Chairman Sarbanes and members of the Committee, it is an honor to be asked to testify today on the FY2003 HUD budget and the degree to which the President has addressed the critical housing needs of families and individuals in the United States through his budget proposal. I appreciate the opportunity to be here today with Secretary Martinez and the other witnesses you have called.
I am Sheila Crowley, President and CEO of the National Low Income Housing Coalition, representing our members across the country who share our goal of ending the affordable housing crisis in America. Our members include non-profit housing providers, homeless service providers, fair housing organizations, state and local housing coalitions, public housing agencies, private developers and property owners, housing researchers, local and state government agencies, faith-based organizations, residents of public and assisted housing and their organizations, and concerned citizens.
An assessment of the FY2003 HUD budget proposal is only meaningful if we ask "in comparison to what?" Compared to what many people feared the FY2003 HUD budget proposal would be with the return of the federal budget deficit, the Presidentís proposal is a relief. Compared to the FY2002 HUD appropriations bill, the Presidentís proposal is remarkably similar, with a few variations in either direction. Compared to the HUD budget in the last year of the Ford Administration, the FY2003 HUD budget proposal is a shadow of its former self. (see Appendix A.) Compared to the housing needs of low income Americans, the Presidentís FY2003 HUD budget proposal is wholly inadequate. Compared to what the Federal Government could afford to invest in low income housing if addressing critical housing problems were a real, not a rhetorical, priority, the Presidentís FY2003 HUD budget proposal is unacceptable.
I would like to use the time you have provided me today to make the case for increased federal investment in low income housing. In my written statement, I address a series of specific policy issues that are part of the budget proposal, which we recommend that the Committee carefully examine. Briefly, these include the OTAG-ITAG crisis, use of Interest Reduction Payments for preservation of assisted housing, transfer of the Emergency Food and Shelter Program from FEMA to HUD, renewals in the Shelter Plus Care, Section 811, and Section 202 programs, combining the three competitive programs under McKinney-Vento homeless assistance programs, reduction of capital funds for public housing, defunding of HUDís Rural Housing and Economic Development Program, redistribution of CDBG formula, and voucher utilization.
The Affordable Housing Crisis
The extent and depth of the low income housing shortage is well-documented. While some may make different assertions about causality, anyone who has seriously examined the numbers agrees that we have an acute problem. Anyone who reads a daily paper is confronted with article after article about some aspect of the housing crisis Ė skyrocketing rents, growing numbers of homeless families, federal housing assistance waiting lists closed because they are too long, owners of assisted housing opting out of the Section 8 program, demolition of public housing, former welfare recipients struggling to pay rent on below poverty level wages, families living in unhealthy and unsafe housing because it is all they can afford, vacant property abandoned by owners who cannot pay the taxes, and so on. These stories and many more like them have crossed my desk in the last few weeks.
Letís run by the numbers again. The National Low Income Housing Coalitionís analysis of the 1999 American Housing Survey data shows that there are 15,500,000 households in the United States who pay more than half of their income for their housing, live in severely substandard housing, or both. The majority of these households Ė11 million - have extremely low incomes, that is, incomes at or below 30% of the area median. Because the American Housing Survey only counts people who are housed, to get a true picture of the number of extremely low income households with severe housing problems, we must add the estimated 2-3,000,000 homeless families and individuals to this number. That takes us to around 14 million very poor households with serious housing problems. These include both renters and homeowners, and comprise over 13 percent of all households in the country. Imagine what would happen if 13% of households in America did not have clean water or did not have access to basic transportation. Imagine what we would do if this many people in our country contracted a serious illness that the private health care system could not treat. In many ways the true extent of the affordable housing crisis can be invisible because so many people hold on by their fingertips and their plight only becomes visible if they lose their grip in this very dangerous game of musical chairs.
