Written Testimony of Shaun Donovan
Mr. Chairman, Ranking Member Bachus, members of the Committee - I want to thank you for holding this important hearing and giving me the opportunity to testify on the Administration's proposed legislation to implement the Transforming Rental Assistance initiative submitted as part of the President's Fiscal Year 2011 Budget Request.
I also want to thank you for the key role this Committee has played in helping to preserve the stock of affordable housing, and to make the policies governing this housing work more effectively. The legislation builds on the substantial work this Committee already has done.
I want to focus on what I believe is the single most important thing we do at HUD - and that is to provide rental assistance to America's most vulnerable families.
Indeed, the current housing crisis has underscored the broad impact HUD has on people's lives, with our public housing program alone serving 2.3 million residents in 3,500 communities. In all, HUD provides deep rental assistance to more than four-and-a-half million households - helping families, and also giving communities the tools they need to tackle their development needs and challenges.
An Unsustainable System
Unfortunately, for all of our progress, HUD's continued ability to serve families in need is at risk.
As you know, this administration came into office during the worst financial crisis since the Great Depression. At one point, housing prices dropped every month for over two years. During that time, homes lost over $6 trillion of their market value. The lending market was stopped dead in its tracks. In helping our economy recover, it was essential that we strengthened the housing market and helped families maintain their homes. We have clearly made substantial progress --restoring a trillion dollars in home equity in the last year, stabilizing the housing market as a result of keeping interest rates low, making sure capital is available through FHA and other means at those low interest rates, ensuring that there is demand through the homebuyer tax credit, as well as attacking foreclosures directly.
But the harm inflicted by the economic crisis we inherited was by no means limited to homeowners and homeownership. In fact, this crisis reaffirmed the need to achieve a better balance between ownership and rental housing and to provide more options-and better options-for families.
It does not take a housing expert to see that HUD's rental assistance programs desperately need simplification. HUD currently administers thirteen different rental assistance programs, each with its own rules, managed by three operating divisions with separate field staff. Too often, additional programs designed to meet the needs of vulnerable populations have been added without enough thought to the disjointed system that would result. This unwieldy structure fails to serve 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 on 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 we had to leverage in order to get the job done.
But I was willing to deal with the transaction costs of engaging with HUD's misaligned 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. Our programs may be imperfect, but they are absolutely irreplaceable.
This said, tolerating the inefficiencies of the status quo is no longer an option. The challenges this Department faces are too great to continue to ignore the costly inefficiencies created by the current array of programs. And quite frankly, 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 currently has a backlog of unmet capital needs that may exceed $20 billion. 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, and the $4 billion in ARRA funds targeted to public housing capital improvements are further stabilizing the portfolio. 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 in 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, increasingly expensive to remedy, and often irreversible. This moment in time calls for a timely, crucial federal investment to leverage other financial 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, if we don't begin to act now, will end up costing the taxpayer substantially more to achieve by other means.
Not only are many properties deteriorating, but enterprising public housing agencies have been driven to look for ways to raise the capital that properties need but that is not available in the current public housing program. The absence of a viable preservation strategy has led to the loss of 150,000 units through demolition or sale over the last 15 years. Given the size of the federal deficit and the challenges we've inherited, it's clear the Federal government alone will not be able to provide the funds needed to bring properties up to date and preserve them for the next generation. We will do our part, but we will need partners to supply the capital needed.
And, of course, rehabilitating these aging properties is not enough. As great as capital needs are, the depth of human needs is even greater.
Decades after William Julius Wilson awakened America to the shattered lives of those living in public and assisted housing in our poorest neighborhoods with The Truly Disadvantaged, countless residents still remain trapped in neighborhoods of concentrated poverty - because moving means giving up their subsidy.
Particularly 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 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- Multifamily Project-based Section 8 (PBRA) and public housing-and the Housing Choice Voucher program. This leaves tenants of PBRA and public housing with limited ability to move to greater opportunity. As a result, these families not only lack mobility - in many cases, they lack opportunity and choice.
And so Mr. Chairman, at this moment, we face a choice of our own: we can approach the challenges facing this population ad hoc, piecemeal, from program to program, as we have for decades.
