Statement of Secretary Alphonso Jackson
May 11, 2005
United States House of Representatives
Committee on Financial Services
Chairman Oxley, Ranking Member Frank, Distinguished Members of the
you for the invitation to join you this morning. I am pleased to
appear before the committee to discuss H.R. 1999, entitled the State
and Local Housing Flexibility Act of 2005.
I would like
to thank Congressman Miller and his cosponsors on this Committee
- Representatives Feeney, Harris, King, and Renzi - for their leadership
in introducing H.R. 1999, authorizing legislation to implement this
believe that this legislation will improve the Department's ability
to serve low income families through the rent and flexible voucher
reform, while at the same time giving certain public housing authorities
the opportunity to become real entrepreneurs in their own communities
through the Moving to Work Program.
of these three initiatives - the flexible voucher reform, rent reform,
and Moving to Work - together represent an engine for positive reform
that is desperately needed in the Section 8 program.
Housing Choice Voucher Program, authorized under Section 8 of the
1937 U.S. Housing Act, is commonly referred to as the "Section 8"
program. Therefore, for the purposes of this testimony, all references
to "Section 8" refer to the Housing Choice Voucher Program.
Under Section 8, HUD provides approximately 2 million low-income
families with subsidies to afford decent rental housing in the private
market. I cannot overstate the importance of Section 8 to improving
the lives of many of this nation's neediest families. As a compassionate
nation, we have an obligation to provide assistance for those citizens
who truly need our help.
the program faces serious challenges. In recent years, Section 8
costs have spiraled out of control and positive results have been
overshadowed by lingering doubts about the program's effectiveness
and future viability. With Congressional support, however, I am
hopeful that we can preserve - and strengthen - the program.
familiarity with the Section 8 program dates back to 1981, when
I was hired as Executive Director of the St. Louis (Missouri) Public
Housing Authority. I was appointed in 1987 to direct the Washington,
DC, Department of Public and Assisted Housing - the city's equivalent
of a public housing authority (PHA). In 1989, I began a seven-year
tenure as the President and CEO of the Dallas Housing Authority.
I am the first Secretary in the history of HUD to have run a PHA.
point is that I bring more than more than 25 years of direct experience
in housing - much of it gained in the public housing arena - to
my job as Secretary. I fully understand the complexities and importance
of the Section 8 program. I support its mission. Yet, my expertise
allows me to tell you without hesitation that the Section 8 program
is fundamentally different today than it was 20, 10, and even less
than five years ago, and that the transformation has put Section
8 at risk.
modern-day equivalent of Section 8 was established 35 years ago,
when HUD created the Housing Allowance Experiment, the Nation's
first program of tenant-based rental housing assistance and the
precursor to the Section 8 tenant-based housing assistance program.
Housing Allowance Experiment was the direct result of the Housing
and Urban Development Act of 1970, through which Congress directed
HUD to "undertake on an experimental basis a program to demonstrate
the feasibility of providing families of low income with housing
allowances to assist them in obtaining rental housing of their choice
in existing standard housing units."
By 1974, Congress had become convinced that tenant-based housing
assistance was a viable alternative to public housing. In the Housing
and Community Development Act of 1974, Congress amended the Housing
Act of 1937 by adding Section 8, which created a tenant-based housing
assistance program, commonly referred to at the time as "Section
8 Existing." This name differentiated it from "Section 8 New Construction"
another portion of the Section 8 program that was used to subsidize
construction or substantial rehabilitation of new privately owned
subsidized housing by providing long-term rent subsidies attached
to the property.
The Section 8 Existing program served lower-income families, introduced
the concept of Fair Market Rents (FMRs), and permitted exception
rents. The tenant payment was set at 15 or 25 percent of income,
taking into consideration the income of the family, the number of
minor children in the household, and medical or other unusual expenses.
The income contribution of tenants was later raised to 30 percent
of income. Generally, families could not rent above the FMR established
by HUD for the locality. Thirty percent of those families assisted
had to be very low-income families at the time of initial renting
of a unit. Properties had to be maintained at Housing Quality Standards
set by the Department.
1983, Congress accepted HUD's proposal that more flexibility in
tenant-based assistance was appropriate and created the Voucher
Demonstration in the Housing and Urban-Rural Recovery Act of 1983.
