Chairman Olver, Ranking Member Latham and distinguished members of the Subcommittee, thank you for this opportunity to provide an update on HUD's expanding efforts to help urban and rural areas across the country create more sustainable homes and communities. Thanks to this Subcommittee's support, first through the American Recovery and Reinvestment Act, then through the appropriation for our current fiscal year, we have been able to make substantial progress on an ambitious agenda in our first year. We are pleased to share with you today our early results and plans for the future.

Our testimony has three main sections. The first highlights the results to date of HUD's Recovery Act investments in sustainable housing and communities, which laid the foundation for much of our continuing commitment. The second summarizes the groundbreaking sustainability partnerships HUD has formed with other federal agencies, which are building the framework for unprecedented collaboration and impact on the ground. The third describes the major activities HUD has underway, led by a new Office of Sustainable Housing and Communities, which will focus our efforts to ensure this agenda remains an enduring priority for the Department. First, however, I wanted to provide context for HUD's commitment in this area.

The Need for Federal Leadership to Advance Sustainable Homes and Communities

While the consequences of climate change are complex and far reaching, we know that the increasing emissions of greenhouse gases, the primary cause of global warming, are largely a result of energy use in our "built environment."

As a federal cabinet agency focused on the built environment, on strengthening communities, and on expanding opportunity for all Americans, HUD recognizes the urgent need for aggressive action to combat climate change. The positive news, and the powerful opportunity, is that we can cut GHG emissions, while creating jobs and expanding opportunity for all Americans through proven strategies for creating more sustainable homes and communities.

Residential housing and the built environment more broadly are major contributors to energy consumption and global warming. Residential buildings alone account for 20 percent of U.S. carbon emissions, with the vast majority coming from detached single-family houses. The transportation sector accounts for about another third of carbon emissions, among many factors because sprawling development patterns separate jobs and houses that, without adequate transit systems, necessitate long commutes and increased dependence on car travel.

The social equity implications of current growth patterns have also become more apparent. As metropolitan areas continue to sprawl outward and jobs become increasingly dispersed, fewer low-wage earners and renters are able to find housing near their work. Nationally, 45 percent of all renters and two-thirds of poor renters live in central cities. Low-income fam¬ilies, many of them minorities, live in neighborhoods that limit access to quality jobs, good schools and opportunities to create wealth and lead healthy lives. The unbalanced nature of metropolitan housing development has strained urban, subur¬ban and rural household budgets, as commutes lengthen: the combination of housing and transportation costs now average a combined 60 percent of income for working families in metropolitan areas.

With few exceptions, the federal government has not been up to the task of addressing these critical trends. Federal programs dealing with housing, transportation and energy is¬sues remain largely divorced from each other, precluding smart, integrated problem solving. Federal policies and rules are narrowly defined, poorly coordinated and often work at cross purposes. The silo driven nature of federal policies and programs extends to planning, data collection, performance measurement and research and evaluation. To address these and other issues, the administration has launched the first comprehensive review of "place based" federal policies in a generation, with sustainability as a central focus.

Place of course is already at the center of every decision HUD makes. HUD's programs today reach nearly every neighborhood in America; 58,000 out of the approximately 66,000 census tracts in the U.S. have one or more unit of HUD assisted housing. Now we have seized this opportunity to renew our focus on place, to better nurture sustainable, inclusive neighborhoods and communities across America's urban, suburban, and rural landscape.

A major component of HUD's refined place-based approach involves making communities sustainable for the long-term. For HUD "sustainability" includes improving building level energy efficiency, cutting greenhouse gas emissions through transit-oriented development, and taking advantage of other locational efficiencies. Critically, we believe sustainability also means creating "geographies of opportunity," places that effectively connect people to jobs, quality public schools, and other amenities. Today, too many families are stuck in neighborhoods of concentrated poverty and segregation, where one's zip code predicts poor educational, employment, and even health outcomes. These neighborhoods are not sustainable in their present state. HUD's commitment to sustainable housing and communities aims to take the challenges head on.

Laying the Foundation: Recovery Act Investments in Sustainable Homes and Communities

As Secretary Donovan testified before you last month, HUD has played a key role in implementing the Recovery Act, which, according to the nonpartisan Congressional Budget Office is already responsible for putting as many as 2.4 million Americans back to work and has put the nation on track toward a full economic recovery. I would like to echo the Secretary's thanks for making our role in that effort possible.

HUD has now obligated 98 percent of the $13.6 billion in Recovery Act funds stewarded by the Department - and disbursed $2.9 billion dollars. As the Secretary noted before you last month, a portion of HUD's Recovery Act funding is fully paid out, or expended, only once construction or other work is complete-just as when individual homeowners pay after they have work done on their homes. Therefore, some of HUD's obligated, but not yet expended, funds are already generating jobs in the hard hit sectors of housing renovation and construction.

While our top priority with Recovery Act funds is creating jobs and economic activity, we are also seizing the opportunity to lay a foundation for HUD's new direction in our Recovery Act investments.  Nearly one-third of HUD's Recovery Act funds can be used for "greening" America's public and assisted housing stock - making homes healthier and more energy efficient at the same time they prepare the new generation of professionals - from mechanics and plumbers, to architects, energy auditors, and factory workers building solar panels and wind turbines - we need to design, install, and maintain the first wave of green technologies.

These investments include:

•  $600 million for energy retrofits of 226 public housing developments and 35 more green newly constructed and substantially rehabilitated public housing developments.
• $500 million for housing on Native American lands, which HUD is encouraging and supporting Tribal housing groups to provide in an environmentally sustainable manner.
• $250 million for green retrofits of 16,600 units of privately owned HUD-assisted housing. (HUD received applications for more than $700 million.)
• $100 million to eradicate lead paint and create healthy homes.

Importantly, energy efficiency and other environmental criteria - and results - are also present in larger HUD programs funded by the Recovery Act, such as $3 billion in formula funding for public housing and $2 billion through the Neighborhood Stabilization Program.

The Recovery Act investments we are making to help families and individuals in affordable housing save energy and live in healthier homes and communities are teaching us what works and how we can be a more effective partner to builders, owners and residents who want the opportunity to live in greener communities. These lessons and feedback from our partners are informing and improving our continuing efforts to increase environmental benefits, lower costs for doing so, and measure and verify the benefits in affordable housing.

Building the Framework: HUD's Sustainability Partnerships with Other Agencies

Creating more sustainable housing and communities at scale - making sustainability the "default option" for our partners and the people we serve - requires an interdisciplinary approach and intense collaboration across the traditional silos of federal policy. While HUD can bring and is bringing enormous leadership, we know we need partners with assets and expertise that we lack. That is why we are so pleased to be working closely with a number of federal agencies to leverage the skills, resources and partnerships that each can bring to truly transforming our built environment.

