corrected, and HUD staff retiring over the next five years are
succeeded by qualified staff to continue quality service and program
HUD is working to determine if competition of staff functions identified
as commercial would result in better performance and value for the
government. However, given HUD's significant downsizing and extensive
outsourcing of administrative and program functions over the past
decade, opportunities for further competitive sourcing are limited
and need to be carefully considered in the context of program risk
exposure. HUD's Competitive Sourcing Plan has initially focused
on establishing an adequate capacity to support the competitive
sourcing process, with identifications of some initial opportunities
for consideration of possible outsourcing, or in sourcing competitions
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
Improved Financial Performance
HUD has strived over the past two years to enhance and stabilize
its existing financial management systems operating environment
to better support the Department and produce auditable financial
statements in a timely manner. HUD has received an unqualified audit
opinion on its consolidated financial statements for the past four
consecutive years, and has reduced the number of auditor-reported
internal control weakness issues. In FY 2005, the Department will
continue making progress to reduce the number of material weaknesses
or reportable conditions in its financial systems.
Electronic Government/Information Technology
HUD is not only pursuing increased electronic commerce and actively
participating in all categories of the President's "E-Government"
initiatives, but is also focused on information technology management
improvements and maximizing the use of Internet technologies to
make HUD more efficient, effective, and responsive.
In FY 2005, HUD will place increased emphasis on the Department's
E-Government, Privacy Act, Section 508 Disabilities Act, and Paperwork
Reduction Act Programs. HUD's FY 2005 information technology portfolio
will benefit from continuing efforts to improve the IT capital planning
process, implement project management guidance, strengthen IT project
management to achieve performance goals, complete major business
segments of HUD's IT business architecture, and continue to improve
systems security on all platforms and applications.
Budget and Performance Integration
HUD developed its portion of the FY 2005 Budget with a focus on
collecting and using quality performance information, utilizing
full cost accounting principles, and emphasizing program evaluations
and research to inform decision-makers and managers. Staffing and
other resources are aligned with strategic goals, objectives, and
accomplishments. The Department will continue to work hard to improve
and measure program performance.
HUD Management and Performance
HUD is aggressively pursuing several major efforts to improve its
management and performance by strengthening internal controls to
eliminate material weaknesses and remove HUD programs from the General
Accounting Office's (GAO) high-risk list.
HUD's considerable efforts to improve the physical conditions at
HUD-supported public and assisted housing developments 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.
HUD overpays hundreds of millions of dollars in low-income rent
subsidies due to the incomplete reporting of tenant income and the
improper calculation of tenant rent contributions. Under the PMA,
HUD's goal is to reduce rental assistance program errors and resulting
erroneous payments 50 percent by 2005. HUD established aggressive
interim goals for a 15 percent reduction in 2003 and a 30 percent
reduction in 2004. The latest study for FY 2003 indicates that HUD
exceeded its error reduction goal for that year with a 30 percent
reduction - estimated to be approximately $600 million in reduced
subsidy errors. Updated error measurement studies will be performed
on program activity in 2004 and 2005 to assess the effectiveness
of efforts to reduce program and payment errors. The Department
has a number of training and monitoring programs in place that should
produce additional error reductions. In FY 2005, HUD will work with
its program intermediaries to fully implement new statutory authority
that enables more effective upfront income verifications to eliminate
over half of the estimated erroneous assistance payments.
FHA will continue to vigorously attack predatory lending practices
that encourage families to buy homes they cannot afford and cause
homeowners to lose their homes by refinancing into loans with high
interest rates. Elderly and minority homeowners are particularly
vulnerable to predatory lending practices, which include property
"flipping" (schemes where unscrupulous lenders buy homes and quickly
resell them at inflated prices to uninformed buyers), home improvement
scams, unaffordable mortgage loans, repeated refinancings with no
borrower benefit, and "packing" life insurance and other products
into the loan amount.
Since 2001, FHA has mounted a vigorous assault on predatory lending.
FHA developed 16 rules to address deceptive or fraudulent practices.
This includes the new Appraiser Watch Initiative, improvements to
the Credit Watch Initiative that will identify problem loans and
lenders earlier on, new standards for home inspectors, a rule to
prohibit property "flipping" in FHA programs, and rules to prevent
future swindles like the Section 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.
The PMA tasked HUD with streamlining the Consolidated Plan process
to make it more useful to communities in assessing their own progress
toward addressing the problems of low-income areas. HUD works closely
with state and local program stakeholders on this initiative. It
is anticipated that statutory and/or regulatory proposals to meet
the intent of the PMA will be announced shortly. Pilot testing of
a variety of streamlining efforts will be completed during 2004,
which may lead to additional proposals for change. As an outgrowth
of the initiative, HUD issued a Notice entitled "Development of
State and Local Performance Measurement Systems for CPD Formula
Grant Programs," which provides guidance to communities on developing
and implementing performance measurement systems.
HUD acquires over $1 billion in contracted services and goods
each year. As part of an overall strategy to improve HUD's acquisition
management, actions are being taken to ensure that HUD's centralized
contract management information system contains reliable data on
the number of active contracts, the expected cost of the contracts,
and the types of goods and services acquired, and that its financial
management information systems provide complete and reliable obligation
and expenditure information on HUD's contracting activities. Other
aspects of HUD's acquisitions management improvement strategy are
being addressed through the human capital management strategy, which
incorporates actions to enhance HUD's procurement staff capacity
and improve guidance and training for acquisition officials throughout
Our success will be judged by the lives and communities we have
forever changed through our work: the young families who have taken
out their first mortgage and become homeowners; the once-homeless
men and women who now have a home; the faith-based and community
organizations that are successfully using HUD grants to deliver
social services; and the neighborhoods once facing a shortage of
affordable housing that now have enough homes for all.
Empowered by the resources provided for and supported by the Administration's
proposed Budget for FY 2005, new success stories will be written
and our communities and the entire nation will grow stronger. And
more citizens will come to know the American Dream for themselves.
I would like to thank each of you for your support of our efforts.
We welcome your guidance as we continue our work together.
Content Archived: June 25, 2010