In the Housing and Community Development Act of 1987, Congress replaced
the voucher demonstration with a permanent voucher program.
simplify the program for the Department, local administrators, and
participating families, the Department and Congress reached agreement
in 1998 to streamline the Section 8 certificate and voucher programs
into a single program with a single set of regulations. No longer
would two similar programs operate side-by-side under two different
sets of rules. The 1998 Quality Housing and Work Responsibility
Act, otherwise known as the 1998 Reform Act, authorized this merger.
final Act was the result of three years' worth of debate and discussion
between both chambers of Congress, both political parties, and the
Clinton Administration. Although there was general agreement that
reform was vital, widespread disagreement persisted as to the substance
of the legislation. However, Congress was able to craft a bill after
considerable dialogue, negotiation, and compromise; and the final
legislation passed almost unanimously.
merged program retained many features of the previous voucher program.
For example, the Act continued to permit families to rent above
the payment standard (but subject to a limitation that the family
cannot pay more than 40 percent of their income for rent) in the
first year, retained Housing Quality Standards, and permitted portability
to any jurisdiction administering a Section 8 program.
the goals of streamlining the programs were admirable, enough time
has now elapsed since 1998 that we can - and must - determine if
the program is working as intended and whether further reforms are
I believe we can now state without equivocation that the Section
8 program faces serious challenges, and has been overwhelmed with
unintended consequences. With each passing year these consequences
have been magnified. To continue serving those in need, and to help
families become self-sufficient, Section 8 reform is desperately
last year, annual funding under the Section 8 program was appropriated
for a specific number of vouchers. These funds were then distributed
to PHAs based on the number of vouchers they awarded, at whatever
costs the PHAs incurred.
For FY 2005, Congress converted this "unit-based" allocation system
to a "budget-based" system. This made sense, and the Administration
encouraged and strongly supported this decision. For the budget-based
system to work, however, program requirements need to be simplified
and PHAs need to be provided with greater flexibility.
CASE FOR REFORM
has taken a first step toward reform by changing the way funds are
appropriated for the program, thereby controlling costs that have
spiraled upward without a corresponding increase in benefits or
number of people served. To complete the reform process, changes
are needed in the Section 8 program that will: (1) give local public
housing authorities (PHAs) greater decision-making flexibility combined
with performance incentives to maximize the use of appropriated
dollars; (2) encourage PHAs to use assistance to families as "hand
up" for families moving toward self-sufficiency; and (3) further
streamlining the program by eliminating overly prescriptive and
complex requirements that do not increase program benefits.
most telling indicator of Section 8's structural challenges has
been the program's rising costs. The program's rising costs are
in part attributable to policies enacted in the 1998 Reform Act.
In 1998, the Housing Certificate Fund (both project- and tenant-based
Section 8 spending) consumed 36 percent of the HUD budget.
By the 2005 appropriation, that had risen to 57 percent.
2. The 1998 Reform Act gave PHAs greater control over local
payment standards, allowing them to set the standards between
90 and 110 percent of the local FMR. This flexibility, without
proper checks and balances, created an incentive for PHAs
to raise the payment standard because HUD paid the full cost.
In December 2000, the average PHA payment standard was $648,
or 95 percent of the FMR. By December 2004, the average PHA
payment standard was $889, which was equivalent to 104 percent
of FMR. As a consequence, the average PHA payment is now approaching
110 percent of the FMR, rather than the intended average of
3. During this time, the percentage of program participants
with payment standards between 101 and 110 percent of FMR
rose from 25 percent to 49 percent of all participants. This
37 percent nationwide average increase in payment standards
between December 2000 and December 2004 is not consistent
with the much lower 13 percent nationwide average increase
in gross rents (as measured by Consumer Price Index) during
this same period.
4. The gross rent allowed for program units increased by 28
percent, from $652 in 2000 to $832 in 2004.
end result was a 36 percent increase in the housing assistance payment
(HAP), the amount the Federal government pays. The average HAP has
increased from $411 per household per month in 2000 to $557 in 2004,
a difference that amounts to more than $3.3 billion annually. This
cost increase has occurred even as markets across the country exhibited
record high vacancy rates and PHAs from across the country reported
to HUD that their rental markets were soft.
Even without these budgetary pressures, however, I believe serious
restructuring of Section 8 would be necessary to improve the program's
results for those it serves.
program currently doesn't provide families with the right incentives.
The Federal government has allowed families who declare no income
to live rent-free and to receive a check to pay for utilities. There
is little incentive for families to seek housing outside of the
voucher program; in fact, there is a disincentive to make positive
That is in part because since 1998 PHAs have been forced to give
three out of every four vouchers to families with little or no income.