As you know, HUD, the Department of Transportation (DOT) and the Environmental Protection Agency (EPA) have formed the Interagency Partnership for Sustainable Communities to help improve access to affordable housing, expand transportation options and lower transportation costs while protecting the environment in communities nationwide. Through a set of guiding Livability Principles and a partnership agreement that frames our collective efforts, the partnership is coordinating federal housing, transportation, and other infrastructure investments to an unprecedented extent to protect the environment, promote equitable development, and help to address the challenges of climate change. (The Livability Principles are attached as Appendix A.)

Having served in government for many years, I can say that the level of collaboration and cooperation among our agencies, starting at the top with Secretary Donovan, Secretary LaHood and Administrator Jackson, and extending to the staff in each agency, has been nothing short of remarkable. We are getting better every day at aligning where it makes most sense and assigning specific responsibilities to the appropriate agency based on their resources and expertise. One example was DOT's inclusion of HUD and EPA in the review of competitive applications for DOT's $1.5 billion TIGER Grant program funded under the Recovery Act. We would by no means suggest that we have perfected the collaborative approach. Decades of statutes, regulations and habits in some cases create real challenges to the partnership results all three of our agencies aspire to achieve. The good news is we are making consistent progress, moving forward despite the barriers, and always welcome ideas and assistance from interested parties, including this Subcommittee.

Another exciting example is the partnership between HUD and the Department of Energy that is working to increase energy efficiency in affordable homes and apartments. One joint project is to develop a streamlined, low-cost, consumer friendly tool to provide homeowners with better information about their home's energy use, options for saving energy, and the cost savings that would result. We are also exploring options for providing financing for consumers to pay for the cost of energy saving home improvements, described more below.

HUD's partnership with DOE is delivering results in multifamily low-income housing as well. Our agencies have worked together to eliminate duplicative and unnecessary rules that impeded the use of federal Weatherization Assistance Program funds to retrofit multifamily properties. Thousands of low-income families are now in better position to benefit from the $5 billion in Weatherization funds provided under the Recovery Act as a result.

In addition, I am pleased to represent HUD on the Steering Committee for the White House Council on Environmental Quality, the Office of Science and Technology Policy, and the National Oceanic and Atmospheric Administration interagency process to produce a set of recommendations for Federal actions that will help society adapt to climate change. This group is developing recommendations on how federal agencies can effectively create and implement climate change adaptation policies and strategies.

Other similar partnerships are in formation or early development. We are especially optimistic about potential collaboration with the Department of Agriculture to ensure we are as effective in helping deliver sustainability solutions in rural areas and small towns as we are in larger and more urban communities.

Ensuring HUD's Long Term Leadership on Sustainable Homes and Communities

Thanks to this Subcommittee's support, we have created a new office that will ensure the foundation laid by our Recovery Act investments and the framework we are building in partnership with other agencies is buttressed and built upon by institutionalized capacity within HUD. The Office of Sustainable Housing and Communities, under my direct supervision, will help provide and expand that capacity among HUD staff and stakeholders.

Shelley Poticha, nationally recognized for her leadership to create more location efficient communities, is in place as Director of the office and we have begun to assemble a talented team that brings the technical skill sets and deep commitment our sustainability initiatives demand. Just as important, we are creating teams of staff in HUD's regional and field offices to serve as partners and points of contact with stakeholders in our sustainability agenda, listening to local ideas and delivering HUD's solutions in real time. Staff playing these roles will be current HUD employees who are trained in additional skills and work with their colleagues from DOT, EPA and other agencies in our communities.

The office has already made significant progress advancing several new initiatives. First is the Sustainable Communities Initiative, which will provide a total of $150 million to a wide variety of multi-jurisdictional and multi-sector partnerships and consortia, from Metropolitan Planning Organizations and State governments, to non-profit and philanthropic organizations. These grants will be designed to encourage regions to build their capacity to plan for  integration of economic development, land use, transportation, and water infrastructure investments, and to integrate workforce development with transit-oriented development.

For the first time ever, we will provide federal money to support planning grants that will be selected not only by HUD, but also by DOT and EPA - because when it comes to housing, environmental and transportation policy, it's time the Federal government spoke with one voice.

The first $100 million in funding is for regional integrated planning initiatives through a Sustainable Communities Planning Grant Program. The goal of the Program is to support multi-jurisdictional regional planning efforts that integrate housing, economic development, and transportation decision-making in a manner that empowers jurisdictions to consider the interdependent challenges of economic growth, social equity and environmental impact simultaneously. And we are committed to encouraging these regions to meaningfully engage residents and other local stakeholders to build long-lasting alliances.

HUD recognizes that while the core principles of the program are not new, the federal government has never attempted to directly support local leaders in articulating and realizing them. In recognition that we have much to learn in our program from leaders on the ground, we have issued an Advanced Notice and Request for Comment for the program. We are inviting feedback through a new online "Wiki" accessible via HUD's website (http://www.hud.gov/sustainability) and through an extensive listening tour around the country in which I am greatly enjoying participating.

We know that this seemingly "small" amount of funding can help accomplish a great deal and we will be working hard and listening closely to ensure it's useful for rural and smaller communities, as well as larger ones, and for places that are just starting to think about more sustainable growth and development, as well as those that are more advanced. Congress has also directed us to share our plans for the entire Sustainable Communities Initiative and we look forward to doing so with the Subcommittee by the end of the month.

Another area where the Office of Sustainable Housing and Communities is focused is scaling up energy efficiency in affordable housing. Our FY 2010 appropriation includes $50 million for an Energy Innovation Fund. Pursuant to Congress' direction, we are using half the funding to expand the market for energy efficient mortgages and half the funding to explore innovations in more energy efficient multifamily housing.  In both cases, our aim is to use these limited federal funds to pilot approaches that HUD's Federal Housing Administration (FHA) and private sector financial institutions will take to greater scale in the market.

Under the leadership of the Office of Sustainable Homes and Communities, HUD has also launched a transformative program to develop uniform investment policies, performance goals, and reporting and tracking systems to support national objectives for energy efficiency. HUD is working together with DOE to support the achievement of the President's goal of weatherizing one million homes per year by enabling the cost effective energy retrofits of a total of 1. 2 million homes in FY 2010 and FY 2011. As part of this initiative HUD intends to complete cost effective energy retrofits of an estimated 126,000 HUD-assisted and public housing units during this time.

