Subcommittee on Housing and Transportation

Hearing on the HUD Section-8 Opt-out Crisis

Prepared Testimony of the Honorable Rick Lazio (R-NY)
Member of Congress

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

Thank you Mr. Chairman and distinguished members of the Subcommittee, for the opportunity to testify today on an issue that is deeply troubling to me, and what many say may be the greatest crisis of affordable housing that we will encounter over the next several years.

Across the country, a growing number of low-income families living in Federally-subsidized housing are in danger of losing their homes. As Section 8 rental subsidy contracts between the Federal government and private development owners expire in increasing numbers, many of the families who rely on Section 8 project-based assistance are at risk.

According to testimony submitted to the House Subcommittee on Housing and Community Opportunity by the National Housing Trust, more than 38,000 affordable housing units were lost in 1998 alone as a result of opt-outs and HUD terminations. The Trust estimates that 2,000 to 3,000 units a month are converted to market levels, and more than 300,000 apartments across the country are potentially at risk.

That translates to putting the stability of hundreds of thousands of families across America at risk. Many residents have lived in these homes for more than 20 years. Most are seniors or persons with disabilities, and live on fixed and very modest incomes. Residents and their families are frightened. They have described to me their feelings of uncertainty and helplessness about the future.

For example, just last month, Ms. Opal Henke, a retired nurse living in assisted housing in small rural town in Nebraska, testified before our Subcommittee that she and many of her neighbors would not know where to go or how to survive if they lose their homes.

In New York City, Ms. Lauren Gelber is at risk of losing her home of 19 years. For Ms. Gelber, confined to a wheelchair, the hopes of finding housing alternatives are even smaller as she must search for affordable housing that is accessible to persons with disabilities. These people, real Americans with real stories to tell, are the true face of the crisis of affordable housing we must confront.

Twenty-five years ago, in an effort to encourage the construction of affordable housing complexes, the Federal government offered private developers the guarantee of rental subsidies for 20 years in exchange for the commitment to serve low-income families.

While clearly not without its problems, the Section 8 program has been a success in providing affordable housing opportunities to low-income Americans. Between the project-based component and the tenant-based vouchers, today Section 8 provides affordable housing opportunities for more than 3 million families--twice the number living in public housing.

There have been challenges, as Members of this Subcommittee and those testifying here today are well aware. As the local real estate markets and economic conditions have changed, a host of complex problems for the program have developed.

Just two years ago, the renewal of expiring Section 8 contract for properties with rents above market were threatening to consume the Federal government's entire housing and community development budget. In response, Congress passed the Multifamily Assisted Housing Reform and Affordability Act of 1997 ("MAHRA"). The legislation established a program to enable the Department of Housing and Urban Development (HUD) to restructure and reduce the debt on many of the Section 8 properties, thus allowing for rents to be brought down to market levels, or marking down to market.

Today, we are faced with expiring Section 8 contracts on properties with rent levels below market levels that potentially must be marked up to market. In this arena, as contracts expire, unless the renewal terms offered by HUD reach toward market levels, many owners, motivated both by the strong economic environment and increasingly frustrated in dealing with the Federal bureaucracy, are "opting out," or choosing to not renew their contracts.

What is even more troublesome is the lack of adequate protection provided to many residents when a unit is converted to the private market. In the vast majority of cases, residents living in these developments receive portable rental assistance, or vouchers, when an owner opts out of the Federal program. However, in many circumstances, standard vouchers are inadequate in the face of market-rate rents, forcing residents to either find other shelter, or remain in their homes and face the awful choice between paying rent or buying food and medicine.

In the House of Representatives, we have introduced legislation designed to address the two aspects of the current problem--unprotected residents and the loss of affordable housing. The Chairman of the Banking Committee, Representative Jim Leach, the Chairman of the VA, HUD, and Independent Agencies Appropriations Subcommittee, Representative Jim Walsh and I joined to introduce the "Emergency Residents Protection Act" to form a two-pronged approach to address this problem.

First, our proposal would protect current residents from rent increases. We would require HUD to offer "enhanced vouchers," vouchers with a greater subsidy level, to protect seniors, persons with disabilities and families from displacement. These enhanced vouchers will allow particularly vulnerable populations the ability to remain in their own homes.

Secondly, we are working with low-income housing groups, residents, and the Administration to provide permanent statutory guidance on preserving the units themselves as affordable where appropriate.

Mr. Chairman, Congress must act. For the last 18 months, HUD has had broad authority to prevent opt-outs and the loss of affordable housing. During 18 months of inaction, an environment of panic among senior residents and families living in these facilities has developed. Finally, just a few weeks ago, HUD issued new guidelines which, however late in coming, appear to be a step in the right direction.

It is my intention to press for our Committee's consideration of the proposal in combination with components of other proposals offered by Members of our Committee Minority. In particular, I look forward to working in partnership with the Ranking Member of the Subcommittee here today, Representative Barney Frank, who has been closely involved in the issue.

Mr. Chairman, you are to be commended for holding this hearing, and I look forward to working with you and your Committee on this important issue.

Mr. Chairman, I also request that our Subcommittee issue brief attached to my written statement be included in the record.

Click here to read the issue brief

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