The National Low Income Housing Coalition is pleased to have this opportunity to present our views on the Public Housing Reform and Responsibility Act of 1997. We look forward to working with the Subcommittee as you wrestle with the difficult problem of enabling very low income people to obtain decent, affordable housing in viable neighborhoods and communities. Achieving this goal is the purpose that the National Low Income Housing Coalition has pursued since its establishment in 1974.
The context: low income housing needs and shrinking available resources. The federal government has provided housing assistance for low-income people in a variety of ways since the mid- 1930's, when the public works program that preceded the U.S. Public Housing Act of 1937 was adopted. It is worth noting that the housing situation which faced the nation in the 1930's was far different - and far more serious - than our problems today. The first housing census, taken in 1940, found that 46% of the occupied dwelling units were either dilapidated or lacked basic plumbing facilities, primarily running water and indoor toilets. Today, the major housing problems facing low income households is not lack of plumbing but housing costs that are more than they can possibly afford.
The fact is that a substantial number of extremely low income renter households not only cannot pay fair market rents, but their entire incomes fall below the level needed just to operate and maintain rental housing units, including paying taxes on them. And, in spite of more than half a century of federally assisted housing, most of these households live in units that are privately owned, and unsubsidized. Their owners either cannot maintain them, or operate at a loss, or both. Analysis of 1993 American Housing Survey data finds that 9% of all renter households lived in severely distressed housing units - defined as units with housing costs (rent, utilities, and other housing costs as defined by the Census Bureau) below $500 monthly, occupied by households with incomes below $20,000 who paid more than 50% of their incomes for housing. An additional 28% lived in moderately distressed units, paying between 30% and 50% of their incomes for housing. Put another way, less than two-thirds (64%) of this nation's entire stock of rental housing -- which is overwhelmingly privately owned and unsubsidized -- is economically viable without some kind of housinc, assistance or measures, including work at well above minimum wage levels, which raise the incomes of its occupants.
Using different criteria, HUD has analyzed "worst case" housing needs based on the same data. HUD's latest report, Rental Housing Assistance at a Crossroads, found 5.3 million unsubsidized very low income renter households income as percent of area median (not counting homeless households) either paid more than half their income for housing costs or lived in seriously inadequate housing units, or both. Almost three-quarters of these households faced only the problem of severe housing cost burden. Moreover, the bulk of these households had incomes below 30% of median and a substantial portion of them were working households. Figure 1 compares the incidence of worst case needs by percent of median income with the income profiles of households in HUD-assisted low income housing and of all renter households. While low income housing programs provide assistance to fewer than half of all very low income renter households with worst case housing needs, it is clear that the income profile of assisted housing tenants closely matches the income profile of renter households with the most severe housing problems. Figure 2 shows the proportion of unassisted renter households with worst case or lesser housing problems by percent of median income. Figure 3 compares the number of households with priority problems with the number now served by assisted housing programs, and shows dramatically the pressing need for housing assistance at the bottom of the income scale.
This situation has arisen in large part because low income housing assistance has not been made available on the basis of need, but rather has been rationed by the level of funds appropriated for our various low income programs. The National Low Income Housing Coalition has long urged that tenant-based assistance be provided on the basis of need, not because we favor large spending programs per se, but because we see no other way of obtaining the goal of decent, affordable housing for all.
Ironically, while low income assistance has not been an entitlement, substantial financial assistance is provided - as an entitlement - to home owners through the deductibility of mortgage interest, property taxes, and various provisions related to capital gains. While most of the recipients of these tax benefits are homeowners who would have difficulty paying for their housing without them, most of the cost to the Treasury comes from deductions taken by taxpayers in the top 15% of the income distribution. Thus the primary benefits go to home owners with sufficient income so that they could maintain their housing without these benefits and still pay smaller proportions of their income for housing than almost all low income people. Figure 4 shows the changes in low income housing budget authority and outlays, compared to housing-related tax expenditures, from 1977-2002 (1997-2002 figures are Treasury projections.) This homeowner entitlement will cost the Treasury an estimated $86.6 billion this fiscal year according to information contained in the Administration's proposed budget. In contrast, the budget estimates that outlays for the housing assistance subfunction, which comprises all federal low income housing assistance activities, will be $29.0 billion. For fiscal 1998, the budget proposes $29.4 billion for housing assistance and estimates the cost of homeowner deductions at $89.9 billion. Thus, the increase in the cost of the homeowner entitlement is more than 8 times the increase requested for low income housing in the President's budget proposals.
