Mr. Chairman and Members of the Subcommittee, thank you for inviting me to testify on the affordable housing needs of low-income families, especially extremely low-income families. This is an important issue, and while this Nation has made substantial progress in homeownership rates and in housing programs for low-income families, there is still much to be done especially for extremely low-income families, those at or below 30 percent of medium income.
In part, to help focus the debate on the need for housing production for extremely low-income families, I introduced, with Senator Collins, S. 2967, the Affordable Housing Expansion Act of 2002. I ask that a summary of the provisions of the legislation be included with my written statement as part of the record. Mr. Chairman, I praise your strong efforts in support of affordable housing for low-income families. Both you and Senator Sarbanes have sponsored similar legislation in S. 1248, the National Affordable Housing Trust Fund Act of 2001, as well as S. 2721, the Housing Voucher Improvement Act of 2002.
The Affordable Housing Expansion Act of 2002 is intended to begin to meet the long-term housing needs of very low- and extremely low-income families. In particular, this legislation would establish a new block grant program to be administered by the Department of Housing and Urban Development (HUD). Under this program, HUD would allocate funds through a block grant to state housing finance agencies for the development of mixed income housing. These Federal block grant funds would be targeted solely to the development of very low-income and extremely low-income housing units within mixed income housing. The funds would be allocated on a per capita basis with no state receiving less than $6,000,000. Each state housing finance agency would have to submit an affordable housing expansion plan to HUD that ensures the funds are allocated to meet the low-income housing needs in both the rural and urban areas of each state. States also would have to contribute a 25 percent match. Moreover, each state housing finance agency could use up to 20 percent of these block grant funds to preserve existing low-income multifamily housing and for the rehabilitation needs of low-income multifamily housing.
I know that there is some differences of opinion as to what entity should administer a Federal housing production program. I believe there are any number of good ideas on this issue. I chose to use state housing finance agencies, in part, because of effectiveness of the Missouri Housing Development Commission in administering housing programs in Missouri, including the low-income housing tax credit program. Moreover, I support the use of State housing finance agencies because these entities know the local housing markets within their states and have both the experience and funding sources to ensure the effective use of Federal housing funds.
Also, the question of funding has been one of the roadblocks that has long hampered the consideration of a new housing production block grant program for extremely low-income families. This is a difficult issue. While a housing production program needs to be a priority for this Nation, the VA/HUD Appropriations Subcommittee has a number of other important and pressing funding needs of great importance and interest, including the need for increased funding for, among other things, VA Medical Care, EPA water and wastewater infrastructure needs, and science research.
Nevertheless, I believe we should look at reserving any "excess" section 8 funds, up to $1 billion a year, for the production of low-income housing. This is as a credible source of funds for this housing block grant program, especially since every year the Congress and the Administration rescind a billion dollars and more to pay for other program priorities, including programs within HUD, VA, and EPA, among others. And contrary to popular belief, these section 8 funds can be rescinded so that not a single family will lose any housing or housing assistance.
The Affordable Housing Expansion Act of 2002 also provides new authority for low-income housing production under the Section 8 program and the Public Housing program. Under the Section 8 program, the bill provides new authority for a "Thrifty Voucher" program that would allow the use of section 8 project-based assistance for new construction, substantial rehabilitation and preservation of affordable housing for extremely low-income families. Because the cost of these vouchers is capped at 75 percent of the payment standard, these vouchers will need to be used in conjunction with other housing assistance programs, such as the HOME program, the Community Development Block Grant program or Low Income Housing Tax Credit program, to be successful. This new section 8 authority is substantially the same as legislation included by Chairman Reed and Senator Sarbanes in S. 2721.
The bill also would authorize a new loan guarantee program that will allow public housing agencies to rehabilitate existing public housing or develop off-site public housing in mixed income developments. The long-term debt of these loans would be tied to the pro-rata share of funds under the Public Housing Capital and Operating Funds that would be allocated to the units that are rehabilitated or constructed over a maximum of 30 years. This tool will allow Public Housing Agencies to address more aggressively the over $20 billion backlog of public housing capital needs.
The Affordable Housing Expansion Act of 2002 is an important first step towards addressing a growing shortage of affordable housing for very low-income and extremely low-income families. While homeownership rates have grown and the cost of housing has skyrocketed, many very low-income and extremely low-income families are being left behind without the availability of affordable rental housing. This is unfortunate, and the social and economic costs to the Nation are dramatic
In particular, HUD=s most recent report on worst case housing needs, A Report on Worst Case Needs in 1999: New Opportunity Amid Continuing Challenges, concluded that the shortage of affordable housing has worsened. In particular, the number of affordable housing units available to extremely low-income renters dropped between 1997 and 1999 at an accelerated rate. As we have seen in this economy, as rents continue to rise faster than inflation, the cost of rental housing at the low end of the housing market has increased, resulting in the further erosion in the supply of rental units that are affordable and available without government subsidies.
In addition, this report found a record high of 5.4 million families (some 600,000 more families with worst case housing needs than in 1991) that have incomes below 50 percent of median income and pay at least 50 percent of their income in rent. Worst case housing needs have become increasingly concentrated among those families with extremely low-incomes.
Further, since that time, we have lost some 200,000 units of section 8 project-based units to rent increases as well as to decisions by owners of the housing not to renew their section 8 contracts. In addition, many families with vouchers simply cannot find housing in tight rental markets. For example, a recent survey conducted by the Council of Large Public Housing Agencies (CLPHA) in 2000 found that the average turn-back rate for vouchers was 19 percent, which means that almost 1 in every 5 vouchers holders returned their vouchers unused despite time extensions granted to voucher holders for housing searches that can be as long as 6 months. In addition, this survey found that the average time needed by voucher holders to find housing was 85 days. And while voucher utilization is improving, some 892 PHAs in 2000 and 715 PHAs in 2001 had voucher utilization rates of below 90 percent. Finally, as families age and people live longer lives, we are beginning to face a new crisis of a lack of affordable housing for our seniors.
The Affordable Housing Expansion Act is designed to provide additional, needed tools that will allow States and communities to develop new affordable low-income and mixed-income housing. This would help fill a gap in the housing needs of the Nation that would allow these lowest income families to begin to climb the housing ladder to homeownership. Decisions would be driven by local choice and need and start to meet the burgeoning need for new low-income housing in tight markets where there is little or no housing for families and seniors at the low end of the economic scale. These families need to be served and the cost to build affordable housing is small compared to potential cascading social and economic costs to both communities and familiesC it is a simple equation --- homes equal stable environments in which children are educated and people can obtain jobs. Jobs and homes represent the tax base of any community and educated children are the future of our Nation.
This is important legislation. The private sector is not making the needed investment to meet the low-income housing needs of the present and future, and existing Federal programs are not addressing those families in the most need - extremely low-income families. The Federal government must show the leadership and make the needed investment to partner with state and localities as well as public and private entities in the low-income housing infrastructure of the Nation. This bill is designed to start to meet this need and focus the debate on the importance of low-income housing production to the current and future housing needs of this Nation.
One final issue. I know that the Subcommittee has some concerns regarding HUD's new legal position that would support the ability of certain section 8 project owners to opt of section 8 contracts where an owner has prepaid the mortgage on a multifamily housing project insured prior to 1980. I am waiting for a response from HUD on a number of related questions, but, absent clear evidence from HUD in support of its legal interpretation, I believe HUD's new position is contrary to both policy and law. Also, unfortunately, HUD's position is creating a lot of uncertainty in the housing marketplace and the issue may have to be resolved in the courts.
Thank you, Mr. Chairman and Members of the Subcommittee.
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