Another way to frame the problem is with the use of the measure of unaffordability that we call the housing wage, which Senator Sarbanes and many others have cited to illustrate the severity of housing unaffordability. Using readily available data and standard assumptions about housing and labor, we determine the hourly wage that one must earn to be able to afford modest rental housing if one works full time (40 hours a week for 52 weeks a year) and pays no more than 30% of income for housing. We use HUDís fair market rent as the proxy for rental housing cost because it is the only housing measure that is standardized jurisdiction by jurisdiction, and because it represents what HUD says is the necessary rent to be paid to afford housing that is decent and safe. In most places that is the 40th percentile of rental housing costs in that jurisdiction, meaning 40% of the rental housing is priced at the fair market rent or less and 60% of the rental housing is above the fair market rent.
Although the housing wage is best understood as a local estimate of housing costs, we can aggregate the data to the state and national level. The housing wage ranges from $8.50 an hour in West Virginia to $18.33 an hour in California. In response to an assertion by an Administration official last summer that if a family had two minimum wage earners, it could afford rental housing anywhere in the country, we showed in our 2001 housing wage analysis that in 33 states and the District of Columbia that even two full time minimum wage earners is insufficient and in three states - New Jersey, New York, and Hawaii- even three jobs at the prevailing minimum wage is not enough.
The disparity between income and housing costs has serious implications for policy objectives that some may not associate with the housing crisis. Across the political spectrum, welfare policy analysts are calling attention to the impediment to success of welfare reform created by the lack of housing that is affordable to former welfare families. To quote a Hudson Institute report about welfare reform in Wisconsin, "success in the labor market and success in the housing market are inextricably linked. Although an employed parent is more able to afford decent housing and a parent living in stable housing is more likely to be able to find employment, it is no longer the case that success in the labor market guarantees success and stability in the housing market." Unfortunately, the proposed HUD budget makes no mention of the vital role that housing assistance plays in welfare reform, nor does the proposed HHS budget address housing in its provisions for TANF and plans for its reauthorization this year.
Housing stability is essential to family stability, which is essential to child well-being. Families with high housing costs burdens are often excessively mobile. That means that children move from school to school, getting further behind academically and socially with each move. High housing cost burdens mean parents have to work many extra hours leaving them less time for parenting duties. The stress of homelessness, frequent moves, choosing between paying the rent or buying food, and resultant feelings of powerlessness and despair inhibit parenting capacity and leave children vulnerable to abuse and neglect. Housing is the bedrock upon which families thrive and failure to address the lack of affordable housing is anti-family.
It is not just low income families who are adversely affected by the lack of affordable housing choices. Disabled people who rely on Supplemental Security Income have the most acute housing cost burdens. On a national aggregate, they must pay 98% of their income for a one bedroom rental unit, making independent living without additional assistance a virtual impossibility.
People of a certain age can remember the time before the onset of contemporary homelessness. There were lots of poor people in 1970, but there was a small surplus of housing that they could afford. Over the past two decades, we have experienced a steady erosion of the housing stock that is affordable to the lowest income people. The sharp federal disinvestment in low income housing assistance that began in the late 1970s correlates with the rise in homelessness in the 1980s. Had we continued to fund low income housing assistance at the level authorized in the mid 1970s, it is safe to say that we could have prevented much of the homelessness at the end of the 20th century and the housing shortage we are experiencing today would not be as serious.
This is not to say that there has not been affordable housing development. The Low Income Housing Tax Credit has produced over 1,000,000 units of rental housing. The HOME program has been used for over 10 years to produce yet more houses and provide additional rent assistance. But the American Housing Survey data clearly show that there has been a precipitous drop in the number of units affordable to the lowest income households, while there has been an increase in the numbers of affordable homes for families in the upper tier of the low income eligible population. Between 1991 and 1999, there was a 14% decline in the number of units affordable to extremely low income renters, nearly a million units.
It is important to translate what extremely low income means in the real lives of ordinary people. The official definition is family income at 30% or less of the area median. In Washington, DC, that is $18,390 a year. These are people who make up the work force on which all of us depend to do their jobs so we can do ours. These are day care workers, hotel staff, cashiers, health care aids, wait staff, office cleaners, receptionists, and other essential members of the work force.