The National Low Income Housing Coalition has never supported repeal of any of the homeowner deductions. We have, however, sought ways of getting a better balance between housing-related tax expenditures and appropriations for low income housing assistance. We developed a specific proposal for doing this in 1994. In brief, our proposal would reduce the value of homeowner deductions taken by upper income households, and use the money saved for a trust fund which would make block grants to local and state governments for both housing costs assistance and additions and improvements to the housing supply. In developing this proposal, we gave careful consideration to how to frame a block grant program so that flexibility was provided, while assuring that those with the greatest needs were served proportionately and so that they had a significant role in decision-making on the uses of the block grant funds. We believe that many of the specific recommendations in our proposal will be useful to this committee as it works to devolve federal housing program in a responsible way.
Before addressing the specific provisions of S. 462, we believe it important to note some of the underlying causes of many of the problems which public housing has faced for some years. First, it was not the choice of housing authorities to concentrate their units in high-rise buildings in low-income neighborhoods; it was a choice which was forced upon them by the cost of acquisition and site preparation without the benefit of redevelopment write-downs combined with a federal limit on the cost per room of public housing construction. Second, when it limited PRA income from tenant rents by adopting the Brooke amendment -- several years before the Coalition was established -- Congress also set up an operating subsidy program to offset the loss of this income. But operating subsidies have not been adequate to maintain public housing in viable condition, and many of the problems we see today are the result of saddling housing authorities with an impossible mandate, given the limits on their funds
We believe it would be unfortunate indeed if the impossible mandate of several decades ago were to be replaced by federal requirements which, in effect, make up for the shortfall in needed federal funds by excluding most of the households with the most critical housing needs from the ibility of receiving federal housing assistance.
This is the context of need in which housing legislation will be considered this year and for the foreseeable future. We hope that this context of need will be paramount in your consideration of S.462 and the other measures before the subcommittee as you work to reshape housing programs. We urge that one major criterion for your consideration be to avoid further exacerbating the critical housing problems faced by extremely low income people and, in particular, that you not withdraw housing assistance unless and until they are able to obtain decent, affordable housing without such assistance.
The Coalition's recommendations on specific provisions of S. 462 are based on both the input of our members, many of whom live in public or assisted housing or are actively in providing it, as well as on our analyses of housing needs and housing programs. We look forward to working with the subcommittee and its staff as you consider how best to approach the critical issues addressed by the bill.
Income targeting. We are concerned at the relaxation of income targeting requirements for public housing, and Section 8, which will inevitably mean that households with the most urgent needs will get fewer units, as vouchers turn over and vacancies occur in public housing. We note, and appreciate, that the Senate provisions are far less draconian than those under consideration by the House of Representatives. But they, too, move us backward at a time when stable housing may be critical to a family's capacity to move from welfare to work.
We recognize the problems of large public housing projects that concentrate extremely low income people in neighborhoods that provide few services or economic opportunities. But we do not believe that relaxing targeting requirements is the right answer to these problems. Instead, we should vigorously pursue efforts to improve the services and economic opportunities available to residents in these neighborhoods. It is particularly important, given the premise of welfare reform that current recipients can and must find suitable training andemployment, that they not be denied the housing they need. Moreover, it seems clear, since Fair Market Rents throughout the nation are well above what households earning minimum wages can afford, that housing assistance will be needed by many working households after they leave the welfare rolls.