And as we are developing new approaches to the Energy Efficient Mortgage, we are also exploring the potential for Location Efficient Mortgages (LEM's). LEM's take into account the lower costs of transportation in transit rich, walkable communities. This is part of a larger effort that HUD is undertaking to "redefine affordability," i.e. looking at housing affordability through the lens of the combined costs of housing (including utility costs) and transportation, rather than looking at them separately. This work, while early in the research and development stage, holds significant promise.

Finally, with $10 million of this office's budget, we are developing an Affordability Index to lower the barriers to consumers who want to buy homes in more sustainable places by accounting for that housing's proximity to jobs and schools.

As you know from Secretary Donovan's testimony, we are requesting $150 for the second year of the Sustainable Communities Initiative. Working closely with this Subcommittee and the housing authorizers, we would use these funds for the following:

• A second round of Sustainable Communities Planning Grants administered by HUD in collaboration with the Department of Transportation (DOT) and the Environmental Protection Agency (EPA). As described above, these grants will catalyze the next generation of integrated metropolitan transportation, housing, land use and energy planning using the most sophisticated data, analytics and geographic information systems. Better coordination of transportation, infrastructure and housing investments will result in more sustainable development patterns, more affordable communities, reduced greenhouse gas emissions, and more transit-accessible housing choices for residents and firms.
• Additional investment in Sustainable Communities Challenge Grants, also as described above, to help localities implement Sustainable Communities Plans they will develop. These investments would provide a local complement to the regional planning initiative, enabling local and multi-jurisdictional partnerships to put in place the policies, codes, tools and critical capital investments needed to achieve sustainable development patterns.
• The creation and implementation of a capacity-building program and tools clearinghouse, complementing DOT and EPA activities, designed to support both Sustainable Communities grantees and other communities interested in becoming more sustainable.
• A joint HUD-DOT-EPA research effort designed to advance transportation and housing linkages at every level our agencies work on.

Conclusion

Our testimony today has focused largely on the work and agenda of HUD's Office of Sustainable Homes and Communities. We want to again express our deep appreciation for the Subcommittee's support for this bold, and necessary, new initiative. As Secretary Donovan and I say, our ultimate goal is to harness the entire HUD budget as a force for creating greener homes and communities everywhere in America. We look forward to working with the Subcommittee to advance that goal.

 Appendix A

HUD-DOT-EPA Interagency Partnership for Sustainable Communities

Livability Principles

June 16, 2009

Provide more transportation choices. Develop safe, reliable, and economical transportation choices to decrease household transportation costs, reduce our nation's dependence on foreign oil, improve air quality, reduce greenhouse gas emissions, and promote public health.

Promote equitable, affordable housing. Expand location- and energy-efficient housing choices for people of all ages, incomes, races, and ethnicities to increase mobility and lower the combined cost of housing and transportation.

Enhance economic competitiveness. Improve economic competitiveness through reliable and timely access to employment centers, educational opportunities, services and other basic needs by workers, as well as expanded business access to markets.

Support existing communities. Target federal funding toward existing communities—through strategies like transit oriented, mixed-use development, and land recycling—to increase community revitalization and the efficiency of public works investments and safeguard rural landscapes.

Coordinate and leverage federal policies and investment. Align federal policies and funding to remove barriers to collaboration, leverage funding, and increase the accountability and effectiveness of all levels of government to plan for future growth, including making smart energy choices such as locally generated renewable energy

Value communities and neighborhoods. Enhance the unique characteristics of all communities by investing in healthy, safe, and walkable neighborhoods—rural, urban, or suburban.

It does not take a housing expert to see that HUD's rental assistance programs desperately need simplification. HUD currently provides deep rental assistance to more than 4.6 million households through thirteen different programs, each with its own rules, administered by three operating divisions with separate field staff. Too often over time, additional programs designed to meet the needs of vulnerable populations were added without enough thought to the disjointed system that would result. This unwieldy structure ill serves the Department, our government and private sector partners, and-most importantly-the people who live in HUD-supported housing.

In my last job, as Commissioner of the New York City Department of Housing Preservation and Development, I personally experienced the challenges of working with HUD rental assistance to preserve and develop affordable housing at a large scale. While implementing the City's 165,000 unit New Housing Marketplace plan, it was a constant struggle to integrate HUD's rental assistance streams, and capital funding resources for that matter, into the local, state, and private sector housing financing that was absolutely necessary to leverage to get the job done.

But I was willing to deal with the transaction costs of engaging with HUD's less-than-ideally aligned subsidy programs for a simple reason: the engine that drives capital investment at the scale needed, in a mixed-finance environment, is typically a reliable, long-term, market-based, stream of federal rental assistance. Historically, no other mechanism-and no other source of government funding-has ever proven as powerful at unlocking a broad range of public and private resources to meet the capital needs of affordable housing. While highly imperfect, HUD's rental assistance programs are irreplaceable.

This said, tolerating the inefficiencies of the status quo is no longer an option. The capital needs of our Nation's affordable, federally-assisted housing stock are too substantial and too urgent. The Public Housing program in particular has long wrestled with an old physical stock and a backlog of unmet capital needs that may exceed $20 billion. [1] To be sure, nearly two decades of concentrated efforts to demolish and redevelop the most distressed public housing projects, through HOPE VI and other initiatives, has paid off. The stock is in better shape overall than it has been in some time, [2] and the $4 billion in ARRA funds targeted to public housing capital improvements are further stabilizing the portfolio. But this very progress has created a unique-but time limited- opportunity to permanently reverse the long-term decline in the Nation's public housing portfolio and address the physical needs of an aging assisted housing stock.

My many years of experience of dealing with affordable housing on a large scale-both in New York and overseeing HUD's multifamily assisted housing programs during the 1990's --have drilled home two key lessons. First, it is far more costly to build new units than to preserve existing affordable housing. And, second, an affordable housing project can limp along for some time with piecemeal, ad hoc strategies to address its accumulating capital backlog, but eventually the building will reach a "tipping point" where its deterioration becomes rapid, irreversible and expensive. This moment in time calls for a timely, crucial federal investment to leverage other resources to the task of maintaining the number of safe, decent public and assisted housing units available to our nation's poor families-an objective that at some point, soon, will cost the taxpayer substantially more to achieve by other means.

Nor can we afford to sustain the disconnect between HUD's largest rental and operating assistance programs, given the disproportionate impact of the recession on the recipients of HUD assistance and the communities where much of HUD's public and assisted housing stock remains. More than ever, communities of concentrated poverty need their public and assisted housing stock-even the most distressed projects that are the targets of our proposed Choice Neighborhoods initiative-to serve as anchors of broader neighborhood revitalization efforts. Simultaneously, in this challenging economy, tenants of HUD-subsidized projects also need the option to pursue opportunities for their families in other neighborhoods and communities as and when they arise, without losing the subsidy that is so crucial to maintaining their housing stability. Today, we lack the seamless connection that should exist between HUD's largest project-based assistance programs-PBRA and public housing-and the Housing Choice Voucher program, which leaves tenants of PBRA and public housing with limited ability to move to greater opportunity.

