Subcommittee on Housing and Transportation

Hearing on "Affordable Housing Production and Working Families."

Chairman Reed and members of the Subcommittee, I am Sheila Crowley, President of the National Low Income Housing Coalition. I am pleased to be invited to testify today on behalf of our members who 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. I am also representing the over 2,200 organizations and elected officials from every state who have endorsed the establishment of the National Housing Trust Fund. We are especially grateful to you, Senator Reed, for championing S.1248, the National Affordable Housing Trust Fund Act of 2001, so vigorously.

It is an honor to follow the testimony of Senator John Kerry, the sponsor of S.1248, and to add further evidence of the soundness of his proposal. The National Housing Trust Fund Campaign pledges to continue to build support for S.1248 this session and, if necessary, its successor bill in the 108^th Congress. The 27 co-sponsors of the S.1248 including Senator Kerry and the 175 co-sponsors of H.R.2349, the companion bill in the House, are just the start of the number of Senators and Congressmen we intend to convince to vote to establish the National Housing Trust Fund.

This Subcommittee and the full Committee have had several hearings on the housing affordability crisis that have thoroughly documented the depth and breadth of the housing problem we face in the United States. Under Senator Allard’s leadership in the last Congress, the Subcommittee also held hearings that came to the same conclusion. In the House, the Subcommittee on Housing and Community Opportunity of the Financial Services Committee has been quite active its analysis of the affordable housing crisis, with a series of hearings in 2001 and this year. At the National Low Income Housing Coalition, we are very gratified that our data on the gap between housing costs and income are cited virtually every time members of Congress come together to discuss the housing problem. My point is that Congress does not lack evidence that we have a serious housing problem, and there is little disagreement that something needs to be done. What remains is to reach consensus about what needs to be done and the role of the Federal government in its implementation.

Let me add documentation of the problem for the record today. It is the position of the National Low Income Housing Coalition that the housing affordability and housing shortage problem is most severe for the lowest income people. In HUD jargon, these are extremely low income households or those with incomes at or less than 30% of the area median. On a national basis, the number of rental housing units affordable for people in this income range has dropped precipitously in the last decade, while the number of rental housing units for other low income people whose incomes exceed 50% of the area median income, but are still less than 80% of AMI, actually grew. Between 1991 and 1999, the number of rental units affordable to extremely low income households declined by 940,000 units or 14% of the total rental stock affordable to people in this income range.

People often assign meaning to the term extremely low income that somehow implies that it is a category that does not include working people. Let’s be very clear. A full time minimum wage worker makes $10,700 a year. In the District of Columbia, an extremely low income family has income of $18,390 or less a year. In Providence, RI, it is $16,230. In Denver, CO, it is $19,500. In Boston, MA, it is $21,480. These are not unusual wages. These are the wages earned by the workers in the service economy. These are retail clerks, day care workers, home health aids, hotel and restaurant workers, janitors, bus drivers, security guards, nursing home staff – all the people whose daily labor is essential to the functioning of our economy. The notion that extremely low income families are somehow different from working families is erroneous.

In the District, 30% of area median income if one works full time breaks down to $8.84 an hour. The hourly wage required to afford the fair market rent for a two bedroom rental unit in DC is $18.13. In Providence, extremely low income is $7.80 an hour or less, while the two bedroom housing wage is $12.50 an hour. For Denver, the respective numbers are $9.37 an hour vs. $17.17 an hour. In Boston, $10.33 an hour is the upper limit of the extremely low income category, while the housing wage is $20.21 an hour. In all these cases, as it is in all jurisdictions in the country, the difference between what low wage earners can earn and what the rental housing market can demand is unbridgeable without federal intervention. Telling people to get better paying jobs so they can afford to pay the rent is hardly the answer. There will always be a demand for people to make up this segment of the workforce.

The position of the National Low Income Housing Coalition is that there is no single solution to the affordable housing crisis, but rather multiple approaches are required. First we must increase low wage workers’ purchasing power in the housing market with more housing vouchers. But more vouchers must be in conjunction with improvements to the housing market’s response to voucher holders and reducing barriers to successful voucher use. Imagine being on the waiting list for a voucher for several years, all the while struggling to maintain a home that costs an excessive portion of your income. Finally you rise to the top of the voucher waiting list and are issued a voucher. You spend weeks searching for a suitable home to rent with a voucher, only to come to the end of your time limit without finding any place. You have to turn the voucher back and start over again at the end of the line. In many communities, the voucher program has become an exercise in social Darwinism, rather than an intervention in the mismatch between what low income people earn and what housing costs. Therefore, we are very supportive of Senator Sarbanes’ forthcoming voucher improvement bill.