Or we can deal with them now, in a comprehensive way, and put our rental assistance programs on a more sustainable footing for years to come.
With this perfect storm of challenges and opportunities before us, I believe now is the moment to finally move HUD's rental housing programs-and the people who rely upon them-into the housing market mainstream.
Transforming Rental Assistance
To address these issues, HUD proposes to launch an ambitious, multi-year effort called the Transforming Rental Assistance (TRA) initiative that forms the basis of the legislation we discuss today. This initiative is guided by five fundamental principles:
The Preservation, Enhancement, and Transformation of Rental Assistance Act
Mr. Chairman, in crafting this proposal, we didn't approach this subject lightly. Over the past year, we conducted an extensive strategic planning process that engaged over 1,500 internal and external stakeholders plus tens of thousands more through the Internet. We hosted three convenings with a cross-section of state and local agency administrators, residents, developers, property owners, lenders, advocates and other stakeholders to explore in depth issues in each of our three major rental assistance programs. We also held two additional convenings with residents of our programs, one with public housing residents and in the other, for the first time in the history of the Department, we brought together tenants of public and assisted housing and participants in the Housing Choice Voucher program to discuss how these programs could be improved.
Collectively, this process has not only affirmed the need for our rental programs to change, but also provided valuable insight into how they must change - what works, what doesn't and what we need to do better. It is based on this feedback from those who know our programs best-their strengths and their weaknesses-that we have developed the legislation before you today.
The Preservation, Enhancement, and Transformation of Rental Assistance Act of 2010 (PETRA) will authorize the conversion of public and assisted housing properties to long-term property based rental assistance under Section 8 of the U.S. Housing Act. I want to underscore that participation in the programs authorized by this legislation is entirely voluntary and up to each public housing agency (PHA) and assisted owner.
We recognize that it will be important to demonstrate that conversion will help owners leverage the funds needed to rehabilitate their properties and that tenants will benefit from the changes TRA will make possible. This is not to say that this legislation, even after it has been modified and approved by the Congress, will be the last word on transforming rental assistance. Experience also will certainly teach us how the policies in this legislation can be improved, and we want to work with this Committee to ensure that will be done, if and when it is necessary.
Allow me now to explain the specifics of the legislation.
PBC or PBV contracts
The policies governing these long-term contracts are designed to preserve this largely irreplaceable public resource and at the same time achieve the first three principles that guide the TRA initiative: streamlining, changing the public housing operating and capital funding structure to leverage capital, and bringing market principles into the operation of the properties. In addition, PETRA will enable residents of converted properties to move with rental assistance, similar to the residents of properties with project-based voucher assistance and other voucher program participants, and will require that converted properties continue to provide affordable homes to the neediest families2.
Use agreement and contract term
A rent comparability study and "green" physical condition assessment will be required as part of the conversion process. Properties will be underwritten to ensure their long-term physical and financial sustainability, including through the establishment of a capital replacement reserve that will enable owners to address repair and rehabilitation needs as they arise. The capital needs backlog that is such a prominent feature of the public housing program today will become largely a thing of the past. HUD will be authorized to charge fees to owners for the costs of such studies and for the underwriting.8 HUD will establish physical condition standards for converted properties, and in fact will be authorized to make such standards uniform for all of its rental assistance programs.9
Together with the investments that Congress has made through HOPE VI and ARRA, as well as grants that will be available through the Choice Neighborhoods program, we believe that the capital that can be raised through a market-based rent policy will be sufficient to rehabilitate most properties. We recognize that some properties will have greater needs than can be met with this one tool, particularly if PHAs determine that the best strategy for a property is to replace it rather than rehabilitate it. Like other affordable housing properties, these properties will need to access additional capital through the Low Income Housing Tax Credit, HOME grants, housing trust funds (state, local and hopefully soon federal), or other sources. Based on the experience of the initial phases of TRA as well as the Capital Needs Study14, HUD will have the more complete data needed to assess whether additional tools are needed to complete the process of preserving public housing.