To address these issues and move HUD's rental housing programs into the housing market mainstream, HUD proposes to launch an ambitious, multi-year effort called the Transforming Rental Assistance (TRA) initiative.

This initiative is anchored by four guiding principles:

First, that the complexity of HUD's programs is part of the problem - and we must streamline and simplify our programs so that they are less costly to operate and easier to use at the local level. Ultimately, TRA is intended to move properties assisted under these various programs toward a more unified funding approach, governed by an integrated, coherent set of rules and regulations that better aligns with the requirements of other of federal, state, local and private sector financing streams.

Second, that the key to meeting the long-term capital needs of HUD's public and assisted housing lies in shifting from the federal capital and operating subsidy funding structure we have today-which exists in a parallel universe to the rest of the housing finance world-to a federal operating subsidy that leverages capital from other sources.

Third, that bringing market investment to all of our rental programs will also bring market discipline that drives fundamental reforms. Only when our programs are truly open to private capital will we be able to attract the mix of incomes and uses and stakeholders necessary to create the sustainable, vibrant communities we need.

And fourth, that we must combine the best features of our tenant-based and project-based programs to encourage resident choice and mobility. TRA reflects HUD's commitment to complementing tenant mobility with the benefits that a reliable, property-based, long term rental assistance subsidy can have for neighborhood revitalization efforts and as a platform for delivering social services. And in a world where the old city/suburb stereotypes are breaking down, and our metropolitan areas are emerging as engines of innovation and economic growth, we have to ensure our rental assistance programs keep up.

In 2011, the first phase of TRA will provide $350 million to preserve approximately 300,000 units of public and assisted housing, increase administrative efficiency at all levels of program operations, leverage private capital and enhance housing choice for residents. With this request, we expect to leverage over $7.5 billion in other public and private sector capital investment. PHAs and private owners will be offered the option of converting to long-term, market-based, property-based rental assistance contracts that include a resident mobility feature, which we are working to define in close collaboration with current residents, property owners, local governments and a wide variety of other stakeholders.

Most of the fiscal year 2011 downpayment on TRA, up to $290 million, will be used to fill the gap between the funds otherwise available for the selected properties-in most cases the public housing Operating Fund subsidy-and the first-year cost of the new contracts. As noted above, a reliable funding stream will help place participating properties on a sustainable footing from both a physical and a financial standpoint, enabling owners to leverage private financing to address immediate and long-term capital needs, and freeing them from the need for annual capital subsidies.

Under this voluntary initiative, HUD will prioritize for conversion public housing and assisted multifamily properties owned by PHAs. Notably, in this regard, TRA delivers on the promise of over a decade's worth of movement in the field of public housing toward the private sector real-estate model known as "asset-management," by finally providing public housing authorities with the resources to successfully implement this model in the projects they will continue to own. Three types of privately-owned HUD-assisted properties will also be eligible for conversion in this first phase: Section 8 Moderate Rehabilitation contracts administered by PHAs, and properties assisted under the Rent Supplement or Rental Assistance Programs. With this step, we can eliminate three smaller legacy programs that have become "orphans" as new housing programs have evolved. This consolidation will preserve these properties for residents, improve property management, and streamline HUD oversight to save the taxpayer money.

Much of the remaining funding, up to $50 million, will be used to promote mobility by targeting resources to encourage landlords in a broad range of communities to participate in the housing voucher program and to provide additional services to expand families' housing choices. A portion of these funds also may be used to offset the costs of combining HCV administrative functions in regions or areas where locally-designed plans propose to increase efficiency and effectiveness as part of this conversion process.

By the spring of 2010, the Administration will transmit to the relevant authorizing committees in Congress proposed legislation to authorize the long-term property-based rental assistance contracts, with a resident mobility feature, that would be funded by the Budget request. Enactment of a number of the provisions in the Section 8 Voucher Reform Act is also an integral part of the Transforming Rental Assistance initiative. The Administration looks forward to working with Congress to finalize this vital legislation.

Without this Subcommittee's work on HOPE VI and the Quality Housing and Work Responsibility Act, this opportunity would never have arisen. In fiscal year 2011, we can together begin to put both public and assisted housing on firm financial footing for decades to come, and start to meld HUD's disparate rental assistance and capital programs into a truly integrated federal housing finance system. I hope that you will help HUD make this breakthrough by funding the TRA initiative.

• Increases investment in proven and restructured HUD homeless assistance programs

Fiscal year 2011 also marks the first year for implementation of the Homeless Emergency Assistance and Rapid Transition to Housing (HEARTH) Act, which - when signed by President Obama in the spring of 2009-restructured HUD's homeless assistance programs to incorporate nearly two decades of research and on-the-ground experience in confronting homelessness. To support implementation of this important legislation, the Budget requests $2.055 billion for homeless assistance funding-a nearly $200 million increase compared to fiscal year 2010.

This additional investment in homeless assistance programs is called for even in a difficult fiscal environment. Culminating in the HEARTH Act, HUD's homeless programs have evolved into a more performance-driven, outcome-based system for targeting and leveraging federal resources at the local level to combat homelessness. This Subcommittee played an indispensable role in this process. In the late 1990's, when less than twenty percent of HUD homeless assistance grants were supporting permanent housing solutions for the most disabled homeless individuals and families, this Subcommittee in fiscal year 1999 joined your colleagues in the Senate in requiring that at least 30 percent of these grants be spent annually on the evidence-based practice of permanent supportive housing, and set forth the ambitious goal of creating 150,000 units of permanent supportive housing for the chronically ill, chronically homeless. Over time, the research foundation for this targeted investment has only solidified-attached to my testimony is a summary of key studies, including several published in the Journal of the American Medical Association, demonstrating that permanent supportive housing both ends homelessness for individuals whom many thought would always live on our streets and in shelters, and saves taxpayers money by interrupting their costly cycling through shelters, emergency rooms, detox centers, prisons, and even hospitals.

As a consequence of the permanent housing set aside, maintained each year by this Subcommittee, HUD's homeless assistance grants produced an average of 8,878 permanent supportive housing beds annually from fiscal year 2001 through fiscal year 2008, and a cumulative total of 71,000 beds, with an increasing percentage targeted to the chronically homeless (66% in FY 2008 compared to 53% in FY 2005, the first year HUD tracked such data). The impact was clear and dramatic. In the four years from 2005 through 2008, the number of chronically homeless individuals dropped by thirty percent, certainly one of the greatest social welfare policy achievements of the past decade.

