Hearing of the House Subcommittee on Housing and Community Opportunity of the House Committee on Financial Services - The Section 8 Voucher Reform
Chaired by: Rep. Maxine Waters
Witnesses: Linda Couch, Deputy Director, National Low Income Housing Coalition; William Fischer, Senior Policy Analyst, Center on Budget and Policy Priorities; Nan Roman, President and CEO, National Alliance to End Homelessness; Gloria Robinson, Section 8 Voucher Holder; Ted Houghton, Executive Director, Supportive Housing Network of New York; Rudy Montiel, Executive Director, Housing Authority of the City of Los Angeles; Tony Bazzie, Executive Director, Raleigh County Housing Authority; Curt Hiebert, President, Public Housing Authorities Directors Association; Renee Rooker, President, National Association of Housing and Redevelopment Officials; Sunia Zaterman, Executive Director, Council of Large Public Housing Authorities; Karen Newsome, Vice President, Winnresidential Association, National Affordable Housing Management Association
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REP. WATERS: The hearing of the Subcommittee on Housing and Community Opportunity will come to order. Good morning, ladies and gentlemen.
I would like to thank our ranking member, Shelley Moore Capito, and other members of the Subcommittee on Housing and Community Opportunity for joining me for our second hearing on the Section 8 Voucher Reform Act. At our first hearing, we were joined by HUD Secretary Shaun Donovan, who testified about the need for this legislation and its importance in protecting the continued viability of the Section 8 program, which provides housing assistance for 2 million low-income families nationwide. Today, we will hear from residents, housing advocates, housing authorities, and the housing managers who deal with this program on a day-to-day basis and will be directly affected by this legislation.
This is legislation that has broad support, including the support of 72 housing and redevelopment stakeholders in California, including the California Housing Partnership. These groups have sent a letter of support, which I would ask unanimous consent to enter into the record. It also has broad bipartisan support, passing the House in 2007 on a vote of 333 to 83.
Over the years, the Section 8 program, which pays the difference between 30 percent of a tenant's income and the fair market rent, has become increasingly complicated for residents and the PHAs that administer the program. Residents must routinely reverify their income through a time-consuming error-prone process.
As we will hear from Ms. Robinson, the inspections process, although well intended, can actually prevent a tenant from leasing a unit if it needs minor repairs. The proposed bill would simplify these processes by streamlining the rent determination process, requiring certifications less often, and improving inspections by allowing PHAs to perform some repairs.
The proposed bill also addresses the funding formula for the Section 8 program. Because of a drastic Bush administration change to how vouchers were funded, over 150,000 vouchers were lost. I agree with the assessment of Secretary Donovan, who testified that the changes to the funding formula contributed to a slide in funding utilization. In fact, in order to make up lost funding, PHAs limited services to residents and even began to restrict or deny moves to higher-cost areas.
While the Democratic Congress has corrected this funding formula, the program has still not achieved the same leasing levels as it had before the formula change. In short, the voucher program serves fewer people today than it did in 2004.
Last year, only 90 percent of authorized vouchers were under lease. In 2004, 96 percent of vouchers were under lease. The legislation before us would establish a sustainable and transparent formula that would stop the reductions in voucher use and actually increase the number of families assisted through the program.
The draft we will be discussing today does not include the Moving to Work program, which allows about 30 PHAs to waive most of the rules that govern public housing and Section 8. As I stated in our first hearing, Chairman Frank and I have agreed that there will be a Moving to Work component to this bill.
I would like to reiterate the concerns I have about the Moving to Work program. First, I am deeply concerned about the imposition of time limits and work requirements by Moving to Work agencies. Second, I'm aware that there has been a substantial decrease -- by one estimate, 24,000 vouchers have gone unused -- in the number of vouchers issued by Moving to Work agencies. Lastly, there has never been a thorough evaluation of the Moving to Work program. So I look forward to hearing our witnesses on these very important issues, and would now like to recognize Ranking Member Capito for her opening statement.
REP. SHELLEY MOORE CAPITO (R-WV): Thank you, Madame Chair. I'd like to yield to my colleague, Ms. Biggert, because she has a time constraint. Let her make her statement first and then make mine second. Thank you.
REP. WATERS: Without objection.
REP. JUDY BIGGERT (R-IL): Thank you very much, Ranking Member Capito, and thank you, Madame Chairman, for holding this hearing today.
And I'd also like to thank all of the witnesses, and I -- many of them were on -- worked on this with us in the last draft and the last passage of this bill, and I think that -- so they bring real expertise and hopefully we can get the Senate to move a bill this year after we've finished this one.
There seems to be something that happens in that rarified air over in the Senate that sometimes the bills just sit there and I think this is a very important bill. It's a very important hearing, and I -- and I hope that we will be able to do it expeditiously and then the Senate will take it up.
And I thank you for your talking about the Moving to Work because I do think that is a very important component of this bill for those that are able to move off expeditiously, and hopefully that we'll be able to work out something that will be of benefit to all of us. And I'd also like to thank you for having the family self-sufficiency bill that I worked on early on in this bill.
So again, thank you very much for holding this hearing. I look forward to the witnesses.
I yield back.
REP. WATERS: Thank you very much. Mr. Lynch?
REP. STEPHEN LYNCH (D-MA): Thank you, Madame Chair. I appreciate you holding this hearing and all your good work on this issue. As someone who grew up in Section 8 housing -- project-based Section 8 housing -- I lived there for 15 years with my mom and dad when I was growing up -- I understand how important this program is to a lot of families, especially now in tough economic times when people may have been able to rent in the private market or maybe they were forced out of their homes because of foreclosure. This is becoming a more important program to a lot of families.
The Section 8 House Choice Voucher program provides monthly rental assistance to about 2 million low-income households every year. Nearly 2,500 public housing agencies administer the program at the local level across the country.
During the past two sessions of Congress, under the great leadership of Chairwoman Waters, this committee has completed a great deal of work on this issue and I'm pleased to help in the effort to bridge those efforts to this Section 8 Voucher Reform Act of 2009. As we know from our past work, however, the Section 8 program has encountered structural inefficiencies and challenges that do affect the ability of public (health ?) authorities to effectively administer the program.
We know that from a 2003 HUD quality control study that there have been high error rates in the subsidy calculations. A study released in 2004 also found that 40 percent of the subsidies were erroneously calculated, and these high error rates are not acceptable and formulas must be simplified to avoid those errors.
We have also heard from public housing authorities that many times there are not sufficient staff and resources to perform inspections to certify Section 8 housing stock, especially in the Northeast in my area, notably in the district of Boston where the housing stock is older than in many parts of the country. Additional inspections are necessary to ensure tenant safety and proper allocation of federal resources.
The Section 8 voucher program of 2009 addresses a lot of these issues and it puts in place needed reforms to this essential program that play an important part in our communities. I look forward to the testimony from all of our witnesses on both panels, and I thank you for the courtesy, Madame Chair, and I yield back the balance of my time.
REP. WATERS: Thank you. Ranking Member Capito?
REP. CAPITO: Thank you, Madame Chair, and thank you for holding this hearing on the Section 8 voucher program -- as you said in your opening statement, the second hearing on this subject following Secretary Donovan's experience -- appearance before the committee. We're going to hear from witnesses who interact with this program every single day, and I look forward to their assessment of the program and ways in which we can make improvements.
As has been stated before, this program is already federal housing voucher program -- assistance program -- is helping approximately 2 million low-income families and individuals each year and administrated by 2,500 public housing authorities. Section 8 program provides families and individuals the flexibility to choose where they want to live and tailor their housing to their needs rather than to be designated -- rather than be designated to public housing, and the freedom and mobility of this program I think are two of the key benefits.
But the Section 8 program does face, I believe, significant challenges. The program already consumes over 40 percent of HUD's budget and it is overly complex and burdensome to administer. This program is in need of some fundamental reform that revises the funding formula, reduces the administrative cost, simplifies the rent calculation, and levels the playing field for those working families in rural America.
We've tried to reform this program since the 108th Congress. It's my hope we'll be successful this time. I look forward to working with Chairwoman Waters to improve the Section 8 program for Americans living in both urban and rural areas. Today's witness (sic) will give us valuable input on how to best reshape this program.
I would also like to thank and introduce a gentleman on the second panel from West Virginia, Mr. Tony Bazzie, who's a friend of mine, and he has been working with the public housing authority in Raleigh County for 29 years, so I think -- I know he's seen it inside and out. So I look forward to hearing his experience and his unique perspective on the second panel and I welcome the other panelists as well. Thank you.
REP. WATERS: Thank you very much. Mr. Cleaver?
REP. EMANUEL CLEAVER (D-MO): Thank you, Madame Chair, and Ranking Member Capito. And I apologize -- at 10:30 I'll have to go get another meeting started and I will rush back to this committee because this is a very personal issue with me. As did my colleague, Mr. Lynch, I too lived in public housing, and in those tough days when my mother, father, three sisters, and I lived in public housing I never thought the day would come when I would actually be in charge of public housing.
But when I became mayor of Kansas City I walked into a buzz saw because our housing authority was in receivership and I had to work to get that taken care of, and having lived there I understood a lot of the problems that the people face.
And I -- it pains me that we failed in the 109th, 110th Congress to do the Section 8 reform. I agree with my colleague that we did our part under the leadership of Chairwoman Waters to get legislation from this subcommittee through the full committee to the House floor and over to the Senate, where all good legislation goes to die.
And we hopefully will be able to do this reform because it's more needed now than ever. I just read yesterday that the foreclosure rate is not dropping -- that people are continuing to lose their homes, and when you look at all of the GM and Chrysler workers -- not the CEOs, the workers -- who will lose their jobs, which means that in many instances they will lose their homes, we are going to need to make sure that this program is inclusive and that the reform will allow us to address the housing needs that we have in this country.
I was hurt over the fact that the president in -- for the last four years zeroed out the public housing because we already had a terribly underfunded program, and now we've got to restore not only the (units ?) but some credibility to the program. And so I appreciate this hearing. We have not only 2 million people who currently use the program who desperately need to see this reform, but I think the people who are going to be lined up at public housing doors -- local public housing authority doors -- trying to get vouchers.
So, Madame Chair, thank you very much for all the work that you've done on this issue and I stand ready to be of continued support to you. Thank you.
REP. WATERS: Thank you very much. Mr. Maffei? No statement? Then we'll go right to our panels, and I'm very pleased to welcome our distinguished first panel. Oh -- (off mike). Do you have a statement? Do you have a statement? No.
We'll go to our first panel. Our first witness will be Ms. Linda Couch, deputy director, National Low Income Housing Coalition. Our second witness will be Mr. William Fischer, senior policy analyst, Center on Budget and Policy Priorities. Our third witness will be Ms. Nan Roman, president and chief executive officer, National Alliance to End Homelessness, and our fourth witness will be Ms. Gloria Robinson, a Section 8 voucher holder from Washington, D.C., who will be testifying on behalf of the National People's Action.
Our fifth witness will be Mr. Ted Houghton, executive director, Supportive Housing Network of New York. Mr. Houghton, we were told by Ms. Velazquez that if she was present she would want to introduce you. She's not here yet so please feel welcome.
I would like to thank you for appearing before the subcommittee today, and without objection your written statement will be made a part of the record. You will now be recognized for a five-minute summary of your testimony. Start with our first witness.
MS. COUCH: Madame Chair Waters, Ranking Member Capito, and members of the subcommittee, thank you for the opportunity to testify today on draft legislation to stabilize and expand the Section 8 Housing Choice Voucher program. The National Low Income Housing Coalition does not represent any sector of the housing industry. Rather, we work on behalf of and with low-income people who need safe, decent, and affordable housing, especially those with the most serious housing problems.
On behalf of the coalition, I would like to thank you for your work on the draft bill, which is testament to the subcommittee's commitment to the nation's housing programs for the lowest-income people. Nationally, more than 70 percent of extremely low-income renters -- those with incomes below 30 percent of area median -- pay more than half of their incomes toward rent. Our analysis of the latest American Community Survey data finds that half of the 9 million renter households in the U.S. spent a stunning 80 percent or more of their incomes on housing in 2007.
The voucher program, which targets 75 percent of its assistance to extremely poor households, addresses these most significant housing affordability challenges. We applaud the bill's authorization of 150,000 new vouchers. At least this many are needed.
Vouchers can prevent homelessness and allow severely cost- burdened families to rebalance their lives with affordable housing. We hope that the voucher program can be doubled in size to serve 4 million families over the next 10 years, and that the number of authorized vouchers in the bill can be increased as the legislation moves forward.
We also congratulate the subcommittee on developing a bill that simultaneously achieves several important rent-setting policy goals, assuring tenants will have affordable rents, simplifying public housing agencies' administrative burdens, and encouraging increased earned income, among others. Affordable rent is one of the voucher program's most basic benefits. Without affordable rent for each household, vouchers would quickly lose their ability to correct the significant and severe housing cost burdens faced by the nation's lowest-income households lucky enough to access them.