TRA strongly promotes the retention of public ownership of properties that have been developed and funded under the public housing program. By enabling public housing properties to tap their accumulated equity value to meet their capital needs, as owners of any other form of real estate do, the long-term Section 8 rental assistance contracts authorized by PETRA will make it more likely that properties will remain publicly owned and affordable to the lowest income households - bringing these properties into the mainstream, with the mixed incomes and uses that are so vital to creating sustainable communities. Indeed, we anticipate that many properties will be able to meet their capital needs without Low Income Housing Tax Credits, through borrowing and possibly capital grants from other sources, and thus will easily be able to remain publicly owned.
If PHAs do need LIHTCs to fund the rehabilitation or replacement of properties-requiring some form of partnership with an entity that has tax liability-PETRA encourages PHAs to establish for this purpose an instrumentality or affiliate over which the PHA retains effective public control. If PHAs structure the transaction in this way, the conversion process will be streamlined and agencies will not be required to go through a separate process to "dispose" of the property.16 Further, it is important to recognize that while relatively few public housing agencies have met capital needs through tax credits and private debt, this is how housing production and preservation have been financed for decades. Having run HUD's multifamily programs and built and preserved tens of thousands of housing units in New York City, I've seen that for myself.
No reduction in families assisted
Only if data demonstrate that the area housing market has persistently high vacancy rates and that vouchers are easy to use, including in neighborhoods of opportunity, would a PHA or private owner be permitted to replace up to half of converted units with tenant-based vouchers. Less than 10 percent of current public housing and multifamily assisted units are potentially subject to this exception, largely because few areas have persistently high vacancy rates. HUD would be required to issue new vouchers to replace any such units, regardless of whether the units were occupied at the date of the conversion request.19
Once a property is converted, the use agreement and the rental assistance contract will require the PHA or private owner to maintain the number of assisted units under contract. The assistance contract may be transferred to another property (for some or all of the units) only with HUD's agreement and if tenants' relocation rights are fully protected. In the unlikely event that a PHA or owner would sell or transfer a property to another owner, the same requirements and tenant protections would apply.
Protections against foreclosure, bankruptcy and the termination of assistance
In addition to the private sector asset management that will come with leveraging debt or equity, most converted properties will be required to submit annual financial statements to HUD and will be subject to regular monitoring of their physical and financial condition through HUD's performance-based contract administrators (PBCAs).20 Complementing HUD's monitoring efforts, tenant organizations-required by PETRA to be independent of PHAs-will be able to "blow the whistle" if properties are not being well-managed or maintained. Further, PETRA will give HUD new powers to bring legal actions directly to enforce compliance with the terms of the contract and the governing law.21 Before a property enters foreclosure, HUD will have authority under PETRA to transfer the rental assistance to another property (or properties) that can house the tenants,22 and the threat of such a transfer is likely to be a strong incentive for owners to bring properties into compliance or to sell them to a mission-oriented entity. HUD also has the authority to condition receipt of cash flow upon owner compliance with physical, financial, and other program requirements - another strong incentive.
If despite this new set of tools a lender does foreclose on a mortgaged property or a PHA/owner declares bankruptcy, PETRA provides that the Section 8 contract, tenants' leases and the use agreement either remain in place, as they do in the case of most multifamily assisted properties today, or are transferred to another property.23
Resident involvement and tenant rights
PETRA creates a platform to establish uniform standards and requirements for resident involvement and tenant rights across rental assistance programs. For public housing tenants, PETRA maintains and enhances the rights that such tenants have long enjoyed, including the right to be involved in decisions about their housing and to procedural protections in the case of adverse actions. The bill will also provide tenants the right to move to a location of their choice without sacrificing the rental assistance they need. (The Resident Choice option is discussed further below.)
No loss of housing as a result of conversion
Finally, PETRA would authorize HUD to create uniform procedural rights for all rental assistance programs, simplifying the maze of rules that now apply to PHAs operating different HUD programs. In recognition of the fact that the requirement to provide procedural rights to applicants and tenants entail costs for assisted owners, PETRA specifies that HUD must consider such costs as operating costs of the property.