One of the key provisions of the HEARTH Act was its codification of the 30 percent permanent housing set aside pioneered by this Subcommittee. Coupled with the level of funding this Budget requests, and the alignment of homeless assistance grants with other HUD rental assistance subsidies (1 year terms), this provision is projected to yield over 9,500 new units of permanent supportive housing for disabled individuals and families. This will enable continued progress toward ending chronic homelessness.

The HEARTH Act also codifies the unique competitive process, known as the Continuum of Care ("CoC"), in which HUD homeless assistance funding and priorities are incorporated within a robust local planning and implementation process. The CoC system provides a coordinated housing and service delivery system that enables communities to plan for and provide a comprehensive response to homeless individuals and families. Communities have worked to establish more cost-effective continuums that identify and fill the gaps in housing and services that are needed to move homeless families and individuals into permanent housing. The CoC is an inclusive process that is coordinated with non-profit organizations, State and local government agencies, service providers, private foundations, faith-based organizations, law enforcement, local businesses, and homeless or formerly homeless persons. This planning model is based on the understanding that homelessness is not merely a lack of shelter, but involves a variety of unmet needs -- physical, economic, and social.

Fiscal year 2011 marks the first year for implementation of this and other key features of the HEARTH legislation including: increased investment in the evidence-based practice of homelessness prevention; improvement in the accuracy of the definition of homelessness; support for the project operation and local planning activities needed to continue the movement of the HUD-supported homeless assistance system to a more performance-based and outcome-focused orientation; and provision of assistance that better recognizes the needs of rural communities.

In this period of economic hardship, which in many respects mirrors the early 1980's when widespread homelessness reappeared for the first time since the Great Depression, communities will need all of the tools authorized by the HEARTH Act-and the additional resources requested in this Budget-to meet the needs of those experiencing homelessness, including too many of our nation's veterans. In particular, I am concerned that HUD's Annual Homeless Assessment Report data showed a nine percent rise in family homelessness from 2007-2008 and the Department's more recent quarterly PULSE data from a small number of geographically diverse localities across the country that suggests a continued increase in homelessness.

Goal 3: Utilize Housing as a Platform for Improving Quality of Life

A growing body of evidence points to the role housing plays as an essential platform for human and community development. Stable housing is the foundation upon which all else in a family's or individual's life is built - absent a safe, affordable place to live, it is next to impossible to achieve good health, positive educational outcomes, or reach one's full economic potential. Indeed, for many persons with disabilities living in poverty, lack of stable housing leads to costly cycling through crisis-driven systems like emergency rooms, psychiatric hospitals, detox centers, and even jails.

By the same token, stable housing provides an ideal launching pad for the delivery of healthcare and other social services focused on improving life outcomes for individuals and families. As noted above, a substantial level of research has established, for example, that providing permanent supportive housing to chronically ill, chronically homeless individuals and families not only ends their homelessness, but also yields substantial cost savings in public health, criminal justice, and other systems-often nearly enough to fully offset the cost of providing the permanent housing and supportive services. More recently, scholars have focused on housing stability as an important ingredient for children's success in school- unsurprisingly, when children are not forced to move from place to place and school-to-school, they are more likely to succeed academically.

Capitalizing on these insights, HUD is launching efforts to connect housing to services that improve the quality of life for people and communities. The fiscal year 2011 budget proposes the following important initiatives:

• Connects formerly homeless tenants of HUD-housing to mainstream supportive services programs

The Department requests $85 million for incremental voucher assistance for the new Housing and Services for Homeless Persons Demonstration to support groundbreaking collaborations with the Department of Health and Human Services (HHS) and the Department of Education. This demonstration is premised on the Administration's firm belief that targeted programs alone cannot end homelessness. Mainstream housing, health, and human service programs will have to be more fully engaged to prevent future homelessness and significantly reduce the number of families and individuals who are currently homeless. Two separate initiatives will be funded in an effort to demonstrate how mainstream programs can be aligned to significantly impact homelessness.

One initiative will focus on individuals with special needs who are homeless or at risk of homelessness. This initiative is designed to model ways that resources across HUD and HHS can be brought to bear to address the housing and service needs of this vulnerable population. Recently released data shows that over 42 percent of the homeless population living in shelters has a disabling condition. The demonstration would combine Housing Choice Vouchers with health, behavioral health and other support services to move and maintain up to 4,000 chronically homeless individuals with mental and substance use disorders into permanent supportive housing.

Vouchers will be targeted to single, childless adults who are homeless and who are already enrolled in Medicaid through coverage expansion under state Medicaid waivers or state only initiatives. In addition, HHS is seeking $16 million in its fiscal year 2011 budget request to provide wraparound funding through grants administered by the Substance Abuse and Mental Health Services Administration to promote housing stability and improvements in health outcomes for this population. HUD and HHS will jointly design the competitive process and conduct and evaluation to determine: (1) the cost savings in the healthcare and housing systems of the proposed approach, (2) the efficacy of replication, and (3) the appropriate cost-sharing among federal agencies for underwriting services that increase housing stability and improve health and other outcomes.

Another initiative will establish a mechanism for HUD, HHS and Department of Education programs to be more fully engaged in stabilizing homeless families, ultimately resulting in reducing the costs associated with poor school performance and poverty. This initiative strategically targets these resources to: (1) identify families who are homeless or at risk of homelessness, (2) intervene with the appropriate array of housing assistance, income supports, and services to ensure that the family does not fall into the shelter system or onto the street (or if already homeless that the family is stably housed and does not return to homelessness), and (3) provide the tools necessary to assist the family to build on its resources to escape poverty and reach its highest possible level of economic security and self-sufficiency.

HUD will make available a minimum of 6,000 Housing Choice Vouchers on a competitive basis and jointly design the competitive process with HHS and the Department of Education. Winning proposals will have to show that the new vouchers are being targeted to communities with high concentrations of homeless families. With guidance from HHS, states will need to demonstrate how they will integrate HUD housing assistance with other supports-including TANF-these families will need to stabilize their housing situation, foster healthy child development, and prepare for, find, and retain employment. HHS will provide guidance to state TANF agencies and other relevant programs to explain this initiative and their role in both the application for the vouchers and the implementation of the program. DoE will assist with identifying at-risk families with children through their network of school based homelessness liaisons, and providing basic academic and related supports for the children. Locally, applicants will need to show that they have designed a well-coordinated and collaborative program with the TANF agency, the local public schools, and other community partners (e.g., Head Start, child welfare, substance abuse treatment, etc.).