The coalition, however, does not support the ability provided in the bill that allows housing agencies to establish alternative rent structures for public housing residents. Even though the bill includes the provision requiring the new rent structure not to result in rents higher than a household would pay under the normal rent structure, this sounds like double work for agencies that are asking for less paperwork.
It is our firm belief that the innumerable benefits the Brooke Amendment has brought to low-income people with housing assistance should continue to be guarded with great fervor. We commend the bill's several provisions that expand the ability of voucher holders to live in neighborhoods of their choosing by improving how fair market rents are set, directing HUD to improve the portability of vouchers, and allowing higher payment standards where a high rate of voucher concentration exists.
The bill would also provide important protections for tenants and other federally-assisted housing programs, improve the inspection process for voucher units, and encourage the expansion of the Family Self-Sufficiency program. The draft SEVRA bill provides significant efficiencies for the voucher and public housing programs without compromising on which income groups are served or how deep their subsidies are.
We do not believe that providing greater flexibilities from the program's core goals by expanding and extending the existing Moving to Work demonstration program to more housing agencies should be included in this bill as it moves forward. Such flexibilities are not a correct counterbalance to the ongoing and historic underfunding of public housing.
Increased funding for public housing and vouchers is among the coalition's highest priorities. We are certain that some agencies have used Moving to Work flexibilities to provide more housing to more people in more communities. We are equally certain that some agencies have done quite the opposite.
Federal housing policies should not gamble on most agencies doing the right thing. We feel it is the responsibility of federal housing policy to ensure to the greatest extent practical that federal housing programs will do the right thing. Without such assurances, the coalition worries that future funding for vouchers and public housing will be jeopardized.
Given the lack of thorough evaluation and several scathing HUD inspector general reports on agencies' use of Moving to Work flexibilities, we believe Moving to Work should not be expanded or extended until we can assess what has occurred, move forward with the good, and leave behind that which has harmed residents with time limits, fewer housing options, and unaffordable rent. Thank you for considering our views on these issues. We look forward to working with you all to improve and expand HUD's affordable housing programs.
REP. WATERS: Thank you very much. Mr. Fischer?
MR. FISCHER: Madame Chair, Ranking Member Capito, members of the subcommittee, I'm Will Fischer, senior policy analyst with the Center on Budget and Policy Priorities. It's a privilege to testify before you today.
The main point of my testimony is to commend the committee for considering SEVRA and to emphasize the important benefits that the bill would provide for housing agencies, for private owners, but particularly for the low-income families that receive housing assistance or are on waiting lists around the country. I also want to urge caution concerning any expansion of the Moving to Work demonstration.
First, I'll talk some about the benefits of the -- of the bill. Overall, it's a package of important, timely, carefully-crafted improvements that would strengthen and update the housing voucher program, which is already a highly-effective form of housing assistance. SEVRA's most important provisions would establish a stable, fair, efficient voucher funding system, and this is important because, as the chair knows, the program's come out of a period of instability in funding policy. From 2003 to 2006, appropriation legislation changed the voucher funding policy every year and this led to the decline of -- to close to 150,000 vouchers being taken out of use.
The improvements that Congress made in 2007 and in 2008 restored about a third of those vouchers to use, and there's a graph on Page 3 of my testimony -- my written testimony -- that shows that trend. SEVRA would built on that and with the improvements to funding policy and put more vouchers to use serving needy families.
Importantly, SEVRA's funding -- renewal funding provisions would do this without increasing costs. They would provide a series of tools and incentives for housing agencies to serve as many families as possible with the resources that are provided to them.
SEVRA's funding provisions are important under any circumstances, but they take on particular urgency during this period of an economic downturn when rising poverty and unemployment are increasing homelessness and the need for housing assistance. The sooner that SEVRA is enacted, the sooner it will extend voucher assistance to more people who would otherwise be homeless or at risk of homelessness.
Another improvement in SEVRA would be the provisions which simplify the tenant -- the rules for extending tenant rent payments, although we share some of Linda's concerns about the provisions allowing alternative rent structures in public housing. Other key improvements in the bill would streamline the housing inspection system, strengthen work incentives, and allow expanded use of project- based vouchers, and project-based vouchers, because they can be tied to a particular building, can be used to preserve and develop affordable housing.
The bill's project-based voucher provisions could be strengthened further by allowing some public housing developments to be converted to project-based vouchers to support their revitalization. I'll turn now to our concerns about Moving to Work.
The Moving to Work demonstration is intended to support experimentation with housing policies by allowing housing agencies to operate their programs without regard to many federal statutes for regulation.
The demonstration has allowed some housing agencies to test innovative and promising policies, but at the same time it does allow many harsh measures, as has been mentioned, including sharp increases in tenant rent and time limits on assistance, even for working poor families who cannot afford housing without help.
Importantly, though, the demonstration has not been subject to any rigorous evaluation so it's simply not known what the effects of these measures have been and there also has not been any adequate monitoring of people after they leave the program in situations where you have rent increases and time limits.
In addition, there's the issue of -- that Moving to Work allows housing agencies to shift funds around and to accumulate very large reserves in ways that are prohibited for other housing agencies. Close to a billion dollars just from 2005 to 2008 has been diverted out of the voucher program either for other purposes or into large reserves, and that could have been used to -- that's money that could have been used to assist tens of thousands of families. As a result, those families went without assistance even though Congress had provided money specifically for that purpose.
If an expansion of Moving to Work is included in the bill, it's important that it be of limited scope, that it have strong tenant protections, rigorous evaluation and transparency requirements, and that it have strict prohibitions on the diversion of voucher funds. Thank you for the opportunity to testify and I'll -- I'd be pleased to take any and all questions from the committee.
REP. WATERS: Thank you very much. Ms. Roman?
MS. ROMAN: Chairwoman Waters, Ranking Member Capito, and members of the subcommittee, I'm honored that you've invited the National Alliance to End Homelessness to testify before you today. Section 8 is probably the most important government resource to prevent and end homelessness. If we had an adequate supply of Section 8 vouchers there would be literally no homelessness probably in our nation, and the alliance commends the work that the committee has done to stabilize, simplify, and expand the program.
With respect to the connection between housing and homelessness, people's lack of housing is what defines them as homeless. However, their need for housing plays out in different ways. About 80 percent of individuals and well over 90 percent of homeless families are homeless for economic reasons. If they had affordable housing, while they might still be poor they would not be homeless. Research has consistently shown that a Section 8 voucher allows virtually everyone to exit homelessness and never become homeless again.
The remainder of homeless people need permanent supportive housing. This includes people with disabilities, about 50,000 veterans, and the increasing number of elderly homeless people. Tenant- and project-based Section 8 has proven to be effective in providing permanent supportive housing.
And there is a much larger pool of extremely poor people and doubled-up people from which the homeless population emerges. Some 16 million people live at half of the poverty level and as many as 10 million live below the poverty level and are doubled up. Only a handful of these people would become homeless if they had affordable housing.
In summary, housing is the key intervention in ending and preventing homelessness, and Section 8 is the lynchpin to providing that housing. It is for this reason that we're so grateful to the subcommittee for its work to stabilize the Section 8 Housing Choice Voucher program.
The draft SEVRA bill improves Section 8 in several ways that will specifically help to end homelessness. It makes the program more reliable. Landlords, developers, and tenants must have confidence in the Section 8 program in how it operates and in what resources it can deliver.
By settling basic questions of funding distribution in ways that incentivize full utilization of authorized vouchers, SEVRA accomplishes this goal of the draft. This will encourage landlord participation -- sometimes a challenge in housing homeless people -- and it will increase the number of families that are assisted.
Project-based Section 8 is essential for the creation of permanent supportive housing for disabled and elderly homeless people including veterans. SEVRA takes a much improved approach to project basing, and this will have a positive impact on communities' efforts to end homelessness among people with special needs.
SEVRA's simplification of rent calculations and inspections makes an important contribution as well. This simplification will encourage more landlords to participate and to make the program easier for tenants to understand.
To maximize the impact of Section 8 -- of the Section 8 voucher program we offer the following suggestions. Distributing scarce resources across a wide variety of eligible populations has little impact, while tightly targeting distribution can (drive towards ?) solutions. Section 8 is a rich resource and it should be targeted to those who need it most in order to maximize its impact. In particular, targeting to people with mental illness, veterans, and families with children in foster care should be retained.
Further, given the extensive unmet need for affordable housing with -- among very poor people we can see no situation in which it would be reasonable to waive or raise income eligibility. Income targeting should be retained.
In the recovery legislation, Congress recently passed the Homelessness Prevention and Rapid Re-Housing Program -- HPRP -- to ameliorate recession-related homelessness. This program provides short- to moderate-term rent assistance to people who are threatened with homelessness or who are homeless. HPRP should work well for a lot of people. However, there are some people who need longer-term assistance, such as people with disabilities, and we need to figure out how to make a linkage between HPRP and Section 8.
The Housing Trust Fund (sic) is a key piece of legislation -- thank you very much for that -- to develop affordable housing. However, to reach the target population of that program, operating subsidies will be required. When the trust fund is resourced it's, I think, also going to be important to consider how Section 8 can best be linked with that.
Section 8 should be a vehicle for exiting homelessness, not a vehicle for entering homelessness. A small percentage of people become homeless while receiving Section 8. The reasons tend to be administrative. PHAs should be given the resources to solve such problems before eviction, and in particular, we recommend that PHAs report their termination rates on a regular basis, including whether or not people terminated end up homeless.
On behalf of the board of directors of the National Alliance to End Homelessness, we support your efforts to try to improve the Section 8 program. We hope that they will eventually lead to an adequate supply of Section 8 vouchers to meet the needs of all people who need them. Thank you very much.
REP. WATERS: Thank you. Ms. Robinson?
MS. ROBINSON: Thank you, Chairwoman Waters, Ranking Member Capito, and members of the committee for inviting me to testify on the draft of SEVRA. My name is Gloria and I work for Organizing Neighborhood Equity, or ONE DC, which is a member of the National People's Action Network. I'm also a Housing Choice Voucher holder.
In the past year, there has been a great deal of dialogue about the ailing economy, the housing and mortgage crisis, and its devastating effects on middle-class America. I'm pleased to be a part of a dialogue that addresses another population -- a population that often seems to exist beneath the radar screens of lawmakers and politicians.
This is the population for which little has changed as a result of the economic downturn and the mortgage and foreclosure crisis. Many of us were poor, living in substandard housing, or homeless way before this conversation began to take place. I was part of this population. In 1994, I entered a transitional housing program and was placed on the waiting list for subsidized housing. Fifteen years later, I've still yet to receive the letter informing me that my name had reached the top of that list.
The D.C. housing authority has over 26,000 households waiting. That number is growing steadily.
Without the 750,000 vouchers proposed by SEVRA over the next five years, they will continue to wait. They will wait in substandard housing and they will wait on the streets. Some of them will die waiting for decent, affordable housing. It is essential that SEVRA gets introduced and passed through the House with this provision in place.
I became a Housing Choice Voucher holder in June of 2008, not because of any movement on the waiting list but because there was an opt-out at the project-based subsidized property where I was renting. Over 2,000 affordable housing units have been lost in D.C. since 2000, and the rent burden carried by thousands of low-income tenants continues to grow. For this reason, I applaud the proposal to increase the number of vouchers made available and the continued funding for the current Housing Choice Vouchers.
I'm concerned about the sometimes prohibitive background checks required of voucher applicants. For example, outstanding or delinquent student loans will negatively affect an applicant's credit score. These debts may be decades old but their negative impact is current. Generally, low-income people are going to have weaker credit histories because the reality is that it's more (expensive ?) to be poor in this country. For that reason, an applicant's credit history shouldn't be considered when they apply for a voucher unless there is overwhelming evidence that they will not be able to pay rent.
D.C.'s housing authority requires criminal background checks for all household members over the age of 18. I would like to see SEVRA include language that limits criminal background checks to certain felonies that have occurred within the past two years. I don't know if it's still the case now, but the Chicago Housing Authority used to only screen for drug offenses and violent crimes such as rape or murder.
Although there is a law in D.C. that is supposed to protect tenants from being discriminated against based on the source of income, I was told on more than one occasion that the property did not accept vouchers. There needs to be a provision added to SEVRA that expressly prohibits discrimination based on source of income at the national level. There also needs to be mechanism put in place to enforce this provision.
I am happy that SEVRA addresses the issue of inspections, especially failed inspections that result in delayed lease-ups where there are no life-threatening reasons for the failure. When I located an apartment and was approved on August 2nd, seven weeks later the inspections were done and the unit failed -- the first time for one bedroom window that had been painted shut, and the second time for a shower pole missing in the master bathroom -- not life-threatening issues. Each time the unit failed, it went to the end of the inspection list.