Second, we must preserve as much as possible the existing housing we have that is affordable to extremely low income households, including public and subsidized housing, as well private market, unsubsidized housing. We support S. 1365, Senator Jefford’s preservation matching grant bill, and we urge Senator Kerry to add preservation as an eligible activity of the National Housing Trust Fund. We also are very concerned about the precipitous loss of housing that is affordable to the extremely low income people through HOPE VI and other public housing demolition or revitalization efforts.

Third, we advocate a renewed federal commitment to building housing that is affordable for the lowest income families. Although there has been lots of discussion about "new production" proposals by all sorts of housing advocacy and industry groups, the only proposal that has actually become legislation in the Senate is Senator Kerry’s National Affordable Housing Trust Fund Act. This bill will create a dedicated source of funds for the production and rehabilitation of affordable housing, primarily rental and primarily for extremely low income households. S. 1248 warrants serious review by this Committee.

The National Low Income Housing Coalition and our many partners from across this country have been working hard to educate members of Congress and your constituents about the need for and the merits of a National Housing Trust Fund. This campaign has generated great optimism and support, as evidenced by the over 2,200 endorsements we have received to date. I would like to place in the record the latest list of endorsers, as well as a letter from Cardinal Theodore McCarrick, the Archbishop of Washington, on behalf of the US Conference of Bishops, which was sent to each Senator and House Member urging support of the National Housing Trust Fund.

In the course of discussing this bill in communities across the country and with nearly every Senate and many House offices, we have found great interest and considerable support. We have also heard all the arguments against it. I would like to use my time today to raise and then respond to these arguments.

1. We do not need another program. We may not need another housing program, but we do need a sharp increase in the level of housing funding that is targeted to serve the lowest income households. A National Housing Trust Fund is a new source of funding more than it is a new program. The National Housing Trust Fund will augment existing production programs that cannot or do not serve these households. Given the severity of the housing shortage, a significant infusion of funds is required that is unlikely to be forthcoming in the current appropriations process. A trust fund with dedicated sources of funding is more likely to provide the level of funding required.

H.R. 3995, which Chairwoman Roukema has been introduced in the House, acknowledges the need for rental housing production for extremely low income households by creating a more deeply targeted component of the HOME program. This is a concept that deserves consideration. However as proposed, H.R. 3995, does not provide for new funding, but rather uses recaptured Section 8 funds. We strongly object to this redirection of Section 8 funds, and much prefer the approach suggested in Senator Sarbanes’ bill that will improve the voucher program so that there are no longer any funds to recapture because all are being used for their intended purpose.

2. The federal government has failed at housing programs for the lowest income households. First of all, we disagree that all housing programs are failures, but we do agree that mistakes were made. Lessons learned are reflected in the design of the National Housing Trust Fund. First, the National Housing Trust Fund will not recreate economic segregation. Trust fund dollars are to be used in conjunction with other funds to support the production of housing affordable to extremely low income households in mixed income developments and low poverty areas. Second, housing produced by trust fund dollars must remain affordable for forty years and not be subject to loss to the affordable housing supply as much of the privately owned, publicly subsidized housing is today. Three, the National Housing Trust Fund does not favor one housing sector over another. Public housing authorities, non-profit organizations, and for-profit companies are all potential developers and operators of housing produced through the National Housing Trust Fund. Funds are to be awarded on the basis of merit to those entities that can best demonstrate their capacity to get the job done.
3. Production funding for extremely low income households is insufficient; operating subsidies are also required. We agree. In response to criticisms that the National Housing Trust Fund proposal and S.1248 have weak operating subsidy provisions, the National Housing Trust Fund Campaign convened a committee of housing experts to develop a new approach. The result is the "thrifty production voucher" proposal that is under consideration in the House as part of H.R. 3995 and is expected to be in Senator Sarbanes’ voucher improvement bill. We urge Senator Kerry to add thrifty production vouchers to the operating subsidy options in S.1248.
4. The excess FHA revenue does not exist. This is the most frequent objection we hear. It is only in the highly idiosyncratic language of federal budgeteers that is possible to say that this money does not exist. What they are really saying is that it is being used for other purposes and therefore not available for this use, or that S.1248 is not budget-neutral and calls for spending without providing offsets. These are policy decisions that can be changed, not evidence that funds do not exist. Indeed, it is precisely these kinds of objections that argue for creating a dedicated source of revenue that makes clear how these particular funds should be used. According to the latest actuarial review of the FHA Single-Family Insurance Program by Deloitte & Touche, the FHA program will generate by 2008 $26,383,000,000 more than is required to maintain the safety and soundness of the program. The Executive Summary of the Deloitte & Touche report is attached to my written testimony, as is the HUD press release that accompanied the report in which Secretary Martinez announces the continued health the program.