Collectively, these initiatives represent an unprecedented, "silo-busting" alignment of federal resources to address the needs of some of the country's most vulnerable individuals and families. At the same time, we believe they will save the taxpayer significantly in the long run. This innovative approach will also involve some collaboration across subcommittee jurisdictional lines, and we look forward to working with the members of this panel in determining how best to facilitate that joint action.

• Modernizes the 202 and 811 Supportive Housing Programs for the Elderly and Disabled

As the Department begins the process of restructuring its rental assistance programs, it must also ensure that its programs providing capital grants and rental assistance that are sized to the actual costs to operate a project ('budget-based' or 'operating cost-based') are well designed for the world of housing finance in the 21st century. Beyond public and assisted housing-the focus of the TRA initiative-the most prominent examples of such funding streams are the Section 202 and 811 programs, which couple housing and services for the nation's poor elderly and disabled, respectively.

Although they have provided critical housing for thousands of residents, these programs are in need of modernization. Project sponsors no longer receive enough funding per grant for the 202 and 811 programs to be a "one-stop shop" to capitalize and sustain a project, yet they are subject to a level of bureaucratic oversight that suggests they are. This regulatory structure also makes it difficult for project sponsors to work with other financing streams, such as low income housing tax credits, even as the average grant size requires accessing other capital sources. As a result, project development is slowed and, coupled with outdated geographic allocation formulae, limited resources are spread too thin to reach scale at either the project or national programmatic levels. In 2009, the 202 program produced only 3,049 units with an average project size of 44 units and the 811 program produced only 661 units with an average project size of 10 units.

Already 10 times as many units are produced under the Low Income Housing Tax Credit program. And under the status quo, the total annual production of units will continue to decrease as the cost of supporting existing 811/202 properties consumes more and more of the overall funding allocation. This threatens to make the programs increasingly marginal for the nation's elderly and disabled.

Accordingly, HUD requests a suspension of funding for Section 202 and 811 Capital Advance Grants in fiscal year 2011 in order to redesign the programs to better target their resources to meet the current housing and supportive service needs of frail elderly and disabled very low-income households. The redesigned programs will maximize HUD's financial contribution through enhanced leveraging requirements and will also encourage or require partnerships with HHS and other services funding streams to create housing that, while not medically licensed, still effectively meets the needs of very low-income elderly and disabled populations unable to live fully independently. The program reforms for both 202 and 811 will include the following: 1) new requirements to establish demand to ensure meaningful impact of dollars awarded; 2) raised threshold for sponsor eligibility to ensure the award of funds only to organizations with unique competency to achieve the program goals; 3) streamlined processing to speed development timeframes; 4) broader benefits of program dollars achieved by facilitating supportive services provided by Medicaid/Medicare Waiver programs such as the Program of All-inclusive Care for the Elderly (PACE) model services to 202 project residents, 5) encouraging better leveraging of other sources of funding, such as low income housing tax credits and 6) integrating 811 programs within larger mixed finance, mixed use projects.

Goal 4: Build Inclusive and Sustainable Communities Free from Discrimination

The Department's approach to this objective is informed by the Obama Administration's landmark, federal government-wide review of "place-based" policies for the first time in over three decades.

Place is already at the center of every decision HUD makes. HUD's programs today reach nearly every neighborhood in America -- 58,000 out of the approximately 66,000 census tracts in the U.S. have one or more unit of HUD assisted housing. But we have taken this opportunity to renew our focus on place, with the result that the proposed FY 2011 Budget allows HUD to better nurture sustainable, inclusive neighborhoods and communities across America's urban, suburban, and rural landscape.

One aspect of HUD's refined place-based approach involves making communities sustainable for the long-term. Sustainability includes improving building level energy efficiency, cutting carbon emissions through transit-oriented development, and taking advantage of other locational efficiencies. But sustainability also means creating "geographies of opportunity," places that effectively connect people to jobs, quality public schools, and other amenities. Today, too many HUD-assisted families are stuck in neighborhoods of concentrated poverty and segregation, where one's zip code predicts poor educational, employment, and even health outcomes. These neighborhoods are not sustainable in their present state.

This Budget lays the groundwork for advancing sustainable and inclusive growth patterns at the metropolitan level, communities of choice at the neighborhood scale, and energy efficiency at the building scale. Specifically, the fiscal year 2011 Budget calls for the following series of programs and funding levels.

• Supports and improves the federal government's premier community development program

The economic downturn and foreclosure crisis have significantly depleted resources in state and local governments while increasing demand for services. Revenue declines often turn quickly into layoffs and cuts in services for the poor. Meanwhile, community development investments have a heightened role in economic redevelopment and stabilization for neighborhoods and regions across the country. During these difficult economic times, it is critical that the Administration support and enhance community development programs and to partner with grantees in developing strategies to increase economic vitality, build capacity, and build sustainable communities and neighborhoods of opportunity. Since 1974, the Community Development Block Grant (CDBG) program has provided formula grants to cities and states to catalyze economic opportunity and create suitable living environments through an extensive array of community development activities.

The fiscal year 2011 Budget proposes a total of $4.380 billion for the Community Development Fund, which includes:

• $3.99 billion for CDBG formula distribution, to meet the President's campaign promise to fully fund CDBG. Simultaneously, the Department proposes a number of improvements to the CDBG program, including revamping the consolidated plans developed by state and local governments, greater accountability, and better performance metrics.
  
• $150 million in funding for the second year of the Sustainable Communities Initiative. The initiative has four components in 2011, described below. HUD plans to work with the relevant authorizing committees in order to refine these proposals.
  1. Sustainable Communities Planning Grants administered by HUD in collaboration with the Department of Transportation (DOT) and the Environmental Protection Agency (EPA). These grants will catalyze the next generation of integrated metropolitan transportation, housing, land use and energy planning using the most sophisticated data, analytics and geographic information systems. Better coordination of transportation, infrastructure and housing investments will result in more sustainable development patterns, more affordable communities, reduced greenhouse gas emissions, and more transit-accessible housing choices for residents and firms.
     
  2. Sustainable Communities Challenge Grants to help localities implement Sustainable Communities Plans they will develop. These investments would provide a local complement to the regional planning initiative, enabling local and multi-jurisdictional partnerships to put in place the policies, codes, tools and critical capital investments to achieve sustainable development patterns.
     
  3. The creation and implementation of a capacity-building program and tools clearinghouse, complementing DOT and EPA activities, designed to support both Sustainable Communities grantees and other communities interested in becoming more sustainable.
     