While housing authorities should withhold rent from landlords that don't make necessary repairs within 30 days, non-life-threatening issues should not delay the occupancy of an otherwise habitable unit. I was finally able to lease up and move in on November 3rd, 2008, after sitting in overflowing waiting rooms every week, sometimes from 7:30 a.m. to 3 p.m. Every employed housing authority client doesn't have the luxury or flexibility to spend six to eight hours away from their jobs every week without seriously jeopardizing their employment status.
Finally, I agree with Secretary Donovan's opinion on the Moving to Work program. Because (of ?) housing authorities were not required to collect any data, there is no empirical evidence to show that the program has been effective. Extensive data needs to be collected and that data thoroughly analyzed before the program is expanded. Thank you for the opportunity to submit this testimony on behalf of SEVRA.
REP. WATERS: Thank you. Mr. Ted Houghton?
MR. HOUGHTON: Thank you, Madame Chair. Thank you, Ranking Member, and the members of the committee. I'm glad to be here. I want to say that the Supportive Housing Network, which represents 180 nonprofit providers and developers of supportive housing across New York State, supports all of these comments that our national advocacy partners and Ms. Robinson have made.
There is an awful lot of consensus on this bill. You guys have done a terrific job of listening to people and crafting a very strong bill that not only provides additional resources but also makes some very smart decisions and makes some efficiencies, and gets some incentives in there that is going to really create -- I think really help this program along.
But I can't help but emphasize that the most important thing here is that we're going to get more vouchers. There is such a great need in both -- both in urban areas and in rural areas for more housing assistance. We have 34,000 people living in homeless shelters each night in New York City right now. It's one of the highest levels ever and we really have not been able to address that because we don't have the long-term rental assistance available to us in the numbers that we need.
Not only that, but if we can get these vouchers, we will be able to not only create housing stability for the families that need them but it will also create community stability -- neighborhood stability -- as we are able to maintain housing in the -- in good condition, and that's going to also help create jobs in maintaining this housing. It also creates housing stability that helps people concentrate on getting jobs.
We use -- Supportive Housing Network and our partners in government use the Section 8 program as a means to leverage other resources to build supportive housing for people with special needs, and the Section 8 program is one of the most important sources of that. There's just not nearly enough Shelter Plus Care vouchers under the McKinney program to build the amount of supportive housing that we need in New York City.
We are about to open up our 40,000th unit of housing in New York State for people with special needs. We're very proud of that, but we could be doing much more if we had the ongoing rent subsidies to serve the extremely low-income people that live in our residences.
A person on SSI in New York State gets $8,000 a year. You cannot fund housing and the ongoing need to maintain that housing and pay for oil and heat and all those other things with that level of money. You need to have Section 8 in addition to that.
We use that in New York City. We take tenant-based Section 8s and we put them in supportive housing. What happens, though, is that there is so much administrative burden in inspections and certifications, and try to inspect an apartment or get a signature on a certification from a mentally ill tenant who is paranoid, who has had all sorts of troubles working with authorities over the years. It's very difficult, and sometimes what happens is we lose the Section 8 but we continue to keep the tenant and we end up paying for that.
Because of (late ?) Section 8, our members are losing millions of dollars a year because we rent to people, they apply for Section 8, and then we wait as long as 11 months, maybe 18 months, before that Section 8 certificate comes through. And so what happens is that we lose money and we still serve the people, but the buildings struggle to maintain themselves.
There are a lot of great things in this bill. We're very happy about it. What we would like to see is improvements in the prioritization so that we're not just stuck with homeless prioritization but we're also able to prioritize people who are -- who are just about on the edge of homelessness, and get them and we can hook that up with HPRP and we'll be able to do that, and also to work with the project basing. What happens, there's a disincentive for localities to project base because if they -- if they give out a Section 8 to a tenant base, they know that they'll just have to pay for that one tenant-based Section 8.
If you do a project-based, the person is allowed to move in a year and they go to the front of the line and get a tenant-based. Then the next person comes in and they move a year later, they get another tenant-based. So you start generating more and more. And so if we could create a national pool of tenant-based to help people moving on from supportive housing that is project-based, I think that would be a very helpful thing because then we'd be able to project base more and help people move on to independence. Thank you very much. I think that I've used up my time. I'm open to any questions.
REP. WATERS: Thank you very much. I thank all of you for your testimony and I will recognize myself for five minutes for questions. I want to talk a little bit about Moving to Work because as you can imagine, this becomes kind of a hot political issue.
There are members who believe that somehow Moving to Work program will make you, if you're in it, more deserving -- that somehow, if we have rules that dictate your life in some way that this is what you deserve to have happen in exchange for being able to receive government support or live in public housing.
Ms. Couch, in your testimony you state that Moving to Work should not be expanded unless there is a thorough evaluation of existing (sites ?). Could you explain how Moving to Work has had a negative impact on residents and communities? How can Moving to Work be reformed so that residents are protected from harmful policies such as time limits and work requirements? I mean, would you give me your thoughts on this?
MS. COUCH: Sure. Excuse me. Thank you for the question, and it is truly an honor to be here today to testify before you. Well, the Moving to Work -- I wish I could tell you a lot more about the Moving to Work program but the truth is we don't know very much. We don't know very much about the residents going into Moving to Work programs and the housing agencies participating in the demonstration, and we don't know very much about what's happened to them at a national level.
Our concerns, I think, are your concerns that you've expressed -- that there is some data that show that resident rent burdens have increased from pre-Moving to Work participation to being -- participating in the Moving to Work program after a few years because housing authorities in the Moving to Work are given the ability to divorce rents from incomes, and the Brooke Amendment, which housing residents have today, says that rents have to be about 30 percent of a resident's income.
With the ability of Moving to Work to divorce rents from income, rents can be what housing agencies think might be a good deal, and it seems to us, frequently, that the Moving to Work aspect of the program is simply ratcheting up rents in such a way that people would be compelled to get higher-earning jobs. But when they can't find those higher-earning jobs their public housing or their voucher assistance becomes unaffordable to them. Some of the -- some of the more troubling aspects of Moving to Work, from our perspective, are the ability to change the income targeting of the program.
The public housing, and particularly the voucher program, are deeply income targeted. Under Moving to Work, housing agencies can allow 90 percent of their assistance to serve residents up to 60 percent of area median, and in many, many communities across the country you would be hard pressed to find severely cost-burdened residents at 60 percent of area median income, which is precisely why the public housing and voucher programs are targeted so deeply. So income targeting, we think, must be maintained, at least at today's current standards.
And again, as I said in our testimony, the ability of residents to know that in a federal housing safety net program, like public housing or the voucher program, their rents will be affordable is critical, and we must have national standards that ensure affordable rents. Time limits, work requirements, other social policies (for the ?) contracts associated with the Moving to Work program we think are troublesome.
We do think that there have been some good things -- some flexibilities that have allowed more supportive services in Moving to Work agencies, but we just don't know. And we think it would be quite troubling to expand the Moving to Work program to more agencies until we have a solid sense of what has been demonstrated so we can really move forward with what has worked and leave behind that which has harmed not just -- not just housing residents but the health and the financial health and the physical health of the housing stock.
REP. WATERS: Thank you very much. Ms. Robinson, I wanted to talk with you or get you to answer some questions about background checks.
MS. ROBINSON: Sure.
REP. WATERS: Now, Ms. Robinson, politically, here in the House of Representatives, we have members who say we must keep all criminals out of public housing -- we must have these background checks so that we can make sure that these bad people don't move into public housing. But you're saying that there are people who would otherwise be eligible, and you alluded to the fact that there may be people who are excluded because they have -- they have been in trouble. They were not felonies; they were more minor crimes. Will you talk a little bit about that?
MS. ROBINSON: Yes, absolutely. Except for the more serious crimes -- the drug offenses, the -- and even with the drug offenses, if an applicant is completing some sort of treatment program and really trying to get well they should have the opportunity if there is a need for assisted housing. In cases where applicants or members of their family who are over 18 have served their time and completed their sentences, their families and they should not be prohibited from getting the assistance for housing.
If they do, then essentially they're back on the streets, which opens up (their ?) door for more criminal activity. So I believe that within the two-year period, you know, if there is no significant criminal activity then they should be able to receive the assistance as any other low-income person.
REP. WATERS: Thank you. Ms. Capito, for questions?
REP. CAPITO: Thank you, Madame Chair. I would first like to ask unanimous consent to enter into the record the National Multi Housing Council comments on the proposed -- (inaudible).
REP. WATERS: Without objection, such is the order.
REP. CAPITO: Thank you. This is a question for the -- whoever wants to answer on the panel. In recent years, Congress changed the way the voucher program was funded, moving from a formula based on the number of units that a PHA has under contract with HUD at their current per-unit cost to a dollar- based formula established by the number of units under lease on a given date, adjusted by an inflation formula. Has this change proven to be more cost effective, and what further improvements would you recommend be made? Anybody want to take that? Mr. Fischer?
MR. FISCHER: I think the change has certainly -- the cost of vouchers have fallen during this period -- the average cost of a voucher. I think it hasn't necessarily been reflecting increased efficiency. In a lot of cases, housing agencies have ratcheted down the cost of vouchers, in some cases excessively, so that they don't cover rent (in an adequate range of areas ?).
And I think that the changes in the formula -- the way they have been done, and particularly the fact that they've -- the formulas have changed or did change significantly from year to year during this period -- from 2003 to 2006 -- made it difficult for housing agencies to manage their program and contributed to a real big loss in the number of vouchers that were in use. Agencies took those vouchers out of use, in some cases because they didn't have enough funding to cover them in the current year but sometimes also because they didn't know how much funding they would receive the next year.
And I think SEVRA -- what SEVRA does is it builds on that system. It builds on the (change ?) that you mentioned. It sticks with a system that's not -- it provides funding based on the vouchers in use in the previous year but it doesn't actually on an ongoing basis fund every voucher at its current cost.
But it builds on that by establishing a stable funding system year after year and creating a series of incentives for agencies to use more vouchers. It allows reserves that let them plan their programs better, and I think it really does start from the change that you were talking about -- going to a dollar-based system, then improve on its strengths and strengthen it in a way that it will make the program work better going forward.
MR. HOUGHTON: And if I can add --
REP. CAPITO: Yes.
MR. HOUGHTON: -- that -- those -- that uncertainty is a big cause for a lot of the delays in payments because the PHA is wondering how much Section 8 --
REP. CAPITO: Uncertainty as -- let me just clarify -- (inaudible) -- uncertainty as to what's going to be coming down the pike -- (inaudible)?
MR. HOUGHTON: Yes.
REP. CAPITO: Okay.
MR. HOUGHTON: Yeah, because you don't know how much you're going to get this year and so you don't know whether you can release enough tenant-based Section 8s to cover our developments and make sure that they're running well. And so that's been very important for us if we can get that change in there.
REP. CAPITO: Okay. I have a question that -- we're talking about redoing the rent calculations and the problems of income verifications that everybody has -- and the reason this kind of caught my attention is certainly we've learned through the subprime lending debacle that the income verification was either A, nonexistent, or B, extremely inadequate.
What kind of improvements can be made for income verifications? Do you think we address that in -- that this is addressed in this bill? And is that sort of a moving target, I think, that presents more difficulties in -- I don't know, in this day and time?
MS. COUCH: Well, I think that this is a great question for the public housing agency administrators as well, but I would just say that the -- that the bill's simplification of rents is going to help a lot. But it's my understanding that the -- that what is in place to certify incomes could work well if the housing authority staff had enough funding and enough staff to implement what's there as far as certifying incomes.
It's extremely important that we have a, you know, an accurate understanding of what incomes are and I -- it's my sense that the, you know, what's in place now works, but we just have to make sure we comply with what's in place.
REP. CAPITO: I think some of the studies that were out showed that in -- and it was a rather large percent -- maybe 30 percent of --
MS. COUCH: Right.
REP. CAPITO: -- under or over.
MS. COUCH: Right. And I think that's because there are inconsistencies with how the rules that exist are implemented. Does anyone else want to --
MR. HOUGHTON: I would say that the -- a lot of Section 8s are now used to support tax credit projects where the income verifications are very strict, and so we're able to do it -- do it well there. I think with the additional administrative fees that are -- the administrative costs that are covered under SEVRA we'll be able to do a better job at the PHAs as well.
MR. FISCHER: I think that's absolutely right that the administrative funding in SEVRA would give PHAs more ability to manage their programs well, including income verification. There are also several provisions in SEVRA that make it both simpler -- the system simpler -- so it's easier to verify, and there's also things that directly help with verification.
And one example of that is that the bill allows housing agencies to rely on verifications from other public assistance programs, so a housing agency could set up a system with a food stamp agency that would let them avoid duplicating all the work that the food stamp agency does, and that's -- I think it could help a lot.
REP. CAPITO: And -- okay.
MS. : No, go ahead.