Moreover, there is no bright line distinction between dependent poor and working poor. Although there is a general tendency to assume that working poor people have higher incomes, this is too frequently not the case. Indeed, as the 1993 American Housing Survey data show, a substantial portion of households in every income range, even the very lowest, receive most of their incomes from work. At the bottom of the income scale, with incomes below 20% of median, 23% of households with children and 48% of other nonelderly households report earnings as their major source of income. The comparable fiaures for households with incomes from 20-30% of median are 62% for households with children and 68% for other nonelderly households. Between 30% and 50% of income, 87% of families with children and 84% of other nonelderly households get most of their income from work. (See Figure 5.)
We hope that the Subcommittee and the Senate will agree with us that low income housing assistance should be targeted on the basis of need. Therefore, we recommend consideration of an approach which would be both effective and flexible enough to adapt to local conditions: rather than set arbitrary percentages, targeting requirements for admission should be based on the distribution of renter households with priority housing problems (homelessness, displacement, paying more than 50% of income for housing, or living in seriously substandard housing). HUD has already provided jurisdictions preparing Comprehensive Housing Affordability Strategies with profiles of households with serious housing problems based on 1990 Census data, which could be used as an alternative to the national standard. Nationally, this would result in the profile of households with severe problems similiar to that shown in Figure 1 of this testimony.
In any event, it is critical that the relaxed targeting requirements either be rejected, or, if they are enacted, that they apply only to large projects in poverty areas, and that additional housing assistance be provided so that the total number of extremely low income households receiving housing assistance is expanded, not dimished.
Resident membership on housing authority boards. The provisions of S. 462 are a substantial improvement over current law in a direction which the Coalition has supported since its founding in 1974. We strongly support the concept of customer participation in decision-making in all low income housing and community development programs. Therefore, we would like to see the concept in S. 462 applied to Section 8 as well as project-based tenants.
Adjustments to income. We strongly support the phase-in of rent increases when public housing residents obtain jobs, including the 18-month wait before rents are increased, as well as the other exemptions from income contained in the bill. "Graduation" dates and work requirements. The Coalition believes the best way to move public housing tenants and other low income people to economic independence is through the provision of opportunities and incentives, not by mandatory requirements, including the community service requirements contained in S. 462.
We believe it is particularly important to avoid placing arbitrary time limits On housing assistance just as this nation is embarking on the TANF program which replaces AFDC. In most metropolitan areas it takes substantially more than the minimum wage to obtain decent, unsubsidized housing. It is unlikely - to say the least - that substantial numbers of people with little or no work experience will be able to get secure Jobs that pay enough to rent unsubsidized housing, even with the best of motivation, training, and Job placement.
Public housing agency plans. The Coalition appreciates the provisions for resident participation in the planning process included in S. 462. We believe that these provisions could appropriately be strengthened by requiring an explanation of why any resident recommendations were rejected, in addition to a summary of comments by the resident advisory board.
In addition, we recommend that copies of proposed plans be made available to residents, with at least 90 days (rather than 45 days) for them to comment on them. Finally, we recommend that, in cases where plans take effect automatically because HUD has not given them timely review, residents have the right to reopen specific provisions by appealing to HUD.
Minimum rents. We appreciate both the preservation of the fundamental ceiling on rents contained in the Brooke amendment and the limitation of mandatory minimum rents to no more than $25.00 per month. We also urge that the minimum rent requirements not be excluded from the phase-in provisions of other rent increases.
Section 8 issues. At present, the Section 8 voucher and rent certificate programs serve far more extremely low income households than does the public housing program. Moreover, given the major affordability problems facing extremely low income unassisted renter households, it is imperative that Section 8 tenant-based assistance be expanded. To this end, we favor consolidating the voucher and certificate programs, if this is done in a way which will preserve basic tenant protections and will not create unaffordable housing cost burdens for assisted tenants. Therefore, we urge ' that any consolidation include the present provisions prohibiting owners from discriminating against holders of Section 8 vouchers as well as protection against arbitrary evictions.
In addition, we urge that the bill include the following provisions:
Again, we appreciate the opportunity to testify today and look forward to continuing dialogue as your work on this legislation proceeds.
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