Resident Choice Option
As I noted at the outset of my testimony, it is wrong that residents of public housing and our old assisted housing cannot choose to live where they want without giving up the rental assistance they need. In the last decade, new federal policies have overcome this division between place-based and people-based assistance. The project-based voucher program incorporates a hybrid policy that allows an owner the security and capital leveraging of a long-term property-based contract while assuring that residents can choose to move with available tenant-based vouchers. This policy represents the future - and will apply to new development with HUD rental assistance.
PETRA would create a similar hybrid policy for properties initially developed under one of the older programs that converts to assistance under the new section 8(n). To balance concerns we heard about implementation and fairness, after an assisted household has resided for two years in a property converted to a project-based contract, the family would be eligible to receive an available Housing Choice Voucher to move to a location of their choice. The property-based rental assistance would remain with the unit.
The primary source of such voucher assistance would be turnover in the Housing Choice Voucher Program as families leave the program. About 11 percent of voucher households leave the program each year, making about 240,000 vouchers available for reissuance if Congress fully funds voucher renewals. HUD may also be able to provide a modest amount of funding for additional moving vouchers by reallocating voucher funding that agencies leave unspent above the level of allowable reserves, as proposed in the 2011 budget and in the Section 8 Voucher Reform Act. Reliance on turnover vouchers to provide moving vouchers means that many families can be provided this important new right at no additional cost.
A public housing agency that administers vouchers in addition to public housing would be required, if one or more properties is selected for conversion, to make available not more than one-third of its turnover vouchers to support families exercising the Choice Option. This limitation would enable most turnover vouchers to serve applicants on voucher waiting lists. When tenants exercise their Choice Option, new families would be able to receive rental assistance by moving into the vacated units, so the total number of new households receiving HUD-funded rental assistance each year would not decrease as a result of extending a Choice Option to converted properties.
The Choice Option for residents of properties assisted under section 8(n) would be more limited than for residents of properties that have project-based voucher contracts. Under the PBV program, residents who want to move receive the next available voucher after one year. This policy encourages agencies to choose to project-base assistance only in properties in which tenants would want to continue to live, and helps give assisted tenants the same right to move at the end of their lease term as unassisted families.
After substantial analysis of expected demand for moving vouchers and the limited supply at a time of constrained resources, we have concluded that it is not feasible to extend the existing PBV policy to all converted properties without unduly distorting voucher waiting lists and undermining the important role vouchers play in meeting diverse community needs.31 In addition, the two-year wait before residents of most converted properties can receive a moving voucher will deter applicants from accepting an available unit with an intention to leave as soon as possible.
Application of PETRA to Other Properties with Project-based Rental Assistance
Currently, HUD provides rental subsidies to 9,585 households through the Rent Supplement program and to 11,380 households through the Rental Assistance Program (RAP). The funding for these contracts was provided decades ago, and is rapidly diminishing. The majority of the 380 remaining contracts for these properties will expire within the next seven years, and many will run out of money before their expiration date. HUD has no authority to renew these contracts or to offer owners new project-based assistance. Indeed, just in the last month, contracts on five properties with more than 100 assisted families expired and could not be renewed. PETRA would create the authority to preserve these properties, giving owners the same options to convert to contracts with HUD under section 8(n) or to project-based voucher contracts as discussed above for public housing.
There are also about 25,000 units assisted under the 1980s-era Section 8 Moderate Rehabilitation program, administered by PHAs, that are now eligible only for annual contract renewals. Without long-term rental assistance, these properties have difficulty obtaining the capital needed for rehabilitation. PETRA would allow owners of these properties to apply for long-term section 8 contracts at market-based rents.
The preservation of these properties is also a focus of Chairman Frank's preservation bill, H.R. 4868. Under PETRA, rental assistance contracts could be for a term of up to 20 years, with available extensions. The minimum term and use agreement period would be the remaining term of the existing contract. Unlike H.R. 4868, PETRA would give owners of properties that qualify as "small" or partially assisted the option to convert to the less regulated environment of project-based vouchers. Initial analysis indicates that a significant share of these properties could qualify for PBV conversion.
The 2011 budget makes these three types of HUD-assisted properties eligible for conversion. This consolidation will preserve these properties with long-term affordability for residents, assure renewal on terms that are physically and financially sustainable, and streamline HUD oversight to save the taxpayer money.