REP. CAPITO: One final question, and this is sort of at the 30,000-foot level. Ms. Couch, in your written statement you mentioned that you hope the voucher program could be doubled in size to serve 4 million families over the next 10 years. What effect do you think that could have -- a doubling the size of that -- on other discretionary programs? I mean, it's like putting air in a balloon -- you only have so much. And we have other great programs under HUD's jurisdiction -- homeless program being one, disabled housing, elderly, and others. Do you have comments on that?
MS. COUCH: Well, we think it would greatly increase the cost of the Section 8 voucher program over the years, but we do think that we do need to put significant new resources into new vouchers. Unless and until we do that, we will not address our nation's homelessness problems. We will not address the number of families of all types living with severe housing cost burdens.
As you well know, housing programs are not an entitlement, and it's estimated only one in four families eligible for them actually receive them. We would like to see a rebalancing of where we put our resources, and the nation has long supported, financially, the people's ability to enter into home ownership. And we would like to see a commitment at the national level to also support people's ability to rent homes that are affordable to them.
So I guess what I'm saying is that we would -- we would anticipate that a doubling of the voucher program would greatly increase the cost of the voucher program to the federal government, but we think that the society's benefits to those costs would greatly outweigh them.
MS. ROMAN: If I could just add one thing to that, I think one of the lessons out of the homelessness field is that there are -- there are a lot of costs associated with not housing people. There are increased health care costs. There are education costs. There are law enforcement costs and corrections costs.
So it's -- while that might not be within the HUD budget, I think that we have to look at those cost offsets in other programs. When we talk about housing people, housing stability seems to be a necessary bedrock upon which a lot of other things rest, and if you don't have them you pay in other ways. Unemployment's another one.
MR. HOUGHTON: In -- I'm sorry.
REP. CAPITO: Go ahead.
MR. HOUGHTON: To add onto Nan Roman's, in New York City we discovered -- and this is 10 years ago -- a homeless mentally ill person costs $40,000 a year because of their use of emergency rooms, shelters, and all those other things. And once you place them into supportive housing, it reduces it so much that it pays for almost all of the cost, and we've gotten very good at targeting the housing to the most needy and really been much more cost effective.
So I think this is a very good investment. It will rise, but I think the savings that -- the cost that you spend on homelessness dwarf any increase that would happen in the Section 8 program.
REP. CAPITO: Thank you.
REP. WATERS: Thank you very much. Ms. Velazquez?
REP. NYDIA VELAZQUEZ (D-NY): Thank you, Madame Chair. Ms. Couch, I heard what you were saying about your concern regarding the changes to the Moving to Work program, and one of them is the lack of data and evaluation. Can you tell us what are some of the critical resident protections that must be included in any program expansion?
MS. COUCH: Well, we would start with income targeting. We think at least the current income targeting standards must be maintained. The current rent structures -- we think that given flexibility to divorce rents from incomes for households or for tiers of households is a -- is a mistake that could lead to harm to residents.
We think an important protection would be an inability of housing authorities to impose time limits. I think the HUD data show that most people who can move out of the housing assistance programs when they're able to, and those that don't would be the ones most likely to be harmed under time limits.
We also think that there has to be a strong evaluation component and that the data have to be evaluated regularly -- you know, at two years, at four years, at -- you know, so that we can not just collect that data but evaluate it so that HUD could have the authority and Congress could step in to make sure that those housing agencies, which are obviously harming residents or harming the physical or financial health of their own housing agencies, would be directed to change their policies because the demonstration wasn't working in the best interest.
REP. VELAZQUEZ: Thank you. If any of the other members of the panel would like to comment, I would like to ask you, where and how should we focus our evaluation efforts regarding the Moving to Work program since we know that there is such a strong push to allow more housing authorities to participate? Ms. Robinson?
MS. ROBINSON: Yes. My concern with the Moving to Work program is the quality of work that participants would be -- have the ability to get. With employment rates being in the double digits, I'm concerned that folks won't be able to find work that preserves some human dignity. You know, if people are going to be forced to work in order to receive housing assistance, where are they going to work? Will they be sweeping streets? You know, I'm just concerned with any measure that makes it mandatory that you work in a climate of unemployment, and that's just -- that's my comment.
REP. VELAZQUEZ: Mr. Fischer?
MR. FISCHER: I think I agree with most of the comments that we had before. I think it's also very important in order to have adequate protections in Moving to Work -- in order to avoid exposing tenants to unnecessary risks to limit the scope of any expansion. I think Moving to Work's purpose should be research. It shouldn't be something that's just meant to give general flexibility to agencies.
If there are statutes or regulations that are too burdensome or too complex, it's something that Congress should look at nationally and see if there are ways to improve that, and SEVRA does that in a whole range of areas. So the purpose of Moving to Work should be targeted on testing particular policies and should only -- it should only be expanded to cover a limited number of agencies that do that.
REP. VELAZQUEZ: And how do we measure success?
MR. FISCHER: Well, I mean, I think that the -- I'll give you an example of something where experimentation might make sense is rent policy. I think that there is a lot of ideas out there about changes that could be made to rent policy. I think it would be important to narrow the scope and look at things that protect the lowest-income tenants and make sure that you're not putting people out on the streets because you're charging excessive rent. But there are some -- there's some experimentation that could be done that would be effective and I think the Moving to Work demonstration testing that should only allow experimentation on rents.
It should be focused on that. It should be just the relatively small number of agencies that would be needed to do that, and it could have control of experimental evaluations so that you have -- so you don't go through -- like you have with the current demonstration where 10 years later or 13 years later you don't know what exactly happened.
REP. VELAZQUEZ: Thank you. Mr. Houghton, you spoke about homelessness that is on the rise due to the economic downturn, and in this draft we have an appropriation for 150,000 (incremental ?) vouchers. Given the circumstances that we are facing today in our nation, are the proposed levels sufficient? And if not, what is an appropriate level to have a real impact?
MR. HOUGHTON: Well, I think Nan Roman could speak to the national level, but I think in general New York State often gets about 10 percent of housing assistance because of need and population, and so that would be about 15,000 vouchers a year and we could use that very, very quickly. We have 125,000 people on the waiting list for Section 8 and we have 34,000 people in the shelters, as I said.
When you talk about a number of people who are homeless each night, you're not capturing the entire group of people. Five percent of all low -- of all people living under the poverty line in New York City are going to end up in the shelter at one time during the course of the year. So it goes on. There's shifting through, and so when you have those homeless episodes again and again, especially when you're hitting children with this, you have these long-term effects that really end up costing in educational attainment, in employment prospects, in health, and all of those things cost us in all these other different systems.
This investment is really what we need to do. So I think that if you took a look at the total cost of what homelessness does you could very well justify a much larger investment, and I could certainly find the people to get these vouchers to them. So --
REP. VELAZQUEZ: (Thank you ?).
MR. HOUGHTON: -- if you can do that.
REP. VELAZQUEZ: Thank you.
REP. WATERS: Thank you very much. Mr. Lee?
REP. CHRISTOPHER LEE (R-NY): Thank you. Just a few brief questions. I am one of the newer members here in Congress. I've tried to learn as much as I can about this program, and I know in two of my counties it is very much needed. In fact, there's a five-year backlog in terms of a wait period. The part that I'm troubling with -- because it is a very good program. I've heard very positives. The other issue, though, is the reality of the fact that we have limited dollars and the fact that this program has continued to take an inordinate amount of the entire HUD budget, and eventually, you know, we're going to run out of dollars. Look at -- look at our current fiscal situation.
So my concern is making sure we use these dollars most effectively. The little research that I have done shows that the -- on average, an individual who is in this program is in it for up to eight years -- eight-year average -- while you have other people who are waiting four or five years to get in, and that, to me, is -- a concern is how do you equitably try to incentivize individuals to -- because this who was supposed to be a helping hand to get them -- get them out of trouble but ultimately it's not a long-term solution. It's to ultimately let them be self-sufficient.
I'd be interested to hear any ideas on ways to promote or ultimately move people off this so that you can -- those in need can get on, because right now if -- if you're -- on eight-year average that means only 12 percent of the people are getting out of this program a year, which is a fairly small number. Anybody have -- could comment on any concepts or ideas?
MR. HOUGHTON: We serve an awful lot of people that are on SSI and SSD -- supplemental security income for people with disabilities -- and that, as I said, is about $8,000 a year, about -- almost $700 a month. They're not going to get off that -- they're disabled -- and it's not enough to pay for the rent. And so getting them Section 8 and having them on it's akin -- I think the corollary might be health care reform. We're going to try -- we're trying to figure out ways to reduce emergency room spending by increasing primary care, and this is the same thing.
We're trying to get -- we're willing to make the investment in subsidizing the rent for this group in order to reduce the amount of spending, and it is an inordinate amount of spending that we spend on emergency shelter, on repeated detoxes and psychiatric hospitalizations and all the other costs (that are going ?).
Now, that's one part of the population, but the fact is is that we are targeting, I think, better and better with -- in the housing world because we've been able to use data and really be able to figure out who needs it and be able to track income -- (inaudible).
REP. LEE: Let me -- and I agree, those individuals -- if that data can be separated out, but again, if you -- that might skew the numbers somewhat, but on average you got people there for eight years. What other way -- and to do this in a way that incentivizes people to ultimately be self-sufficient? Are there any other concepts or ideas for those individuals who have been on it in a long period?
MR. HOUGHTON: Our -- in supportive housing, which has services attached, our average is about five and a half years and then people move on to independence where they probably take a Section 8 with them but they're not using the services in the level that they were. So there is some independence and there is some lowering of cost. But I'll give it over to -- (inaudible).
MR. FISCHER: I'm not familiar with the eight-year average. The numbers I'd heard for either median or average length of stay were more in the three- to five-year range for the voucher program. But I think regardless, it's important to have, as you're saying, incentives, ways to encourage people to increase their income and -- to a point where they don't need housing assistance anymore.
And this bill does some really important things to do that. The rent provisions would provide a new earnings incentive that would -- an earnings deduction that would count less of earned income towards the rent so there would be a little bit more of a -- less of a rent increase when your earnings go up.
Probably maybe the most important provision is that it would strengthen the Family Self-Sufficiency program, which is a program within both Vouchers and the public housing program that allows -- that provides employment counseling to tenants and it also gives a work incentive where tenants, if they have -- if they're following a self-sufficiency plan that they come up with their employment counselor, then their increases in earnings will go into a escrow account that then they can use for purchasing a home or starting a business or an education or things along those lines, and it provides both support and incentives for people to increase their earnings and SEVRA would provide a dedicated source of administrative funding for employment counselors under that (and is ?) provide a better source of funding to cover these financial incentives. And I think that really would go a long way towards furthering the goals that you're talking about.
MS. ROBINSON: Statistics have shown that in the D.C. area, a resident would need to earn at least $21 an hour to afford a one- bedroom market-rent apartment. So we would need better quality jobs to increase the incomes of these Section 8 voucher holders.
MS. COUCH: And I'd just like to chime in and say that the data that I've seen show that about 54 percent of voucher holders cycled out of the program within five years, and so it'd be good if we all got on the same page on the data. But the bill -- I would strongly agree with Will that the bill does several things that -- to encourage increased earned income of voucher holders and of public housing residents. And the gap today between what people are earning at the lowest income levels and what rents are is so broad that you'll have to do what Ms. Robinson said -- is get those higher-paying jobs and make them available or we're going to continue to have to subsidize people's rents if we want to bolster their ability to have stable housing.
REP. LEE: Thank you.
REP. WATERS: Thank you very much. Mr. Driehaus?
REP. STEVE DRIEHAUS (D-OH): Thank you, Madame Chair. I'd like to continue the conversation that Congressman Lee has initiated, and I'm struck by the last figure, Ms. Couch, that you give -- about 54 percent of the people cycling off the program within five years. It's the 46 percent that stay longer than five years that concern me, and it goes back to Ms. Robinson's comment about the waiting list.
And, you know, the fact is that the more people we have on the program for a longer period of time, the longer that waiting list becomes. I think all of us believe very strongly in emergency housing and we believe very strongly in providing housing for people with disabilities, for people who have lost their jobs. But I think we have to have the courage to have a conversation -- a serious conversation -- about dependency. My background's in international development. We talk a great deal about dependency and creating dependent situations, and that number -- that 46 percent that's over there -- over five years -- that's a big number. That's no small number.
And so when we talk about Moving to Work just not having enough data for it, you know, that really doesn't make me very comfortable -- that we shouldn't be working on programs such as that because there's not enough data. Sometimes I feel as if we look at this equation and we think, well, there are a lot of people that need housing so we should provide more housing. I look at the equation and say, there are a lot of people in poverty that need housing so we should try to get them out of poverty.
You know, and I think too often we look at our housing program in the wrong way, and that rather than building the capacity of individuals on the program, especially those prone to long-term (times ?) on the program, we look at continuing and expanding the number of vouchers.