  4. A joint HUD-DOT-EPA research effort designed to advance transportation and housing linkages at every level our agencies work on.
• $150 million for the Catalytic Investment Competition Grants program to create jobs by providing economic development and gap financing to implement targeted economic investment for neighborhood and community revitalization. For too long, communities have lacked the kind of place-based, targeted, 'game-changing' federal capital investment program in the community and economic development arena that HOPE VI has proven to be with respect to severely distressed public housing. The Catalytic Investment Competition would rectify that imbalance by providing 'gap financing' for innovative, high impact economic development projects at scale that create jobs. The program will create a competitive funding stream that is responsive to changes in market conditions, leverages other neighborhood revitalization resources (including formula CDBG funds), and ultimately increases the economic competitiveness of distressed communities and neighborhoods.
  
  Under this proposal, my office would be permitted to consider how much and to what extent the project will complement and leverage other community development and revitalization activities such as the Choice Neighborhoods Initiative, Promise Neighborhoods, HOPE VI, Sustainable Communities, or other place-based investments in targeted neighborhoods to improve economic viability, extend neighborhood transformation efforts, and foster viable and sustainable communities. Applicants must develop a plan that includes measurable outcomes for job creation and economic activity, exhibit capacity to implement such plan, and demonstrate approval for the plan from the local jurisdiction. Applicants will be required to leverage other appropriate federal resources, including but not limited to, Community Development Block Grant formula funding and Section 108 Loan Guarantees. This will support HUD's effort to partner with grantees to more effectively target community development investments towards neighborhoods with greatest need, disinvestment, or potential for growth.
  
• Enhances and broadens capacity building for our partners

The fiscal 2011 Budget provides $60 million for a revamped Capacity Building program. HUD must embrace a 21st century vision for supporting the affordable housing and community development sector and will reframe the Section 4 program, including renaming the program "Capacity Building", in order to reflect that vision. The objective is to expand HUD's funding capabilities, and encourage open competition through mainstream and consistent program funding for these activities.

Working with cities and states to readily understand how to meet the needs of their communities, leverage private and other kinds of resources, and align existing programs is fundamental to building resilience in tough economic times. Increasing capacity at the local level is critical as jurisdictions partner with the Administration in implementing key initiatives such as Choice Neighborhoods, Sustainable Communities, and the Catalytic Competition and work to restore the economic vitality of their communities. This enhanced program will include local governments as technical assistance service recipients.

• Takes Choice Neighborhoods to scale

The Administration will also propose authorizing legislation for Choice Neighborhoods, funded at $65 million in fiscal year 2010 on a demonstration basis, and at $250 million in the Budget. I am appreciative that Congress was willing to fund Choice Neighborhoods on a demonstration basis in FY 2010, and HUD is now requesting that the program be expanded to a level where its impact can be significantly broader.

This initiative will transform distressed neighborhoods where public and assisted projects are concentrated into functioning, sustainable mixed-income neighborhoods by linking housing improvements with appropriate services, schools, public assets, transportation, and access to jobs. A strong emphasis will be placed local community planning for school and educational improvements including early childhood initiatives. Choice Neighborhood grants would build upon the successes of public housing transformation under HOPE VI to provide support for the preservation and rehabilitation of public and HUD-assisted housing, within the context of a broader approach to concentrated poverty. In addition to public housing authorities, the initiative will involve local governments, non profits and for profit developers in undertaking comprehensive local planning with input from the residents and the community.

Additionally, HUD is placing a strong emphasis on coordination with other federal agencies, with the expected result that federal investments in education, employment, income support, and social services will be better aligned in targeted neighborhoods. To date, the Departments of Education, Justice and HHS are working with HUD to coordinate investments in neighborhoods of concentrated poverty, including those targeted by Choice Neighborhoods. Again, we will be working with the House and Senate authorizing committees on these efforts.

• Protects consumers from discrimination in the housing market and affirmatively furthers the goals of the Fair Housing Act

The Budget proposes $61.1 million in support of the fair housing activities of HUD partners. Some sources estimate that more than 4 million acts of housing discrimination occur each year. To meaningfully address that level of discrimination, the Department, in addition to directing its own fair housing enforcement and education efforts, must engage outside partners. Therefore, this budget funds state and local government agencies to supplement HUD's enforcement role through the Fair Housing Assistance Program (FHAP) and provides funding also to nonprofit fair housing organizations that provide direct, community-based assistance to victims of discrimination through the Fair Housing Initiatives Program (FHIP). The entities participating in the two programs both help individuals seek redress for discrimination they have suffered and help eliminate more wide-scale systemic practices of discrimination in housing, lending, and other housing-related services. This Budget provides $28.5 million to state and local agencies in the FHAP and $32.6 million to fair housing organizations through the FHIP.

While this budget does not continue a $10 million initiative within the FHIP program, funded in fiscal year 2010, specifically directed at mortgage lending discrimination, fair housing funding, generally, and FHIP funding, in particular, remains substantially higher than in fiscal year 2009. Overall, the $61.1 million requested this year for fair housing activities overall represents a 12 percent increase over fiscal year 2009's enacted level of $53.5 million, and the $32.6 million requested for FHIP, in particular, is fully 18 percent above the $27.5 million in FY2009.

Since its passage in 1968, the Fair Housing Act has mandated that HUD shall "affirmatively further fair housing" in the operation of its programs. This requires that HUD and recipients of HUD funds not only prohibit and refrain from discrimination in the operation of HUD programs but also take pro-active steps to overcome effects of past discrimination and eliminate unnecessary barriers that deny some populations equal housing opportunities. To assist recipients in meeting these obligations, the Department is revising its regulations to clearly enumerate the specific activities one must undertake to "affirmatively further fair housing" and the consequences for failure to comply. To support this effort, $2 million of the FHIP budget will support a pilot program whereby fair housing organizations help HUD-funded jurisdictions comply with these regulations.

Finally, I want to emphasize that as HUD works through the Choice Neighborhoods initiative and across all of its programs to revitalize neighborhoods, as well as enable families to choose to move to other neighborhoods with lower poverty and greater economic opportunity, HUD will strive to ensure that newly revitalized neighborhoods remain affordable, inclusive places for low-income people to live.

Goal 5: Transform the Way HUD Does Business

In light of recent natural disasters and the housing and economic crises, last year HUD saw a pressing need for adaptability and change. To become an innovative agency with the capacity to move beyond legacy programs, shape new markets and methods in the production and preservation of affordable housing, green the nation's housing stock, and promote sustainable development in communities across America, the Department had to remake itself.

To accelerate the Department's transformation, the fiscal year 2011 Budget makes the following vital reforms.