Please note that it is our position that the National Housing Trust Fund should not rely solely on the FHA and Ginnie Mae programs as the dedicated sources of revenue. Indeed, these are insufficient to meet the goal of 1,500,000 homes in 10 years. There are 280 state and local housing trust funds across the country, funded by a wide range of sources. We see the FHA and Ginnie Mae as making some, but not all, of the contributions to the trust fund. We are interested in working with you to identify other appropriate sources of dedicated revenue streams.

5. Any excess FHA revenue should go back to FHA insured homeowners. Once objectors have accepted the notion that there are extra funds, the next argument is that they should be redistributed to the insured homeowners who must be overcharged for their homeowners’ insurance. The distributive nature of the FHA Single Family program was eliminated by Congress in 1990 as part of the reform to the program needed to prevent its financial decline and to put the program on sound financial footing going forward. The HUD Secretary does have the authority to reduce premiums and indeed the premiums were reduced in 2000. FHA-insured homeowners are receiving an important federal benefit, that is, access to homeownership that otherwise would not be available to them, and are paying a fair price for this service.
6. This use of FHA revenue will harm the FHA program. This is yet another argument against use of the FHA revenue for a National Housing Trust Fund. S. 1248 protects the FHA program more that current law does by raising the capital adequacy ratio, or the level of required reserves, from 2% to 3%. The projected $26 billion excess that would go into the National Housing Trust Fund assumes the higher ratio. The Deloitte & Touche analysis also includes projections based on several other economic scenarios. Even in the worst case scenario, the ratio remains well above 3%.
7. It is not appropriate to use funds from the FHA single family program to fund multi-family housing production, because such proposals are beyond the goals of the program. This could be a legitimate policy argument, if the funds were sitting idle. But they are not; they are going into the Federal Treasury and funding other federal priorities. Our argument is that funds earned by one federal housing program are appropriately used to support other federal housing priorities. This is simply a decision to make rental housing production for extremely low income families and individuals a federal priority again. Having said that, we are open to being persuaded that other sources of funds may be more appropriately dedicated to the National Housing Trust Fund and welcome any and all suggestions that members of the Subcommittee and others may have.
8. We cannot afford it. This is the least convincing argument of all. Of course, we can afford new investment in rental housing production if we decide it is a priority. We have made housing a national priority at several points in the past when we faced housing shortages and we can do so again. Housing has historically received bi-partisan support and indeed, the peak year of subsidized rental housing production of 500,000 units was during the Ford Administration.

Not only can we afford to do this, more importantly, we cannot afford not to. The consequences of failing to act are serious. Good housing is fundamental to healthy human development. We have growing evidence that housing instability has adverse effects on employment success, school achievement, health status, and family well-being. Excessive housing cost burdens are the primary cause of housing instability. Housing instability means frequent moves, family disintegration, staying with relatives, lack of a permanent address, inability to hold onto possessions, and in the most serious cases, falling out of the housing system altogether and become homeless. Once homeless, regaining stable housing is even more difficult.

Because most of us enjoy good housing that we can afford in neighborhoods of our choice, we take housing for granted and find it difficult to empathize with people with housing problems. However, we all tacitly know how central our housing is to our physical and emotional well-being, to our ability to fulfill our family obligations, and to our capacity to do our jobs. Imagine not having a regular and safe home. How well would any of us do at what is expected of us in the absence of the security, respite, comfort, and sanctuary that our homes provide?

Thank you for the opportunity to testify today. We looking forward to working with the Committee on S. 1248, the National Affordable Housing Trust Fund Act.

Home | Menu | Links | Info | Chairman's Page