So I would really like you to explore it a little further -- you know, how we might do a better job of building the wealth of families. You know, we embarked initially on things like IDAs through Congress -- individual development accounts -- to help build the wealth and build the capacity of families to achieve self-sufficiency. So I'd like you to explore it a little further with me how we might do a better job of working with that 46 percent, because that's a big number in my mind.
MS. COUCH: My first response is that let's say the number is 54 percent are on for less for five years and then we have that balance of that 46 percent. What Mr. Houghton was saying that happens in New York is the case nationally -- that a large percentage of the people in voucher-assisted households are people who are elderly or disabled and on fixed incomes, whose incomes won't be increasing to the point that we can count on that they'll be able to enter, and so I think that they take up a large majority of that balance.
REP. DRIEHAUS: Do you know how much? And I'm with you there, and I don't --
MS. COUCH: Forty percent.
REP. DRIEHAUS: -- think any of us are talking about people with disabilities or that fall under those situations.
MS. COUCH: Right.
MR. FISCHER: It -- I mean, in the voucher program it's closer to 30 percent in public housing. In project-based Section 8 it's much higher. But it varies. But it is a -- when you look at people who are on for a length of -- longer length of time, a lot of those people are elderly or people with disabilities.
MR. HOUGHTON: I would say that also a large number of them are children who are getting educations and growing up in a stable environment. The one thing that I think it's important to talk about with Section 8 is that while it may be framed as dependency, it does not disincentivize work.
You pay 30 percent of your income, and the fact is is many, many people are working that receive Section 8. I don't know if you have statistics, but I know that within our residences people who are struggling with disabilities, we have 25 to 40 percent of them are getting jobs of some kind. The fact is, though, that it's very difficult for them to live completely independently with the levels of income that they're earning.
And we get into a problem of markets. The job market has depressed wages and the housing market has made it very difficult to build enough housing where it's needed. When you try to build -- I spend most of my time talking about developing housing and representing nonprofit developers -- when you try to site buildings in a urban area it takes years to get all the approvals and zoning regulations and everything like that.
And because of those pressures, housing has gotten much more expensive, and at the same time our globalization and other pressures have lowered wages.
And so we have a very big gap that we're trying to fill. Section 8, I think, is one of the best, most efficient targeting of trying to address that gap.
MR. FISCHER: (Off mike) -- I think the other point to remember or another thing to be aware of in looking at these length of stay numbers is that they vary enormously from one part of the country to another, and in places like New York City it tends to be much longer because you could be a person who's working and climbing the ladder in New York City for a long time before you can afford an apartment, or in a place like San Francisco, whereas in places with lower housing costs they tend to be -- have much -- the costs tend to be lower.
And as we heard, the majority of people who are not elderly or not disabled in the voucher program do work. They do have some kind of employment. But I think what needs to be done is we need to look at things to build their assets, build their -- give them incentives to work more. And I mentioned this before but I think it's important. The Family Self-Sufficiency program within the housing assistance programs is one of the largest asset development programs out there. It's a major work incentive, and it just has been underused so far because it hasn't had the resources -- it hasn't had the funding, and SEVRA would make enormous progress in changing that.
REP. DRIEHAUS: Thank you.
REP. WATERS: Thank you very much. Mr. Clay?
REP. WILLIAM LACY CLAY (D-MO): Thank you so much for holding the hearing. Thank you all for being here. Let me kind of follow up on Mr. Driehaus' questioning -- line of questioning -- and what you just mentioned, Mr. Fischer, about employment assistance, Section 3, and just how -- what we should do or should then be part of this restructuring or a new law that would allow people who live in economically-, socially-disadvantaged communities in Section 8 housing to seek and capture gainful employment, especially when we do these projects in these communities.
Just panel-wide, give me your impression of what you think could make Section 3 more effective and how we could actually connect the people who live in these communities with meaningful employment opportunities. I represent Missouri, and we have two different strategies going now between Kansas City and St. Louis and the whole Section 3 issue. Kansas City seems to do it a little better than St. Louis when it comes to employment opportunities.
So can I start with you, Ms. Couch, and get your impression of how we can improve a program like Section 3 so that it actually provides meaningful employment opportunities to people?
MS. COUCH: Sure. The Section 3 program could be a very important way to help residents increase their earned income. I'd say off the cuff that the new HUD could do a better job in clarifying and making very clear to housing agencies what the rules are with Section 3 to make sure that everyone is on the same page, with educating resident advisory boards and tenant councils about what they should be expecting as far as Section 3 notices and what the work opportunities are.
The -- you know, the nation, I think, was very grateful for the stimulus money for public housing that's pushing a lot of new capital funds down to the local level, and that $4 billion in new public housing capital funds, I think, is a great place to test new mechanisms to make sure that housing agencies are implementing Section 3 and that Section 8 -- or that public housing tenants and low-income people get some of those jobs at the (street ?).
REP. CLAY: Thank you for that response. Mr. Fischer, anything to add?
MR. FISCHER: Just on the issue of voucher holders in Section 3 -- Ms. Velazquez has a bill that would do that -- would expand the Section 3 preferences to cover voucher holders. It improves the ability of voucher holders to benefit from jobs under Section 3. That's sort of something that's going forward and that there could be progress on.
REP. CLAY: And where do you think the disconnect is as far as having an effective program and having something written on a piece of paper and saying it's law but not really implementing? Where is the disconnect?
MR. FISCHER: Well -- (inaudible) -- I think there has to be HUD enforcement -- HUD monitoring of it in order to make sure that people really are getting the jobs that they should be getting.
REP. CLAY: I see. Ms. Roman, anything to add?
MS. ROMAN: Well, I'm not an expert on Section 3, but I will say this. I think training is an issue that comes up a lot around Section 3 -- the need of people for training -- and also, just to point out, I think there's a tremendous opportunity moving forward with the administration's goals around greening and better building standards to train a lot of people on Section 8 and in public housing in these new skills that are going to be needed, which are very under -- you know, we have a -- we don't have enough of a workforce that can do that. So it seems like maybe through Section 3 or other ways there might be some opportunities there.
REP. CLAY: Okay. Thank you. Ms. Robinson, anything?
MS. ROBINSON: I agree with Ms. Roman. There does need to be training, but not only for the participants of Section 3 but also for the local public housing authorities. And then there ought to be some monitoring in effect to make sure that the program is being implemented as established.
REP. CLAY: Thank you. And Mr. Houghton?
MR. HOUGHTON: I would echo on the connecting Section 3 to development, the National Housing Trust Fund, in addition to the federal stimulus money. National Housing Trust Fund will also drive development of housing and there are a lot of opportunities that maybe we can try to focus -- that we try to get jobs to people like that.
In New York right now, we're struggling with an issue of prevailing wages and affordable housing. My members build about half their housing with prevailing wage and we do a very good job with that, and then we also do the other half with non-prevailing wage. It's still very good money -- it's better than what our case managers get -- but the fact is is that it's -- and the end result is the same, but there is talk now -- there are two bills in the state that are going to look at making all affordable housing construction prevailing wage.
One of our concerns is that when we go into a community, one of the things we're able to give in return for their approval of our siting our building is that we will hire locally. And in prevailing wage, that's not always possible because you often -- the unions don't always hire from the minority neighborhoods that we --
REP. CLAY: Thank you.
MR. HOUGHTON: -- often -- (inaudible).
REP. CLAY: Yeah, and I do understand. And thank you for that response, and before I close out, Madame Chair, I don't know if the -- if Section 3 fits on this legislation but I'm really interested in it and hopefully we can shed some light and have a discussion about that as a committee.
REP. WATERS: Thank you very much, Mr. Clay, and I will talk with you and work with you to see what we can do to maybe include some more definitive ways by which we can offer opportunities for work and be of assistance to the housing authorities.
REP. CLAY: Thank you, Madame Chair. I yield back.
REP. WATERS: You're welcome. Thank you very much. The chair notes that some members may have additional questions for this panel which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record.
This panel is now dismissed, and I would like to welcome our second panel. Thank you very much.
Ladies and gentlemen, I get to introduce our first witness.
Mr. Rudy Montiel happens to be the executive director for the housing authority of my city, the city of Los Angeles. Since his appointment as executive director at the end of 2004, Mr. Montiel's leadership has been instrumental in the financial turnaround of the housing authority of the city of Los Angeles.
Under his guidance, the housing authority has turned a 25 million (dollars) operating loss at the end of 2004 into net operating income in 2005. Prior to coming to Los Angeles, he successfully led the housing authority of the city of El Paso for three years.
His strong private-sector experience includes engagements with Fortune 500 companies such as General Motors, Delphi (ph), and the IT Group Shaw Company (ph). He is a licensed professional engineer in Texas and sits on the boards of the Housing Authority Insurance Group, the Public Housing Authority Directors Association, the Council of Large Public Housing Authority (sic), and the Hispanic Engineers National Achievement Awards Corporation. I thank you for joining us today. Welcome, Mr. Montiel.
MR. MONTIEL: Good morning.
REP. WATERS: Our second witness will be Mr. Tony Bazzie, executive director of the Raleigh County Housing Authority, which I will turn to my ranking member, Ms. Capito, for introduction.
REP. CAPITO: Thank you. I am very pleased that Mr. Bazzie is joining us here today. He -- as I mentioned in my opening statement, he's been in this field for 29 years, and I can personally attest that he is a forceful advocate, as I see him and many other in the group that he comes with every year to tell their story and to make improvements and to serve as many people as possible with good quality housing. So thank you, Tony, for joining us and I appreciate and then look forward to your comments. Thank you.
REP. WATERS: Thank you very much. Our third witness will be Mr. Curt Hiebert, president of the Public Housing Authorities Directors Association. Our fourth witness will be Ms. Renee Rooker, president of the National Association of Housing and Redevelopment Officials.
Our fifth witness will be Ms. Sunia Zaterman, executive director, Council of Large Public Housing Authorities. Our sixth witness will be Ms. Karen Newsome, vice president, WinnResidential, on behalf of the National Affordable Housing Management Association. Without objection, your written statements will be made part of the record. You will now be recognized for a five-minute summary of your testimony. Mr. Montiel?
MR. MONTIEL: Good morning, Chairwoman Waters, Ranking Member Capito. My name is Rudolf Montiel and I come to you from Los Angeles, the nation's second largest city and the city with the largest homeless population on any given night in this country.
In 2004, L.A. was near receivership and close to bankruptcy. Today, we are HUD-certified high-performance Section 8. We have over 50,000 units 100 percent leased up and this year we'll complete expending all of our net restricted assets. We are running the program the way the program should be written -- or run.
Over the last three to four years, we have experienced significant innovation and development utilizing Section 8 funds. We have instituted a permanent supportive housing program in Los Angeles that has created over 700 units in close partnership with the city of Los Angeles. We have a homeless set-aside that today serves almost 9,100 families in Los Angeles -- families and individuals. And most importantly, we are -- we are embarking on a redevelopment of Jordan Downs in Watts with one-to-one public housing replacement for a 2,100 mixed-income unit development that will be the start of redevelopment of public housing citywide.
But there is a price to pay for this success. The price is that today we are fully utilized. Today, we cannot serve additional homeless families. Today, we cannot serve additional low-income working families. And in order to be able to do more we need additional resources. We need stable funding.
We can no longer, as Secretary Donovan said in one of his presentations, operate under a binge and purge scenario for Section 8 funding. It needs to be predictable. We need to know how many families we can serve year to year. We need to reallocate resources in this country. If there are areas of the country that are not using the resources and yet there are areas of the country that have desperate need, then we should be able to reallocate those resources nationally.
In Los Angeles, when we open our wait list next year we expect fully 300,000 households to apply for Section 8 assistance, and we need to provide flexibility when it comes to converting tenant-based vouchers to project-based vouchers, especially in redevelopment of public housing or in development of permanent supportive housing or other affordable units.
I think it is widely accepted now that a private -- the project- based voucher truly represents a hard unit. We are also in support of MTW -- and I prefer the name Housing Innovations Program, HIP -- when it comes to redevelopment and creation of new hard units, with a focus on that and not necessarily a focus on and somehow disenfranchising tenant protections. We believe that we should focus on incentives to Moving to Work and not so much exclusions or requirements.
That is my testimony and I, again, applaud your leadership for bringing this very important hearing forth and this very good piece of legislation. Thank you.
REP. WATERS: Thank you very much. Our next witness, Mr. Hiebert? Oh. (Inaudible.) Rudy Montiel? Mr. Curt Hiebert?
MR. HIEBERT: Yes. Yes. Thank you, Madame Chairman.
REP. WATERS: Well, then we'll get to Mr. Bazzie next. (Laughter.)
MR. HIEBERT: Thank you, Chairman Waters, and Ranking Member Capito and subcommittee members. I'm Curt Hiebert. I'm president of the Public Housing Authority Directors Association, which has another acronym I'll refer to as PHADA in the interest of time as we go on.