In light of these data, the proposed FY2003 HUD budget has serious shortcomings. Most of the proposed increase will simply allow HUD to stay in place. The only thing that the Presidentís proposal does to expand housing choices for those with the most serious housing problems is to call for 34,000 new housing vouchers. While the proposals to expand down payment assistance and to add a low income home ownership tax credit are laudable, they do very little to ease the affordable housing shortage for the lowest income people. While the declaration to end long term homelessness in the budget blueprint is an important statement, in the absence of new investment in housing production, it is an empty statement.
What Should We Do?
Solving the affordable housing crisis is well within the capacity of American ingenuity and resolve. We know how to build the best housing in the world. We have non-profit, for-profit, and public housing sectors that stand ready to produce, preserve, and rehabilitate enough housing for all American households. What is needed is the political will to advocate for renewed federal investment.
There are three basic ways to end the affordable housing crisis and a comprehensive strategy must include all three. One, we must improve the ability of low income people to compete in the housing market by improving their earning capacity and passing living wage ordinances and increasing the minimum wage, or by subsidizing the differences between what they can afford and what housing costs through housing vouchers. Although more housing vouchers each year has become a key symbol of forward movement, the number of new vouchers each year has been miniscule compared to the need. Further, problems with voucher utilization in many communities indicate that simply adding more tenant-based assistance is not enough.
The second thing we need to do is preserve the viable publicly assisted housing we have, both Section 8 project-based and public housing. We have lost over 150,000 units of assisted housing in the last six years through opt-outs and prepayments. Public housing is lost to demolition and disposition, as well as HOPE VI. We should eliminate poor quality housing, but we cannot afford to continue to lose this housing stock in the absence of a commitment to replace it.
Finally we must build new housing. The need for renewed federal investment in the production of housing affordable for the lowest income households is widely recognized and should be a federal priority. Despite the relative cost effectiveness of vouchers over production, when there is an absolute shortage of physical units such as exists now, production fulfills important policy objectives. What is most disappointing about the Presidentís FY2003 HUD budget is its failure to address production needs in the face of such overwhelming need.
The National Low Income Housing Coalition and 1,900 partner organizations across the country are calling for the establishment of national housing trust fund capitalized with dedicated sources of revenue sufficient to produce and preserve 1,500,000 homes for the lowest income households. Housing trust funds are a proven approach to funding affordable housing programs as evidenced by the over 200 state and local jurisdictions that have established housing trust funds in the last 15 years. Most recently, Los Angeles established a housing trust fund capitalized with a range of funding sources identified by the mayor totaling $100 million in ten years. We look forward to a debate on S.1248, the National Affordable Housing Trust Fund Act, in the Banking Committee this year.
Policy Issues of Concern
The Continuing OTAG-ITAG Crisis. Despite clear direction by Congress to do so last December, HUD has yet to release funds to pay outstanding invoices to OTAG and ITAG grantees as well as the Corporation for National and Community Service for their work to preserve the assisted housing stock. We cannot stress strongly enough the urgency of this problem. Many community-based, non-profit organizations
have not been paid for their work and the consequences to these organizations are dire. Several have laid off staff and others have gone into debt to maintain services in anticipation of receipt of money owed. These are small organizations that are at risk of going out of business if HUD does not pay them immediately. The damage to these organizations is obvious. HUD should be keenly worried about the damage it does to the departmentís credibility, especially given the Secretaryís promise to make HUD more efficient and effective. Most critical, however, is the damage that will be done to residents, many of whom are elderly and disabled, when their housing is jeopardized. We urge the Committee in the strongest possible terms to demand that HUD make these payments in accordance with what Congress explicitly directed HUD to do.
Interest Reduction Payments. Section 531 of the HUD Multifamily Housing Reform provisions of the 1998 HUD-VA Appropriations Act provides that HUD may take "recaptured" Interest Reduction Payments (IRP) from the termination of Section 236 mortgages and convert such funds into grants for the capital costs of rehabilitation to owners of certain projects. Adopted over four years ago, the provisions of Section 531 have unfortunately never been implemented by HUD. Meanwhile, millions of dollars of "recaptured" Interest Reduction Payments have been building up. There is a provision in the FY2003 proposed HUD budget that appears to indicate that these funds should now become available. These IRP recaptured funds are a precious resource for the long term preservation of the low income housing. We ask that the Committee direct HUD to assure that prepayment recaptures can be used to help recapitalize and assist in the financing of HUD insured and assisted housing stock.