• Develops a basic data infrastructure and delivers on Presidential research and evaluation priorities

HUD requests $87 million for the Office of Policy Development and Research, an increase of $39 million from FY 2010, to continue the transformation of PD&R into the nation's leading housing research organization. The role of housing issues in starting the economic crisis, and the importance of housing issues to the nation's economy, shows the urgent need for this housing research. These funds would be used for three critical activities:

Basic Data Infrastructure. Continue the investment made in fiscal year 2010 to support the collection and dissemination of the core data needed to support effective decision making about housing. HUD's request for this purpose is $55 million, which is $7 million more than the fiscal year 2010 appropriated level of $48 million. This will be used to conduct housing surveys-including full funding for the American Housing Survey-support enhanced research dissemination and clearinghouse activities, and underwrite a Young Scholars research program.

Presidential Research and Development Initiative. As part of the Administration's Research and Development initiative that is tied to the President's national goals of energy, health and sustainability, the Department proposes to administer $25 million for research on the linkages between the built environment and health, hazard risk reduction and resilience, and the development of innovative building technologies and building processes.

Presidential Evaluation Initiative. Also for fiscal year 2011, the President is proposing to fund rigorous evaluations of critical programs to inform future policy discussions. The $7 million proposed will supplement funding from the Transformation Initiative set-aside to support rigorous evaluations of the Family Self-Sufficiency Program, potential Rent Reform strategies, and the Choice Neighborhoods program.

• Maintains the Department's existing technology infrastructure

HUD requests $315 million for the Working Capital Fund, to cover the steady state operations, corrective maintenance of HUD's existing technology systems, and the re-competition of HUD's infrastructure support contract. As with FY 2010, this does not include the "next generation technology" development that would be funded through the Transformation Initiative, as described below. The bulk of the fiscal year 2011 request ($243.5 million) would be in the form of a direct appropriation. In addition, HUD seeks a $71.5 million transfer from FHA to pay for its share of infrastructure costs and system maintenance.

• Provides flexibility and resources needed to fuel agency transformation

As in fiscal year 2010, the Department again seeks the authority to set-aside up to 1 percent of HUD's total budget for an agency wide Transformation Initiative.

HUD's FY 2010 Transformation Initiative was intended to indeed be transformational. The resources it provides are allowing us to take long-overdue steps to upgrade and modernize our department and allow it to function as a 21st century organization. As one example, it is helping us replace computer programs written in COBOL in the 1980s with those written in the flexible and powerful languages of 2010. In addition, HUD has not conducted a major demonstration since the 1990s, when the Moving to Opportunity study was conducted. This demonstration is still yielding important evidence on how mobility and rental assistance interact that guides policy. And local government capacity to effectively use federal resources varies widely and leaves some communities at risk of always lagging the pack.

Further, even in the instance that efforts such as technical assistance were adequately funded, they were funded in silos - making cross-cutting initiatives that achieve the biggest bang for the buck next to impossible.

The TI approach we propose-allowing for the flexibility to take up to 1 percent of our budget and devoting it to four key areas-is similar to the approach applied by most cutting-edge institutions. This recognizes not only the need to have targeted funding to overhead - but the ability to respond to changing circumstances that may require overhead to consume an increased share of the budget, a change in the mix of activities funded and cross-cutting initiatives.

While reprogramming requests to the Appropriations Committee provide some flexibility along these lines, these are inherently limited in comparison to TI funding because of absolute caps in statutory appropriations accounts.

The flexibility inherent in this TI structure allows for the more nimble, responsive agency required in a long budget process where individual research ideas or investment proposals made in January might have been usurped by developments through the course of the year. A good example would be the $50 million in Neighborhood Stabilization technical assistance HUD made available to communities through ARRA. Full funding of the Transformation Initiative will enable HUD to take such an approach to scale and continue the delivery of a new level of technical assistance and capacity building to Federal funding recipients, recognizing that human capital, technical competence and institutional support are critical for the success of HUD's partner organizations.

And while we appreciate that the Subcommittee did recognize this reality in funding this effort for FY 2010 at $258 million, which has begun an important process of increasing investment and bridging silos, we renew our request for authority to use up to 1 percent. I would note that this past year we received 110 groundbreaking research, information technology and technical assistance proposals internally -- but we were only able to fund a little over half of these requests. Further, of the demonstrations and IT projects that were funded in 2009, many were multi-year projects that we have had to plan and operate, in all but the most urgent circumstances, with single-year funding.

Salaries and Expenses Central Fund: Building on the principle of the Transformation Initiative, the Budget requests the creation of a Salaries and Expenses Central Fund, funded through a one percent transfer from each of HUD's salaries and expenses accounts. The Fund will provide targeted, temporary infusions of resources to any of HUD's program offices in order to increase our responsiveness to unanticipated crises and new challenges through the hiring of staff with appropriate expertise. One example of how this type of funding might be used would be in the instance of a national disaster - in response to which HUD would be expected to play a key role. Another would be FHA, which inside of three years has temporarily expanded from insuring 2 percent of the market to, as mentioned previously, approximately a third.

As you know, HUD staff has been meeting with the bipartisan, bicameral appropriations staff to discuss our plans in this area, and have recently submitted a detailed report on our proposals. And so, while I appreciate the level of trust this subcommittee showed in HUD leadership for FY 2010, I would hope that the progress we have demonstrated and the extraordinary need to build on these successes would warrant full funding for the coming fiscal year.

Conclusion

In sum, this Budget continues the transformation begun with the 2010 Budget - a budget I recognize simply would not have been possible absent the leadership and commitment of this subcommittee. With the housing market showing signs of stabilization, our economy beginning to recover and the need for fiscal discipline crystal clear, now is the moment to reorient HUD for the challenges of the 21st century - retooling its programs and initiatives so it can better fulfill its mission to serve American households and communities more effectively and more efficiently over decades to come. I am proud of the progress we have begun to make in these areas with this subcommittee's support, and I look forward to our continued progress through the proposals outlined in the fiscal year 2011 Budget. Thank you again for the opportunity to appear before you to discuss HUD's proposed budget. And with that, Mr. Chairman, I would be glad to answer any questions.

[1] HUD is currently conducting a definitive Capital Needs study of the public housing portfolio.

[2] Preserving Safe, High Quality Public Housing Should Be a Priority of Federal Housing Policy (http://www.cbpp.org/cms/index.cfm?fa=view&id=655), Barbara Sard and Will Fischer, October 8, 2008 (noting that "ninety percent of developments meet or exceed housing quality standards, although most developments are more than 30 years old, and many will need rehabilitation").

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