Our association was founded in 1979 and represents over 1,900 housing authority chief administrative officers. A significant portion of PHADA members administer small- or medium-sized agencies that operate a mixture of assisted housing programs. Some operate public housing, some (of the ?) Housing Choice Voucher program, many operate both programs, and a number of members operate assisted housing financed with HOME, CDBG, low-income housing tax credits, Department of Agriculture, and other non-federal support.
We're very grateful that you're investing the committee's resources to address this assisted housing reform initiative. Many provisions contained in the draft bill are attractive to PHADA and its members. Some may reduce administrative requirements for program sponsors or program intrusiveness into participants' personal affairs, such as reducing the frequency of a Housing Choice Vouchers' subsidized unit inspections, reducing the frequency of some household income recertifications, and other (thing ?).
However, other provisions may have some significant cost or revenue implications for housing authorities, and some may introduce new, more complex administrative requirements, such as new asset eligibility standards may require new inquiries into real estate ownership and its availability to applicants and participants. Of particular concern to us are provisions that may diminish potential rent revenue in public housing when the Congress faces significant budget challenges, which they shall. The public housing program lacks cost-reducing mechanisms that are available in various Section 8 program components.
The bill, however, permanently restores the Housing Choice Voucher funding allocation protocol based on units in use and actual cost. The bill also establishes an administrative fee that is based on vouchers in use. Such funding mechanisms are critical to the program's stability, permits sponsors to build HCV utilization, and provide ways for program sponsors to accommodate local market variability.
In the interest of full disclosure, Madame Chairman, as you could probably tell from the horns I wear and I am carrying a pitchfork, the Keene Housing Authority is an MTW agency and has been since 1999. While I applaud the intentions of the concerns about MTW, I do have a couple comments about that portion of the bill.
Unlike the previously passed version of SEVRA, the proposed bill does not yet include provisions concerning the Housing Innovation Program, HIP, or other permanent authorization for Moving to Work. We believe the committee should include HIP or another MTW authorization provision as it considers the revised SEVRA bill.
We urge the committee to include provisions that, one, make the MTW demonstration permanent, moderately expand the MTW program, assure a robust evaluation process focused on the effects of local flexibility on program participants and applicants, offer reasonable protections for applicants, tenants, and participants, and continue existing MTW agencies' participation.
I agree with the sentiments of the previous panel in that tenant protections are vital and the effects on our tenants are vital as well, and as a matter of fact, I don't think they go far enough. I think it is wrong to just insist on protecting our tenants. They are not our children, and also it is this -- MTW is not just an experiment.
I can speak from personal experience. What we were doing was working with our community, working with our residents, working with the people on our waiting list to find problems that were exigent in Keene, New Hampshire. It's wonderful if we develop a program that may work in Detroit, but the -- or Kansas City, or wherever, but the circumstances are entirely different there.
The flexibility to allow local -- dealing with local conditions, demographics, employment circumstances, opportunities for training, education, and everything else is vital for housing authorities. It would be a mistake to make a one-size-fits-all program again. I urge the continuation of the MTW program.
I do know that we have a very transparent process. We go through a long process every year of saying what we're going to be doing the following year. There are public hearings. There are opportunities for our stakeholders to be part of that entire process.
And at the end of every year, we report back to our community -- not only to HUD, but to our community, to our residents, to our participants, to our waiting list -- okay, what happened with last year's program? Did it work? Did it not? In our case, we have actually increased the utilization of Section 8. We now range between 105 and 110 percent utilization. We house more people than we would under the normal program.
Other MTW programs have used vouchers to support homeless participants' transition to permanent housing in ways that aren't permitted presently; have implemented home ownership initiatives that enhance Section 8 -- (inaudible) -- and encourage landlord participation and increased housing choice.
PHADA has participated in the development of the HIP provision in the previous version of SEVRA passed by the House last -- during the last Congress, and we strongly urge the committee to include a similar section in the version of SEVRA under consideration. SEVRA is a complex statute with many provisions that will have unanticipated and anticipated outcome.
The bill includes many provisions that PHADA has supported and it includes some provisions that PHADA has opposed. On balance, we believe that this bill represents a very positive step for the Section 8 program and for public housing. However, we are concerned that the bill lacks authorization and modest expansion of the MTW demonstration.
REP. WATERS: Thank you very much.
MR. HIEBERT: Thank you.
REP. WATERS: Now, Mr. Bazzie?
MR. BAZZIE: Thank you, Chairwoman Waters, Ranking Member Capito, and members of the subcommittee. My name is Tony Bazzie, the executive director of the Raleigh County Housing Authority in Beckley, West Virginia for the past 29 years. My agency assists nearly 1,300 families in a six-county area of our state.
Due to the time constraints in addressing you today, I certainly cannot touch upon a number of the topics included in the draft legislation, so I would encourage you to read the lengthier written testimony that's been submitted to you. I do thank the members of the subcommittee for all the work that has been done thus far in the draft legislation as it seeks to bring about changes that will make the Housing Choice Voucher program more inviting to landlords, ease the administrative burden on housing authorities, and better assist low- income families in their quest for decent, safe, and affordable housing.
For the most part, housing authorities in West Virginia are small and medium sized but yet all are hopeful for the changes that will ensure the continued viability of the voucher program, which assists families in every county in my state. I and others in West Virginia support many of the proposed changes, including the one that will allow HUD-funded rental assistance to begin from the date of the initial inspection so long as there are no life-threatening HQS violations.
One agency in West Virginia -- the Charleston-Kanawha Housing Authority, which is in your district, Ranking Member Capito -- has determined that on average 18 days elapse between the initial failing inspection and a date that the unit does meet HQS. Removing this obstacle, as this bill would, will provide an incentive for more landlords to participate in the program in addition to getting families into units much sooner.
Likewise, I support the biennial inspection option as a change that would be cost-efficient for many housing authorities. In West Virginia, a number of agencies administer the program in multiple counties.
My agency administers the voucher program in six counties with more than 3,350 square miles, a geographic area larger than the states of Rhode Island and Delaware combined. The annual inspection process is a major program expense ranging from staff salaries to vehicle maintenance to postage for mailing notification and inspection results.
While I do support the goal of trying to keep low-income families from having to relocate as much as possible due to HQS violations, I do not favor the provision in this bill whereby housing authority can use (abated ?) HAP funds to make or cause to be made repairs to a landlord's unit. My agency and many others in West Virginia are ill- equipped to administer such a provision, and in my opinion this would have the negative consequence of keeping landlords from participating in the voucher program as this would -- they would view this as an intrusion into their private property.
The rent reform and simplified reporting provisions in SEVRA are a welcome change. It will encourage work on the part of assisted households and relieve housing authority staff of many verification and processing tasks. For example, in 2008, again, the Charleston- Kanawha Housing Authority conducted approximately 1,200 interim reviews in addition to over 2,400 annual re-exams.
Undoubtedly, many of these interim adjustments would be eliminated through the provisions that would no longer require examinations for increases in earned income. Also, the provision that allows for three-year recertification for fixed-income households will provide much relief. In recent years, the uncertainty of the renewal funding process has made the management and operation of the voucher program a difficult challenge. The goal of any housing authority is to maximize its leasing to the baseline. Unfortunately, with constant formula changes and delays in the annual budget process, many agencies have been hesitant to issue vouchers.
In closing, Madame Chairwoman, Ranking Member Capito, let me thank you again for your work. However, I would caution that a number of the proposed changes in this bill, such as increased deductions for earned income, elderly and disabled, child care, applying HAP dollars towards relocation, while those certainly will provide a benefit to the families we serve, it will increase the overall HAP costs, and as I'm sure you know -- I know Ms. Capito knows -- there already exists a serious situation being encountered by housing authorities in that net restricted assets, which can be used to cover increasing and unfunded HAP costs, are dwindling. For example, my agency will be losing at least 26 families per month for the next six months this year just due to inadequate funding for the -- in HAP by the federal government.
Overall, I'm very confident -- (inaudible) -- proposed changes to the program will make it more attractive to private property owners and increase the available housing stock. Reducing the reporting burdens and providing incentives for work will make the program more accommodating to low-income families. I also trust the provisions related to administrative simplification will produce more customer- oriented agencies throughout the (state ?).
REP. WATERS: Thank you very much. Ms. Renee Rooker, president, National Association of Housing and Redevelopment Officials.
MS. ROOKER: Chairman Waters, Ranking Member Capito, and members of the subcommittee, my name is Renee Rooker. I'm the executive director of the Walla Walla, Washington Housing Authority. I'm pleased to be here today in my capacity as president of the National Association of Housing and Redevelopment Officials, representing the association's 23,000 agency and individual members.
NAHRO is the nation's oldest and largest nonprofit organization representing public housing authorities and redevelopment agencies. This year, we are celebrating our 75th anniversary. NAHRO agency members administer more than 80 percent of the vouchers under the Section 8 Housing Choice Voucher program. The need to advance voucher reform legislation in this Congress is unquestionable. We applaud you for holding this hearing today to move this process forward.
Madame Chairwoman, there is much about SEVRA -- (inaudible) -- has matured to date that is extremely positive, including a sound distributional funding formula; the ability to retain and use unobligated fund balances; authorization to undertake maximized leasing with funds available; a reallocation provision to provide, among other things, funding to housing authorities with high budget utilization rates; and a need for additional voucher assistance to increase leasing rate; and housing quality standard inspection reform. My written testimony goes into greater detail on these and other SEVRA reforms that we like and can support.
I would like to highlight this morning our more significant comments on the current discussion draft of the legislation. First, regarding the inspection of dwelling units, there is much in the draft that we support. I agree with my colleague, Mr. Bazzie, that it would be a hindrance to the program to have housing authorities do the repairs on owner units and it would disincentivize landlords from participating in the program. With regard to income reviews and rent determinations, NAHRO recognizes that efforts to address rent simplicity are difficult. We applaud the effort in the discussion draft to simplify some administrative elements in the rent and income calculation process.
We do have some concerns and we suggest that the secretary be given the discretionary authority to address increases in rent for elderly or disabled families and for families with dependent children whose rent has increased due to changes in the allowable exclusions for medical or disability expenses or child care expenses enacted in this act. I refer you to my written testimony for further recommendations.
We appreciate that the draft bill demonstrates an understanding that the rent and income provisions in SEVRA may have a unintended and negative impact on housing authorities' rent, revenue, and public housing program. In this regard, we suggest that language be included in the bill to compensate housing authorities through increased operating funds the same year that they go into effect and thereafter.
Improvements to portability feature of vouchers through regulation are welcome. We support the provision on portability that provides tenant mobility, reduces or eliminates interagency billing, and gives the ability for local agencies to address their wait list. NAHRO has consistently recommended that the secretary administer funding for portability adjustments primarily through a central fund. NAHRO continues to recommend that funding structure to support the administrative functions necessary to help families succeed and to enforce housing quality standard should be stabilized by the Congress and not left open to change by the executive branch.
Additionally, we suggest modifying the housing act to provide affirmatively that the same administrative fees shall be paid with respect to housing authority-owned units assisted by the program as is paid to non-owned units. Currently, housing authority-owned and - operated units receive 60 percent less of administrative fees than vouchers leased in the private sector. However, because housing authorities must contract out for inspections of their units and rent reasonableness determination, the case can be made -- (inaudible) -- housing authority units exceeds non-owned units.
In closing, we understand the subcommittee is considering the possible inclusion of language regarding Housing Innovation Program in the version of SEVRA, and you intend to move forward in this Congress. NAHRO has long advocated for greater program flexibility that brings innovation and expanded Moving to Work demonstration and urge you to include provisions previously contained in H.R. 1851.
This concludes my testimony, and NAHRO looks forward to continuing to work with you and other members for the passage of this important bill, and I would be happy to answer any question that you or the members have.
REP. WATERS: Thank you very much. The committee will stand in recess. We have about five minutes to get to the floor. We have a series of votes. It's going to take us about a half hour. I would suggest you stretch your legs. We will be back as quickly as possible.
REP. WATERS: The committee will come to order and we will resume our testimony from our witnesses. My page has been turned, and I think we were -- Ms. Zaterman. Okay.
MS. ZATERMAN: Madame Chair Waters, Ranking Member Capito, and members of the subcommittee, my name is Sunia Zaterman and I am the executive director of the Council of Large Public Housing Authorities, comprised of nearly 60 of the largest public housing authorities in the country in virtually every major metropolitan area. These agencies serve over 1 million households under the public housing and Section 8 programs.
We thank the subcommittee for holding this hearing and the opportunity to present CLPHA's views on the Section 8 Voucher Reform Act. In some respects, this hearing today has a deja vu quality to it. As you well remember, this committee worked hard on the passage of H.R. 1861 (sic), the 2007 version of SEVRA, and CLPHA applauds the subcommittee for once again continuing with efforts to reform and improve this much-needed program.