PETRA also permits the conversion of properties with other forms of Section 8 project-based assistance to contracts under section 8(n) or, if they are small or partially-assisted, to project-based voucher contracts under section 8(o)(13). While these properties have available long-term renewal options under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA), owners may prefer the policies that would apply after such a conversion. For example, PHAs that own properties with project-based section 8 assistance - there are about 40,000 such units owned by PHAs - may prefer to operate their properties under uniform rules. Owners of properties eligible to convert to PBV assistance may prefer the reduced reporting requirements that such a conversion would bring. Other owners may want to use the flexibility that PETRA would create to transfer rental assistance for a portion of the units in a property to another location, facilitating a transition to mixed income housing.
Policies governing such contracts under PETRA would be similar to what owners are familiar with under MAHRAA: contracts up to 20 years, market-based rents with annual adjustments and 5-year rebenchmarking to market, same tenant eligibility, ability to have site-based waiting lists, etc. But the "live" authority under PETRA creates greater flexibility for owners to adapt properties to current conditions than is now often possible due to Congressional repeal of the authority for new project-based section 8 contracts in 1983.
For tenants of these properties, conversion to assistance authorized by PETRA would create a number of benefits. Most importantly, tenants would for the first time have the option to move without giving up rental assistance, as discussed above. In addition, the procedural rights of tenants and applicants would be strengthened and tenant organizations in all properties, not just those at greatest risk of losing project-based assistance, would be eligible for funding. PETRA would enhance the tools available to HUD to ensure that properties are well-maintained and well-managed, and also would provide a federal first option to purchase when owners wish to sell their properties. This option would enable HUD to facilitate a sale to an owner that will preserve the affordable housing opportunities the property provides.
For HUD, unifying the policies applicable to the major project-based rental assistance programs will create opportunities for economies of scale in rule-making, monitoring and enforcement. In the long-term, creating a common platform for HUD rental assistance will make it easier for communities and regions to plan comprehensively and use HUD programs.
Modifications to the Project-based Voucher Program
Share of vouchers that may be project-based
PETRA would modify the share of vouchers that may be project-based. To eliminate a disincentive for agencies to project-base assistance in higher rent areas (which are likely to offer greater opportunities), the limitation would be determined based on the number of units assisted, rather than the share of funding, as is the case under current law. Up to 25 percent (rather than 20 percent) of units may be assisted in housing that serves homeless individuals and families or that provides supportive housing to the elderly or persons with disabilities, or that is located in areas where vouchers are difficult to use. (HUD will determine the criteria for such areas by regulation.)
An additional exception for agencies administering vouchers for projects converting under section 8(m)(2) would provide that up to 40 percent of the dwelling units assisted by an agency may be project-based.33 This limitation is designed to minimize the tension between the demand for moving vouchers under the Resident Choice option in the PBV program and an agency's voucher waiting list. Under this policy, a PHA with a relatively large voucher program that opts to convert one or more properties to PBVs could administer the contract for the additional units itself, with third party performance of key functions such as inspections and rent determinations.34 In other cases, HUD would award the additional vouchers to another PHA that would enter into the PBV contract with the converting PHA.35
Similar to H.R. 3045, PETRA would allow for assistance at the greater of 25 dwelling units or 25 percent of the dwelling units in any project; and for areas in which vouchers are difficult to use and for census tracts with a poverty rate of 20 percent or less, up to 40 percent of units in a property would be permitted to be assisted. Properties serving elderly families or households (of any type) eligible for comprehensive social services that are available at the property could be fully assisted, but in the case of converted properties no more than 40 percent of units serving such populations could be assisted. (PETRA would eliminate the exception in current law for fully-assisted properties that serve people with disabilities but do not provide comprehensive services. Allowing such single population housing is perceived by some to be a form of segregation, and is contrary to the shift to more integrated housing policies for people with disabilities embodied in the Frank Melville Supportive Housing Investment Act of 2009, approved by the House last year.) PETRA would authorize HUD to establish additional monitoring and oversight requirements for properties that have assistance on more than 40 percent of units at a property.