To be precise, the 1998 statute requires that 75 percent of all
vouchers be issued to families making 30 percent or less of area
median income. This has restricted a PHA's ability to address the
needs of other families who, despite having slightly higher incomes,
might benefit more from housing assistance, including many working
requirement has shut the door to voucher assistance on low-income
individuals who work hard to raise their income, and then find themselves
competing with those that earn slightly less. They are likely to
remain too poor to afford a home, yet if they are outside the targeted
group, they will be relegated to lengthy waiting lists with the
ever-diminishing likelihood of receiving a voucher. Thus, housing
agencies are forced to discriminate against those moving up the
has also led to a higher rate of subsidy per family and created
a system where families are more likely to stay in the program longer.
We believe that since 1998, the fastest-growing segment of voucher
recipients has been families that have been in the program for longer
than five years. The current program design has made housing assistance
a permanent support for some families. Moreover, results from the
welfare-to-work voucher demonstration indicate that providing vouchers
to welfare recipients may have contributed to a short-term reduction
in earnings and employment, and an increase in welfare dependence.
Rather than a "hand up," Section 8 Housing Vouchers have turned
into a "hand out."
problems do not end there. The verification of household income,
the determination of tenant contribution to rent, and countless
other requirements have become so complex that it is difficult to
perform these functions accurately. Section 8 currently has separate
rules for more than a dozen different types of vouchers, along with
120 pages of regulations that PHAs are required to navigate. It
is far more time-consuming to determine the right rent contribution
for a low-income household than to calculate the Federal income
tax for that household.
Over the past two years, HUD has engaged in numerous discussions
with PHA directors, housing policy experts, representatives of the
housing industry, Members of Congress, and other interested parties
on how best to address the challenges facing the Section 8 program.
result of these policy discussions is the proposed State and Local
Housing Flexibility Act of 2005, incorporating the Flexible Voucher
Program (FVP, in Title 1 of HR 1999), which the Administration first
proposed in its FY 2005 Budget request, and now has re-proposed,
with a number of changes, for FY 2006. The Administration is convinced
that the Flexible Voucher Program will enable PHAs to better serve
low-income families, reduce the waiting lists for vouchers, and
move more working families toward self-sufficiency and homeownership.
It will put more decision making at the local level, allow PHAs
to run a more streamlined program while requiring them to control
costs, and to encourage them to give a "hand up" in order to help
more needy families. As more families move up to self-sufficiency,
the duration of assistance will drop and the same dollars can be
used to help additional families over time. While giving PHAs additional
flexibility, the reforms also would give them new incentives to
set and meet local performance goals, including goals appropriate
for special populations such as the elderly and the disabled. The
result, we think, is that PHAs will direct vouchers to those most
likely to benefit from assistance.
HR 1999 also takes the initiative to provide long awaited rent simplification
relief to PHAs operating public housing programs in Title II. The
current statutory and corresponding regulatory requirements governing
calculation of income and rent are enormously cumbersome and difficult
Over time the process has become ever more complex so that one study
indicated it would consume more than 6 hours of PHA staff time to
correctly conduct the required tenant interview and income calculation
process. Rent simplification is a logical result of the President's
Management Initiative, Rental Housing Integrity Improvement Project
(RHIIP), to reduce errors in rent calculation and improper payments,
caused in part by the complexity of the rental determination requirements.
Public Housing Rent Flexibility and Simplification proposal (Title
II) provides PHAs with the ability to make local rent determinations
that will best suit their needs. It provides the same menu of rent
options provided by Title I and applies this to the public housing
this title, PHAs will have the option to keep existing rent structures
or to make changes that better serve their populations. It removes
all deductions and exclusions from the calculation of income, the
cause for much of the current law's complexity, but it retains the
current public housing targeting requirement of 40% of the tenants
below 30% of area median income. Under the proposed reforms rent
structures could be more transparent, equitable and easily administered.
reiterates the protections afforded elderly and disabled and applies
the same review requirements, and finally, the legislation simplifies
the administration of escrow savings accounts and encourages their
use to promote savings.
the State and Local Housing Flexibility Act provides in Title III
for an authorized Moving to Work Program.
the legislation makes permanent the highly successful Moving to
Work Demonstration. It opens up the benefits of flexibility and
fungibility to all PHAs that have at least 500 public housing units
and 500 Section 8 units AND are also high-performing PHAs, as well
as all participants of the Moving to Work Demonstration. We have
heard the good things these participants are saying about Moving
to Work and agree that this program should be extended and opened
to even more candidates.
works and it is amply shown by the innovative programs PHAs develop
when they are not forced to move lock step according to government
mandates. Under this program, current MTW PHAs with contracts expiring
in the near future will be given the option to extend their existing
contracts for a period of three years or to enter the Program immediately.