We are pleased that this bill will stabilize the funding of voucher renewals. With a permanent statutory formula, PHAs will be able to plan for the future, taking steps to increase utilization, reduce costs, eliminate inefficiencies, and improve service delivery. An adequate and stable reserve is the bedrock of any well-run enterprise. While we would prefer a higher level of allowable reserves -- for example, at least one month of funding -- we appreciate that the bill allows agencies to retain not less than 5 percent of their allocation, allowing the secretary to determine when a higher amount is needed. This provision could be especially helpful when renewal funds must be prorated and agencies need more reserves to maintain their program.
CLPHA recommends that reserve amounts be based on formula eligibility rather than funding allocations so that agencies do not have to wait for HUD to determine their proration before knowing the amount of their allowable reserves, or alternatively, the higher of the former -- formula eligibility or funding allocation. We applaud the commitment to increase the supply of tenant-based subsidies.
A hundred and fifty thousand incremental vouchers annually for the next five years is sorely needed to move families off waiting lists and into decent, affordable housing. The provision allowing agencies to lease more vouchers than their specific authorized level is one we have sought for years. We strongly support removing the authorized caps to allow housing authorities to fully utilize their funding allocation.
We are very pleased that the bill increases the cap on project- based vouchers and allows PHAs to project-base vouchers in their own buildings without going through a competitive process. This provision eliminates a significant unnecessary administrative burden.
Further, we urge greater flexibility in using project-based vouchers to preserve and replace public housing that would not be subject to this cap. We appreciate the program simplification measures in SEVRA, particularly those allowing biannual inspections and triennial income recertification.
We commend the committee for taking important first steps in rent reform. However, during the first year of implementation of SEVRA's public housing rent reforms, housing authorities may receive substantially less rental income than anticipated by their operating fund formula allocation. We believe that the secretary should be directed to provide funding adjustments in such cases.
Once again, we are concerned that the bill authorizes agencies to take on the role of private landlords and make repairs and pay for utilities in units where the actual landlord is neglecting his or her duties. Though understandably well-intentioned, these provisions will open PHAs to many legal, administrative, and liability issues. We recommend removing this language from the bill.
Expansion of Moving to Work is a high priority for us. H.R. 1861 (sic) renamed MTW the Housing Innovation Program and expanded to 60 PHAs and another 20 PHAs granting funding fungibility in what was called HIP-Lite. It also included provisions that provided for rigorous program evaluation and strong tenant protections.
While this bill does not yet include the MTW provisions or HIP provisions, we are hopeful that it will include the HIP provisions from H.R. 1851. Adding HIP from the 2000 SEVRA is a well-reasoned approach, as these provisions represent policies and principles that were already vetted through a full airing of the issues and they were achieved through the consensus-building amendment process at the subcommittee, full committee, and House-considered levels.
Under HIP-Lite, work requirements and time limits are prohibited and rent reform initiatives are limited. What remains under HIP-Lite is the funding fungibility, flexibility, and innovation that PHAs desperately need to undertake redevelopment and expansion activities. We recommend that HIP-Lite be expanded.
We urge you also to consider a preservation proposal that will allow the conversion of public housing subsidies to project-based voucher assistance under Section 8. In addition, we propose linking the award of project-based vouchers for public housing preservation activities with the award of low-income housing tax credits in order to facilitate greater leveraging of resources in public housing.
In closing, we appreciate the subcommittee's dedication to reshaping the voucher program through the initiatives included in SEVRA. We look forward to continuing to work with you and with HUD on refining these proposals for reform and developing additional improvements. Thank you again for the opportunity to testify.
REP. WATERS: Thank you. Ms. Newsome?
MS. NEWSOME: Thank you, Chairwoman --
REP. WATERS: Could you pull that microphone a little bit closer?
MS. NEWSOME: And there we go. And good afternoon, Ranking Member Capito and members of this distinguished subcommittee. My name is Karen Newsome. I'm here on behalf of the National Affordable Housing Management Association, NAHMA. I'm also the vice president of administration for WinnResidential.
NAHMA strongly supports the Section 8 Housing Choice Voucher program and we look forward to working with this subcommittee to improve this program as well as the project-based Section 8 programs administered by HUD's Office of Housing. My written statement has been submitted for the record and I would like to summarize that testimony by focusing on the positive results that can be achieved by creating a more efficient voucher inspection process, authorizing a limited English proficiency technical assistance program in HUD, and expanding the project-based and enhanced voucher program.
I would also like to express NAHMA's strong support for authorizing a stable voucher renewal funding formula and providing 150,000 new incremental vouchers for each of fiscal years 2010 through 2014. And finally, I'd like to thank Chairwoman Waters and this subcommittee for the strong leadership you provided in stabilizing the project-based Section 8 funding.
SEVRA proposes common sense reforms to the inspection requirements that will help expedite the lease-up process for voucher holders. NAHMA strongly supports provisions in SEVRA which will permit housing authorities to approve lease-ups in properties (with ?) pass inspections under a program with standards at least as stringent as HQS, such as the home or tax credit program, to provide residents with housing sooner and to reduce lost income for owners; to allow minor repairs to be made after the tenant moves into the apartment; and to give public housing agencies the discretion to inspect units occupied by voucher holders every other year rather than annually for the term of the HAP contract.
The streamlined inspection process proposed in SEVRA would remove a major obstacle for voucher holders in tight rental markets. NAHMA strongly supports Section 17 of the SEVRA draft, which allows HUD to better serve persons with limited English proficiency, LEP, by providing technical assistance to recipients of federal funds. In the last Congress, this language was included in both the House and Senate versions of SEVRA.
HUD's LEP guidance became effective on March 7th, 2007. The guidance states that recipients of HUD funding, including affordable rental housing providers, have an obligation to provide translated documents and oral interpretation services to persons who have difficulty communicating and reading in the English language. Originally, HUD provided no additional funding for affordable housing providers to offset the cost of providing language services nor did they identify a specific list of documents housing providers would be expected to translate. In the summer of 2007, a coalition of multifamily housing representatives and civil rights advocates proposed the LEP language which is included in SEVRA.
Our compromise addresses the cost and vagueness concerns raised by housing providers, and it will provide greater assistance to our residents and applicants with LEP. NAHMA is especially interested in the provisions which create a task force of industry and civil rights stakeholders to identify vital documents, require HUD to translate the vital documents within six months, create a HUD-administered 1-800 hotline to assist with oral interpretation needs and authorized appropriations.
In FY '08 and FY '09, Congress appropriated funds for HUD to provide LEP technical assistance and document translations. So far, HUD has used this funding to translate the four multifamily model leases and other important documents into 12 languages.
We appreciate HUD's progress but we strongly believe the authorization language is still necessary. First, it reaffirms Congress' commitment to provide consistency in the level of service for individuals with LEP, but NAHMA is concerned by HUD's budget request to consolidate the account. We fear eliminating the LEP line item will make it more difficult to secure funding for future translations or to update current translations as the documents change.
Project-based vouchers are an important tool for expanding the supply of affordable housing, particularly when used for the tax credit program. NAHMA welcomes the new project-based preservation vouchers, which will protect residents while ensuring that actual units are preserved as affordable.
In July 2004, GAO released a report on the options for protecting tenants in properties with expiring HUD mortgages, noting that mortgages on more than 2,300 subsidized properties will reach maturity through the year 2013. In many instances, rents in these developments were kept low by subsidizing the mortgage and limiting the rents that could be charged, and on several occasions NAHMA has called on Congress to provide enhanced vouchers to tenants whose rent would be unaffordable after the HUD mortgage reached maturity when affordability requirements expire. We are pleased that the SEVRA draft authorizes enhanced vouchers for low-income and certain moderate-income tenants who live in properties with expiring mortgages under the Section 221 and 236 programs.
Thank you for allowing NAHMA to comment on the draft SEVRA bill, and we look forward to working with you to improve what works about the Section 8 program and to reform the areas that need attention. Thank you.
REP. WATERS: Thank you very much. I will recognize myself for five minutes to raise a few questions. How many people feel that -- well, let me ask how the credit reports work. If you have a tenant or a would-be tenant applying and they meet all of the criteria except for credit reports, could they be denied Section 8 or rentals in public housing? I mean, how does it work?
MR. MONTIEL: In Los Angeles, they would not be denied that assistance. Furthermore, we would go on record, Chairperson, indicating that we believe that minimum credit scores, especially in the redevelopment right-to-return situation, don't make sense in the sense that if people have minimum credit scores or good credit scores, they probably would not require our public housing assistance to begin with.
REP. WATERS: Anyone feel different about credit scores? Okay. Mr. Montiel, you talked about a different way of dealing with Move to Work and you talked about incentives. (You ?) give us some idea of what you were talking about?
MR. MONTIEL: Indeed, and we've seen many aspects of that, Chairwoman, in our redevelopment efforts in Jordan Downs. Incentives are -- could be things such as linking people to jobs -- for example, skilled trades jobs -- to take advantage of massive redevelopment efforts that will take place, but then to keep those people engaged with unions so that they can move up, if you will, the income ladder without necessarily leaving their unit.
They can go from a public housing unit, then it is a workforce housing unit, and then it is a market-rate unit, then maybe even to home ownership, without ever having moved. Incentives also become perhaps --
REP. WATERS: To pay initial, like, union initiation fees?
MR. MONTIEL: Initiation fees. It could be things such as helping a person who wants to become a carpenter but doesn't have the GED and algebra skills, getting them the assistance so that they are then prepared to enter the job market in the apprenticeship program.
REP. WATERS: And let me just ask -- it's been brought up several times that perhaps the role of the housing authorities should not include, I guess, hiring a workforce to do repairs when the owners of our Section 8 units are not in compliance -- that this (can ?) somehow creates, what, additional responsibility.
Didn't we say something about limiting the liability or making sure that you would not be held responsible for repairs in some way? Does that not satisfy your concerns or is it something else you would like to tell us about that? Yes, Ms. Rooker?
MS. ROOKER: Chairwoman Waters, yes, in the bill it does limit the liability issues to the housing authority. I'm not clear that it even goes far enough. But one is, it's the property that's owned by the landlord, and in the experience in the Walla Walla Housing Authority, landlords are not particularly in favor of other people touching their property and abating those issues, and they want to take ownership. It's their property. They want to maintain it as they see fit.
Maybe we could have more discussion of how we can encourage them to do that in some rental markets that are very tight -- how to do that. But it's that private ownership that's so important and for them to deal with that, and I think there's other incentives we could look at.
REP. WATERS: Or another way of looking at this may be that the owner that's in noncompliance could be asked who would -- who would -- what contractors, what handymen, what -- who do they use, and then we could -- you could utilize those persons because they're familiar with the building or the units, et cetera. And then the owner could be billed by the housing authority for that work, or something like that.
MS. ROOKER: That may entail more legal aspects. So if the owner didn't pay you and you were already out that money then you'd have to go through a whole collection process. But I think there's opportunities to further discuss this in more detail -- (inaudible). There could become some resolution so that there's more units opening up for families.
REP. WATERS: Despite the fact that we have a housing shortage and we need units, do we have landlords who are constantly in violation, who do not do the repairs, and who may be trouble even in another way that we attempt to do it that we could just exclude from the program?
MR. MONTIEL: I think that's an approach that could possibly work, Chairwoman, and keep in mind that many -- certainly all the large urban areas -- New York, Chicago, and Los Angeles -- have very appropriate code enforcement areas. So that's one way of tying it to having landlords meet their obligation for safety, for decent and affordable housing, is many times just meeting the strict code enforcement requirements of the city.
MS. ROOKER: And also, for example, in some rural areas if the housing is on the substandard side landlords can make more money renting to non-voucher holders because they will allow doubling up in their units, especially with agricultural workers, and they'll charge a rent per head. So they don't want to make the repairs unless it it's a (court ?) enforcement issue within that particular community. They can just take more money.
REP. WATERS: Lastly, are any of our housing authorities dealing with the cities about code -- their codes and code enforcement so as to eliminate your having to even get into all of that?
MR. HIEBERT: Yes, Madame Chairwoman. It's an ongoing conversation in a lot of small- or medium-sized communities about formulation of codes and how they affect and there's -- it really is an ongoing discussion, particularly in areas such as our community, which is also a college community, which we had the same problem with. Landlords can very often make more money by renting to a number of college kids instead of a family. So we're constantly having conversations, both with groups of landlords and with the city inspection crew.
REP. WATERS: All right. Thank you very much. Ms. Capito?
REP. CAPITO: Thank you. Mr. Bazzie, in your statement -- your verbal statement -- you mentioned that your PHA is going to be losing 26 families a month. Could you expound on that, why that is, and is -- just -- I know you gave a brief explanation. I'd like a fuller explanation for that. And do you think that's a trend nationwide?
MR. BAZZIE: I know that it is definitely a trend in West Virginia, and I would expect that it's a national problem. The funding that our housing authority received this year based on past numbers has just not been adequate to cover our increasing cost to house a family. As a result, we're using what's called net restricted assets, or money that had been in reserve for some time, to cover those costs. And in my county -- in my county housing authority -- our HAP costs were exceeding our funding by about $100,000 a month now.