Contract term and funding
To create uniformity for contracts under the new section 8(n) and the PBV program, PETRA would alter the PBV contract term, extending the initial term and extensions from a maximum of 15 to 20 years, subject to the availability of funds and the owner's compliance with HUD's physical inspection standard. One of the concerns expressed by stakeholders about HUD's initial proposal to use PBVs as the form of assistance for converted properties was the perceived vulnerability of PBV funding to shortfalls in the Tenant-based Rental Assistance account. This Administration understands the importance of reliable rental assistance funding, particularly to induce lenders to rely on HUD funding. PETRA would amend section 8(o)(13)(F) to give priority to renewal of funding under PBV contracts in case of a shortfall in annual voucher renewal funding.36
Rents for PBV units must always be "reasonable" in light of comparable unassisted units in the local market, but the Secretary would have new authority to approve a market rent above 110 percent of the FMR.37 Unlike section 8(n), there is no authority for above-market exception rents. The Secretary could require that PBV rents be adjusted annually using an index based on the same index used for properties assisted under 8(n) (based on changes in the rents for multifamily properties). The same rules as apply under section 8(n) would apply if the Secretary requires the use of an index to adjust rents.38
Like the policy in H.R. 3045, an owner of a PBV-assisted property would be permitted to establish a site-based waiting list, subject to compliance with civil rights, fair housing, and other requirements. If a voucher is project-based in an occupied unit, the tenant must receive an absolute preference for assistance, if eligible.39
Security of tenure
Just as for properties assisted under section 8(n), or currently assisted through the public housing or multifamily programs, the termination of leases and tenancy would be permitted only for good cause.40
Other policies to streamline and create uniformity in HUD programs
Section 3 hiring preferences
PETRA would remove this barrier by streamlining hiring preferences into two categories that apply uniformly: (1) recipients of federal rental assistance in the area (including public housing, other subsidized properties, and Section 8 vouchers), and (2) other low- and very-low income residents. The Secretary may add additional preferences by regulation.41
At this point we do not, however, propose uniform hiring and contracting obligations for all types of HUD rental assistance funding. Creating workable policies for the different operating environments of the range of owners that receive HUD rental assistance will take more time; we look forward to working with members of this Committee on this effort. For now, PETRA extends to converted properties the hiring and contracting requirements that apply under their pre-conversion funding source. That is, public housing converted to section 8 assistance would remain subject to the Section 3 requirements that apply to public housing, and multifamily properties remain subject to the requirements that now apply to those programs.
The President's 2011 budget shifts renewal funding for the approximately 15,000 Mainstream Vouchers to the tenant-based rental assistance account. Consistent with this funding shift, PETRA would amend the section 811 statute to specify that these vouchers shall be provided under the legal authority of the section 8 voucher program. PETRA also requires that turnover vouchers must continue to serve "qualified persons with disabilities and…qualified non-elderly disabled families," and would also make unexpended amounts under section 811 available until expended for renewal vouchers. The Secretary is authorized to provide technical assistance to PHAs to assist them in using these and other vouchers to provide permanent supportive housing for persons with disabilities, particularly as part of strategies to end chronic homelessness and to help states meet community care requirements.42
Administration of rental assistance
Fewer entities, serving larger areas, will streamline access to rental assistance for low-income families, eliminating the pressure applicants face to get on as many waiting lists as possible to increase their chance to receive the assistance they need. Expanding the geographical reach of program administrators also will broaden housing choice, increase access to neighborhoods of opportunity, enable grantees to meet their obligation to affirmatively further fair housing,43 and facilitate coordination of rental assistance with other infrastructure (housing, transportation, etc.) and human service investments. Finally, if HUD contracts directly with fewer administrative entities, HUD staff can work more effectively with our partners to improve program performance.
