Subcommittee on Housing and Transportation

Hearing on the HUD Section-8 Opt-out Crisis

Prepared Testimony of the Honorable Jim Jeffords (R-VT)
United States Senator

9:30a.m., Thursday, July 1, 1999

Chairman Allard, Senator Kerry, Senator Grams, thank you for inviting me here today to discuss the affordable housing problem we face in our country today.

Last month during consideration of the Financial Modernization bill you, Senator Allard, Senator Gramm and I discussed this issue which has rapidly become a serious national problem - one where thousands of low income elderly, disabled, and families with children are increasingly unable to afford privately-owned low income housing units.

Thanks to encouragement and assistance from you, Senator Kerry, Senator Grams, and Senator Bond, today I will be introducing the Affordable Housing Preservation Act of 1999.

I applaud Secretary Cuomo and Commissioner Apgar for their recent initiatives to exercise the authority provided by Congress to use additional vouchers to stem the tide of Section 8 opt outs and prepayments. I believe that this issue demands a more permanent solution.

The Jeffords/Kerry Affordable Housing Preservation Act will provide it by building on local partnerships between non-profits, state and local governments, and private landlords to keep existing projects available for low income tenants. The bill will effectively preserve existing low income projects, as well as increase the units to expand a tight housing marketplace through new acquisition and rehabilitation.

In Vermont rents have increased 11 percent over the past three years, making it increasingly difficult to find affordable shelter. To make matters worse, the lack of low income housing makes it simply impossible to find a place to live in areas like Burlington, where the vacancy rate is less than one percent.

The need to preserve existing housing from opt outs and prepayments is only exceeded by the need to expand the number of housing units for low-income families, elderly and disabled. The affect of more Section 8 vouchers is undermined when there is nowhere to use them. On any given day in Burlington there are just 60 available rental units in a city of more than 40,000 people.

In such circumstances, low income families cannot even find a place to live, much less find one that's affordable. This problem has been a key factor in increasing homelessness, as families seeking help from Burlington's emergency shelter rose over 60 percent between 1997 and 1998.

As Section 8 federal subsidies come up for renewal more often, the risk of opt outs by private landlords increases. Housing projects in Brattleboro and Montpelier currently face opt out situations where landlords will raise rents to levels that Section 8 tenants cannot afford.

The Affordable Housing Preservation Act will build foundations for cooperation where efforts to raise public and private money are enhanced through federal matching grants. Vermont's community based non-profit organizations have achieved much success by encouraging private landlords seeking to exit the affordable housing business to transfer ownership to these groups.

Although "sticky vouchers" provide much needed short term relief, the Affordable Housing Preservation Act offers a long term solution to the opt out and prepayment problem by expanding community-based housing preservation and acquisition initiatives. This bill will give hope by providing help for those elderly, disabled, and families facing eviction or homelessness.

I look forward to working with you, Mr. Chairman, Senator Kerry, Senator Grams and the members of this Committee to fix this problem and provide a new direction for the nation in affordable housing. Thank you again, Senator Allard, for the opportunity to testify this morning.

The Jeffords/Kerry Housing Opportunities Preservation and Promotion Act of 1999
July 1, 1999

Purpose: To provide federal matching grants to states to preserve HUD-assisted affordable housing for low-income families, including elderly, disabled, and families with children.

Problem: As real estate values around the country rise, there is increased pressure on owners of federally assisted housing to either prepay their subsidized mortgages or let their section 8 contracts expire without being renewed. HUD estimates that about 30,000 units of affordable housing have been lost due to section 8 opt-outs since 1996, and others estimate the loss through prepayment at nearly 60,000 units of affordable housing through 1998. At a time when studies show that families with worst case housing needs remain at historically high levels (5.3 million households), this loss of affordable housing cannot be sustained.

Solution: The Housing Opportunities Preservation and Promotion Act of 1999 would preserve existing low-income housing stock and increase opportunities for the purchase of housing projects by resident-approved non-profit organizations through a matching grant program. The bill:

How the Program Works

The Secretary of HUD determines each state's pro rata share of the funding based on the extent of the problem each state faces in terms of loss of affordable housing and lack of alternatives for residents.

States then qualify for federal funds, up to their share, based on their ability to raise matching funds. $1 of state funds qualifies for $2 of federal funds. Tax credit and bond funds get $1 of federal Matching money.

States, in turn, will fund projects based on a number of criteria, including length of commitment to affordability, whether the property is transferred to non-profit ownership, whether preservation of the project is consistent with the Comprehensive Housing Affordability Strategy (CHAS), whether a local government provides funds, and others. These criteria provide guidance to the states. If a state does not apply or qualify for federal funds, HUD would reallocate those funds among the qualifying state, according to need. The legislation authorizes such sums as may be appropriated for fiscal years 2000 through 2004.

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