So we're able to use that net restricted asset to cover those costs. However, come next month that money is gone, and if we continue to lease at our current leasing rate, by the end of the year we'll have a large $70,000-some deficit. And so to not have that deficit -- (well ?) we have no money in the bank to pay landlords we're going to have to start decreasing the number of families who are receiving assistance by at least 28 per month, which comes out to about 150-some at the end of the year, just to have enough HUD HAP money to pay landlords.
REP. CAPITO: How are you going to pick which 28 are the ones that don't?
MR. BAZZIE: That's going to be the difficult question towards the end of this year. We do have a certain amount of attrition each month --
REP. CAPITO: Right.
MR. BAZZIE: -- maybe 20, 25, sometimes more, sometimes less. So come November or December, I don't know what we're going to do to -- are we going to have to decide who on our program must come off? And that's the conference call I've got scheduled with HUD Baltimore come next month.
REP. CAPITO: What kind of notification do you have to give of a nonrenewal? Is it a 30 days or 60 days? Thirty?
MR. BAZZIE: The notification for --
REP. CAPITO: Nonrenewal of your voucher.
MR. BAZZIE: You know, because this has never been a problem before I'm not sure. But I would think that probably a 30-day --
REP. CAPITO: Thirty-day.
MR. BAZZIE: -- notice, but we would definitely want to give a family as much possible notice --
REP. CAPITO: Right.
MR. BAZZIE: -- as we can because the rent from then on is up to them.
REP. CAPITO: Uh-huh. You also mentioned in your written testimony some issues concerning the utility allowances in rural areas. Has that been a problem for you?
MR. BAZZIE: It is somewhat of a problem. The requirement is that each year housing authorities update their utility allowances so that the families not pay more than 30 percent of their income towards rent and utility. And so for every --
REP. CAPITO: So utilities are included in that, right?
MR. BAZZIE: Yes.
REP. CAPITO: Okay.
MR. BAZZIE: So for every dwelling unit that is rented, we'll make an individual determination of an estimated utility cost. Well, in order to come up with that estimate, we have to contact every utility company within our jurisdiction --
REP. CAPITO: Right.
MR. BAZZIE: -- and in a six-county area, that's hundreds when you include all of the water and sewer public service -- (inaudible) --
REP. CAPITO: Right.
MR. BAZZIE: -- and various -- (inaudible). HUD is already determining estimated utility costs for every fair market area. They have to in order to come up with this fair market rent.
REP. CAPITO: Right.
MR. BAZZIE: So my suggestion in the written was that this may be one area that SEVRA will explore -- because it's not in there now -- is to allow housing authorities to use this HUD data if they so desire. Now, a smaller community, it may not be a problem. In West Virginia, the average housing authority is covering three counties so it is very staff intensive and time consuming when the information is already there.
REP. CAPITO: Okay. I'd like to ask all -- whoever wants to answer this question. Are any of your housing authorities or the folks that you interact with daily, are you all receiving any money from the stimulus package? Could you just briefly tell me how much and what you're using it for? Just real quick because I don't have much time.
MR. MONTIEL: Twenty-five million dollars in Los Angeles for rehab of vacant units and for public safety cameras in public housing developments.
MR. BAZZIE: In Raleigh County, approximately 100,000 (dollars) -- $120,000 we're going to receive, really just to make additional repairs to our public housing units.
MR. HIEBERT: I'm extremely envious of the $25 million figure. We got $400,000, which is used for roofs and siding that we hadn't been able to do in the last 20 years.
MS. ROOKER: And in Walla Walla, we're getting $245,000 -- will deal with energy upgrades.
MS. ZATERMAN: Every one of our members is using their stimulus money. A lot of the money focused on upgrades that have been in their five-year plans for more than five years.
Many housing authorities are using it to fill a credit gap on deals that were stalled or the value of the tax credit dropping so they can move forward with expanding the supply of affordable housing. And many of them are very focused on green energy efficiencies and upgrading properties not just on reducing energy conservation but looking at the surrounding sites too and how they impact climate change.
MS. NEWSOME: And the 2 billion (dollars) in project-based Section 8 funding to fund the gap (is ?) helped all of the members of NAHMA.
REP. CAPITO: Thank you.
REP. WATERS: Thank you. Mr. Cleaver?
REP. CLEAVER: Thank you, Madame Chair. I'd like to focus on the rent structure, and I -- this probably is a question that I should have asked the secretary when he was here on this same subject a couple weeks ago, but where do we get the 30 percent of the adjusted income from? I mean, do any of you know?
MS. ROOKER: The Brooke Amendment.
REP. CLEAVER: Yeah, I know. Yeah. But I mean, where did it come from? I mean, what is it based on? How was it designed? There was just -- was it just a figure that was just pulled out of the air?
MS. ROOKER: It was negotiated by Congress, and this is where we're at today.
REP. CLEAVER: Well, you're not suggesting that we did that, technically, and that we actually thought deeply about it?
MS. ROOKER: It began at 25 percent and it's been raised to 30 percent, so it -- so there has been a second look. We have looked at the percentage before and -- (inaudible) -- the development.
REP. CLEAVER: Well, do you believe that -- do any of you believe that in this legislation that maybe we ought to look at a flat rate? Do any of you have difficulty with a flat rate?
MR. HIEBERT: I think that that may be something that can be done on a case-by-case basis in different areas, depending on their local community and their residents and their waiting list. I think that ought to be part of the discussion that they have and that's why we're recommending the Housing Innovations Program. That's the sort of thing that they can take a look at -- rather than making one decision here, allowing that local flexibility to be able to work it in a particular community or region.
MS. ZATERMAN: And Congressman Cleaver, I'd like to add also that if we look at the current MTW agencies, they submit annual plans every year and report on what they have accomplished each year. A number of housing authorities are looking at rent reform policies -- not just flat rents, but reducing the percentage of the rent to income to 28 or 27 percent and eliminating deductions.
I think this is a very strong argument for the Housing Innovations Program, where you continue to have tenant protections and a rigorous evaluation, because we need to look at what the impact actually is on residents, both in the incentives for work, the amount of disposable income available for education expenses and transportation, work-related expenses. So this is really the time we should be looking at what current MTW housing authorities are doing in rent policy because I think we will find some very interesting results.
And contrary to early testimony, they are required to report on their activities and the outcome of their activities. But we do currently have data that we can look at and we should expand our experimentation in this area.
REP. CLEAVER: So all of you would then support the flexibility to modify the rent subsidy. I mean, you talked about, Ms. Zaterman, the -- you know, someone who has to, you know, ride the bus each day and who has to pay for child care may need a greater level of help, and maybe 30 percent is too high compared to someone who works around the corner -- they walk around the corner and they can drop their kids off at grandma's.
MS. ZATERMAN: I think the other case is for households who are increasing their income -- that every additional dollar that they earn goes into an increased rent payment. The thinking behind flat rents for some housing authorities who are interested in this is an incentive for work in that your rent does not go up when your income goes up, and that you can budget and plan in terms of your expenses and not be subject to rent increases every time your income goes up.
REP. CLEAVER: Well, the previous HUD secretary -- well, not the previous -- Mr. Jackson has supported the flat rate, which caused me to not want to support it. But the -- that was not nice. But that he pushed that, and I just recently started looking more thoroughly and deeply at it, and I -- and if we can achieve what a flat rate would do by making adjustments, then that certainly ought to be something we would include in the legislation. I'm assuming all of you would agree with that.
MR. MONTIEL: Yes.
REP. CLEAVER: Mr. Montiel?
MR. MONTIEL: Yes.
MR. HIEBERT: Yes, I very strongly agree with it. Also, Congressman, in the original legislation of MTW and also contained in the new contracts is public housing, and our programs have often been referred to as a safety net. We have to have a safety net within that safety net. There -- nobody fits the entire mold of any program. So we do take into account somebody who has different circumstances and can't afford whatever innovative program is being tried. So that is contained in every HIP or Moving to Work program.
REP. CLEAVER: Ms. Rooker?
MS. ROOKER: I would agree, and just on the administrative side, it's just very complicated to deal with rent calculations and, you know, error rates, all the exclusions. And NAHRO has done some modeling in studies as to what those exclusions cost and then where that percentage goes to be able to react to this bill and hopefully be informative.
REP. CLEAVER: Ms. Newsome?
MS. NEWSOME: NAHMA would definitely welcome looking into how rents are calculated. In our written testimony, we also brought up the issue of the fact that many of our residents we pay a check to to live in our communities.
REP. CLEAVER: Thank you, Madame Chair. I yield back.
REP. WATERS: Mr. Driehaus?
REP. DRIEHAUS: Thank you, Madame Chair. I'd like to pursue a little further the issue of rent but from a different perspective, and that is rent reasonableness, and I'm interested in your perspectives. We talked a little bit about HIP and MTR (ph) and the flexibility that local housing authorities might want or should have with regard to those programs.
But I also find, certainly in Cincinnati we have seen that there are restrictions placed upon local housing authorities when it comes to rent reasonableness studies, and at times it has caused a reconcentration of pockets of poverty in neighborhoods because we see certain neighborhoods where the rents are so high and landlords not willing to accept vouchers that they're essentially closed off.
And so where that rental reimbursement is rather significant relative to the market rate and where the greatest profit margin exists we see landlords flocking into those neighborhoods, especially to purchase very affordable single-family homes, and then, you know, an introduction of significant numbers of vouchers into those neighborhoods, thereby reconcentrating pockets of poverty.
You know, the idea initially of the voucher program was to deconcentrate poverty, not to reconcentrate it. And I'm interested in your perspectives in terms of the flexibility given to local housing authorities when it comes to rent reasonableness and whether or not you are limited in your ability to achieve the objective of decentralizing poverty. Mr. Hiebert, maybe you could offer some perspective.
MR. HIEBERT: Yes. The original intent was very good -- to make sure that program participants weren't overpaying for housing. Our program in Keene exactly went through that thought process you were just talking about. It makes allowance for somebody to make a choice if they would like to live closer to their school, where they're working, closer to public transportation. For instance, if they did that maybe they wouldn't have to have a car, wouldn't have to pay for parking, wouldn't need insurance.
And even the housing industry, in looking at the magic 30 percent figure and looking at, for instance, if somebody is qualified for a mortgage, goes beyond that and looks at what other debts do they have. Do they have a car payment, do they have insurance, and that sort of thing.
If somebody would like to pay a little bit more to get closer to their school or work or whatever, or a nicer neighborhood, they should be able to have that choice. That's what it's all about. So yes, I would certainly like to see that added flexibility, which is not actually contained in the Section 8 program now, but is, during -- again, in my mantra, in the Moving to Work program.
REP. DRIEHAUS: Mr. Montiel?
MR. MONTIEL: Yes. I think your comments are very well taken and we definitely would benefit from the flexibility as would the clients that we serve. In Los Angeles, we have one council district of 15 in the city. They have 25 percent of our 50,000 vouchers -- Castleman (ph) Parks. And whereas I'm not one to advocate that everyone should live in Brentwood -- that'd be great, but that's really not what the program's designed for -- it's obvious that as you get into better neighborhoods you have a double bottom or triple bottom line -- more jobs, better transportation, and better schools.
So anything that we can do to help the families get into situations where they can become more self-sufficient quicker I think is a good thing and that flexibility would certainly be welcome.
REP. DRIEHAUS: Do you feel that there are restrictions right now placed upon you in terms of your ability to adjust reimbursement rates in given neighborhoods?
MR. MONTIEL: Absolutely. We have a maximum of 110 percent that we can provide of the FMR for any particular neighborhood in Los Angeles, and to go past the 110 percent you have to get HUD approval. I'll give you an example. Right next door in Santa Monica they've gotten a HUD waiver because their minimum is 147 percent of the FMR just because of the markets. So yes, right now we have a cap of 110 without HUD approval.
REP. DRIEHAUS: Ms. Rooker?
MS. ROOKER: One item that might -- may be of assistance is that HUD bases the fair market rent at 40 percent of the percentile within your market. Some markets have been raised to the 50th and it used to be at the 50th. And raising the amount of rental stock available within your fair market rent and your payment standard, whether it goes to 110, opens up what I think you're trying to achieve, is deconcentration, so the more rental units.
But that has a cost to the program and that's why the -- why HUD decreased the fair market percentile to the 40th versus keeping it at the 50th, which provides more rental options within your community, and then you get deconcentration.
REP. DRIEHAUS: Thank you, Madame Chair. I yield back the balance of my time.
REP. WATERS: (Off mike.) The chair notes that some members may have additional questions for this panel which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record.
Now this panel is dismissed, but before we adjourn the written statements of the following organizations will be made part of the record of this hearing -- the National Leased Housing Association, the Poverty & Race Research Action Council, and the California Housing Partnership.
I'd like to thank our witnesses for being here today, for their patience while we had to go to vote. We appreciate the work that you are doing, and this hearing is now adjourned. Thank you.