Consistent with the voluntary nature of the TRA initiative - and recognizing the local political sensitivity of program administrative geography - PETRA and our 2011 budget proposal focus on providing incentives to solve these problems. For example, PETRA authorizes HUD to facilitate the implementation of regional portability agreements among PHAs administering housing vouchers, as well as consortia of agencies and other methods of "streamlining administration of vouchers and other rental assistance on an area-wide basis as the Secretary determines appropriate to promote greater efficiency in the use of resources and to increase informed resident choice and mobility".44 The 2011 budget request for TRA specifies that a portion of the funds may be used to help offset the cost to PHAs of such administrative changes.45 PETRA would also require HUD to award funds for the administration of rental assistance for converted properties in a manner that promotes administrative efficiency and informed choice of where to live by recipients of HUD rental assistance.46
In addition to providing financial incentives, HUD plans to facilitate such agreements among PHAs by revising regulations governing consortia and portability, making it easier for PHAs to take these steps. But I want to emphasize that it would be voluntary for PHAs to take such actions.
To help achieve the streamlining goal of TRA, PETRA would make a conforming change to the definition of a "public housing agency" to allow HUD to contract directly with non-profits to administer Section 8 rental assistance.47 HUD already contracts directly with non-profits to administer rental assistance under a number of other tenant-based programs, such as the section 811 Mainstream program and the McKinney-Vento Shelter-Plus-Care program, as well as a number of project-based programs. Folding the 811 Mainstream Voucher program into the Housing Choice Voucher program, discussed above, requires broadening the existing definition of a PHA. Under current law HUD may contract directly with a non-profit to administer the Housing Choice Voucher Program, but only if the entity had a contract with HUD or a PHA for this purpose when Congress enacted the Quality Housing and Work Responsibility Act in 1998.48 Such piecemeal grandfathering undermines our broader streamlining efforts. To enable administering agencies to achieve economies of scale and take on increased responsibilities - for which they will earn additional fees - we must modernize the administrative structure of our rental assistance programs.
In case this explanation of our proposals has not been clear enough, let me state it more plainly: HUD has no plans to require agencies to consolidate. But we will hold ourselves and our partners accountable to achieve the goal of our new 5-year strategic plan to "expand families' choices of affordable rental homes located in a broad range of communities."49
Meeting the Housing Needs of Every Family
So, Mr. Chairman, Ranking Member Bachus, and other members of the Committee: really, this is just beginning - and we look forward to working with you to ensure we get the transformation of our rental programs right.
Doing so requires us to recognize what drives affordable housing today. In the 1970's, it was the public sector. In the last decade, it was the tax code.
Today, it must be a partnership - one that draws upon the best practices of the past and present to leverage not only resources but also the experiences and successes of local not-for-profits, city and state governments, private actors, and all the other innovators and partners that have emerged in recent years. As I saw for myself in New York City, when we achieve this balance of both public and private resources, all parties can see they are getting a real set of benefits - from the managers, to the owners, to the most important stakeholder of all: the people.
At the outset of my testimony, I mentioned The Truly Disadvantaged. Of all the tragedies that book revealed, perhaps the most tragic was that the segregation of the very poorest families into the very poorest neighborhoods across the country didn't happen in spite of government policy - but more often than not, because of it.
But in America, we don't accept one public education system for one group of children - and a better one for everyone else.
We don't accept one set of rules about what pollutants can be in the water some people drink - and another set for the rest of us.
We don't accept a worse set of health outcomes for one population - and another for everyone else.
So, why should we do that with housing - with all that we know about how central housing is to creating a geography of opportunity? Why shouldn't we make this right?
I hope the progress we've begun these last 16 months has demonstrated the commitment that we in this Administration and at HUD have to meeting the housing needs of every family in this nation.
To putting HUD-assisted rental housing on a strong foundation for decades to come.
To building a truly integrated federal housing system that serves families better - every family in every neighborhood in America.
That is our goal - and in the weeks and months ahead, may we work together to build it with this legislation.
And with that, I thank you and I look forward to your questions.
1 A "small" property is one with 25 or fewer units. A "partially assisted" property eligible for conversion to PBVs is one that has project-based assistance for no more than the greater of 25 units or 25 percent of the units; or for no more than 40 percent of the units if (a) the property is located in an area of low-poverty (20 percent or less) or (b) where vouchers are difficult to use, or (c) the units serve elderly families or (d) households eligible for available comprehensive social services. PETRA section 5, pp. 45-46, amending sec. 8(o)(13)(D) of the U.S. Housing Act.
|Content Archived: February 16, 2012|