Transfer of the Emergency Food and Shelter Program from FEMA to HUD. The Administration proposes to shift responsibility for the Emergency Food and Shelter Program from FEMA to HUD. We urge the Committee to oppose this move. This program has been one of the most effective means to distribute funds to needy families ever devised by the Federal government. Administered by a national board of social service and faith based organizations, these funds are spent quickly, effectively, and preventively to keep millions of people from losing their homes. Given HUDís poor track record of administering funds in a timely fashion, we have serious questions about the efficacy of such a transfer.
Renewals of Shelter Plus Care, Section 811,and Section 202. A lingering unresolved policy issue is the future of housing subsidies begun under specific programs that then must be renewed each year within the total funds provided for these programs. It is essential that we assure sufficient funds for renewal of housing assistance provided through the Shelter Plus Care, Section 811, and Section 202 programs. For example, while the Presidentís FY2003 HUD budget request does include a $10 million increase for the Section 811 program for people with disabilities, it is expected that renewal of expiring tenant-based rent subsidies under the Section 811 program will cost $32 million in FY2003. The absence of separate funding to account for upcoming rent subsidy renewals in the Shelter Plus Care, Section 811, and Section 202 programs results in actual program funds being reduced. We urge that renewals for these programs be shifted to the Housing Certificate Fund and considered along with all other rental subsidy renewals.
Combining the Three Competitive Programs in HUDís McKinney-Vento Homeless Assistance Program. We applaud the move to make these funds more flexible and giving local service delivery systems discretion in how best to use these funds in their individual communities. However, we continue to object in the strongest possible terms to the block granting of McKinney-Vento homeless assistance programs and trust that is not what HUD has in mind.
Reduction of Capital Funds for Public Housing. While we appreciate the attempt to encourage public housing agencies to experiment with new ways of solving old problems, we do not think that the capital fund should be reduced unless and until there is evidence that such an experiment is successful. Rather than reduce capital funds for public housing, we would urge HUD to help public housing agencies to spend their capital funds more efficiently. Public housing is publicly owned physical structures and the taxpayers have the right to expect that the responsible agencies maintain them in good repair and plan for their long term use. For example, an appropriate use of new public housing capital funds would be to retrofit elderly housing to accommodate the changing physical and social needs of residents to allow them to "age in place."
Defunding HUDís Rural Housing and Economic Development Program. This is a small, but important, program that improves the capacity of non-profit housing providers to develop affordable housing in rural areas. The argument that a rural program at HUD is duplicative of USDA programs ignores the fact that all formula based programs administered by HUD provide funds to rural areas. Cutting this program is penny wise and pound foolish.
Redistribution of CDBG Formula. The President proposes to alter the CDBG formula so that the wealthiest communities will receive less money that then will be redirected to assist the Colonias. We certainly agree that the Colonias need and deserve an infusion of funds for a host of essential services, but it is unnecessary to take money that would help poor communities that happen to be in wealthier jurisdictions to help other poor communities. We can afford to do both if we only choose to.
Voucher Utilization. Finally, we look forward to working with the Committee in shaping legislation to improve voucher utilization and to continue to expand the creative use of tenant based assistance. HUD is implementing a "use it or lose it" approach, which will redistribute housing vouchers from underutilizing communities to those that can use them effectively. This a good short term approach to maximizing the value of housing vouchers. But the poor people in need of housing assistance in those communities that lose housing vouchers are the real losers. This brings us back to the fundamental housing problem that the Presidentís FY2003 housing budget fails to address Ė investment in new rental housing production for extremely low income families.
Thank-you for the opportunity to represent the members of the National Low Income Housing Coalition at this important hearing.
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