Others can opt into the program at the end of their normal contract
term if they are high-performing at that time.
participants may combine public housing operating and capital funds
with their voucher assistance to provide housing assistance to low-income
families and services to facilitate the transition to work.
MTW provisions require HUD to set forth standards to measure PHA
performance within two years of passage. Until then, a MTW participant's
performance would be assessed under applicable assessment systems.
New standards may include: moving assisted low-income families to
economic self-sufficiency; reducing the per-family cost of providing
housing assistance; expanding housing choices for low-income families;
improving program management; or increasing the number of homeownership
opportunities for low-income families.
Returning to Section 8 and Title I, PHAs would continue to receive
a set dollar amount as in 2005, but would have greater freedom to
adjust the program to the unique and changing needs of their communities,
including the ability to set their own subsidy levels based on local
market conditions rather than Washington-determined rents. This
would allow PHAs to serve as many families as possible within their
grant amount, rather than being held to a specific number of vouchers.
FVP would allow local PHAs to determine the appropriate mix of low-income
families to serve by targeting 90 percent of all assistance to those
earning at or below 60 percent of Area Median Income - the same
targeting specified in the HOME Investment Partnerships and Low
Income Housing Tax Credit programs.
The proposal would allow PHAs to create incentives for voucher recipients
to find work, or improve their job situation. For example, PHAs
would be allowed to establish time limits of not less than five
years for able-bodied families. This would be an option, not a federal
mandate. Disabled individuals and the elderly would be exempt from
any time limits.
proposal would allow PHAs to design their own tenant rent policies
and simplify rent calculations, thereby reducing the number of errors
that are made. The FVP would eliminate many of the complex forms
that are currently required to comply with program rules, saving
both time and money. The proposal would significantly reduce unnecessary
administrative burdens on PHAs in the area of annual unit inspections,
annual family income re-certifications, rent calculations, portability,
and program eligibility.
These improvements would provide a more efficient and effective
housing voucher program, which would help low-income families obtain
decent, affordable housing and thereby achieve their personal goals.
FVP would also create new options for families pursuing homeownership
by: (1) allowing a PHA to provide monthly principal and interest
subsidy; (2) allowing a PHA to provide a one-time downpayment grant
of up to $10,000; (3) allow qualified families to work with homebuilders
to pledge their homeownership voucher assistance in advance of construction;
and (4) provide PHAs with a special administrative fee for each
new homeownership closing.
the FVP would limit the ability of currently designated "troubled"
agencies to implement important flexibilities without HUD approval,
and gives HUD the ability to step in and take quick action in cases
of PHAs that fail to properly manage the program.
with the 1998 Reform Act, the FVP retains the strengths of our nation's
voucher program. FVP would continue to: serve only low-income families
with non-luxury housing; permit families to rent above the payment
standard; retain Housing Quality Standards and; permit portability
in a more equitable manner that acknowledges resource limitations.
The FVP provides a reasonable, responsible, and fair approach to
maintaining the housing voucher program into the future. Once the
FVP is in place, Section 8 will be more effective, efficient, and
flexible, but more importantly, it will be better able to meet the
needs of the low-income families that depend upon it.
tenant-based housing assistance has grown from serving 30,000 households
through the Experimental Housing Allowance Program to serving 2
million families today through the Section 8 program. As the program
has grown in size and importance, it has also gained acceptance
as an appropriate method for providing housing assistance to very
low-income families. The 35-year history of tenant-based housing
subsidy for low-income renters has been one of growth, refinement,
and responsiveness in meeting the needs of our nation's low-income
families and individuals.
It has been a history of change.
is no question that change is urgently needed once again. It must
happen soon if we are to continue serving those families that need
Federal help, and continue providing for individuals who seek the
American dream of self-sufficiency.
I said at the outset, and I should say so again: taken together,
these three initiatives of Flexible Voucher Reform, Rent Reform
and Moving to Work, embodied in HR 1999, can serve as the engine
for reform that is genuinely necessary. This committee has shown
leadership, equal to that of the sponsors of the bill, which will
go a long way to moving this important debate forward.
I look forward to the work ahead, as we seek to improve our nation's
largest rental assistance program. I would like to thank all the
members of this Committee for your support of our efforts at HUD.
I welcome your guidance as we continue our work together.
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