Statement of The Honorable Alphonso Jackson, Secretary, United
States Department of Housing and Urban Development, before the United
States Senate, Subcommittee on Transportation, Treasury, the Judiciary,
Housing and Urban Development, and Related Agencies
April 14, 2005
Bond, Ranking Member Murray, Distinguished Members of the Subcommittee:
you for the invitation to join you this morning. I am honored to
outline the Fiscal Year (FY) 2006 Budget proposed by President Bush
for the U.S. Department of Housing and Urban Development (HUD).
Over the past four years, HUD has expanded homeownership, increased
access to affordable housing, fought housing discrimination, tackled
homelessness, and made a new commitment to serving society's most
vulnerable. The Department has implemented innovative solutions
to address our nation's housing needs, and our results have been
impressive and measurable.
$28.5 billion in new net budget authority for FY 2006 seeks to build
on our success and lend a compassionate hand to individuals in need,
while also using taxpayer money more wisely and reforming programs
in need of repair. The HUD budget proposed by the President reflects
this intent through three broad, yet focused strategic goals: promoting
economic opportunity and ownership, serving society's most vulnerable,
and making government more effective.
his February 2 State of the Union Address, the President underscored
the need to restrain spending in order to sustain our economic prosperity.
As part of this restraint, it is important that total discretionary
and non-security spending be held to levels proposed in the FY 2006
Budget. The budget savings and reforms in the Budget are important
components of achieving the President's goal of cutting the budget
deficit in half by 2009 and we urge the Congress to support these
reforms. The FY 2006 Budget includes more than 150 reductions, reforms,
and terminations in non-defense discretionary programs, of which
eight affect HUD programs. The Department wants to work with the
Congress to achieve these savings.
funding reductions, reforms, and terminations contained within HUD's
FY 2006 budget represent difficult choices in an era of significantly
diminished resources for all domestic discretionary programs. These
decisions were made thoughtfully, following an analysis of each
program's current funding levels and an assessment of future needs.
Economic Opportunity and Ownership
President's vision of an "ownership society" has been a central
theme of his Administration. Ownership - and homeownership in particular
- is the key to financial independence, the accumulation of wealth,
and stronger, healthier communities.
Homeownership creates community stakeholders who tend to be active
in charities, churches, and neighborhood activities. Homeownership
inspires civic responsibility, and homeowners are more likely to
vote and get involved with local issues. Homeownership offers children
a stable living environment, and it influences their personal development
in many positive, measurable ways - at home and at school.
Homeownership's potential to create wealth is impressive, too. For
the vast majority of families, the purchase of a home represents
the path to prosperity. A home is the largest purchase most Americans
will ever make - a tangible asset that builds equity, good credit,
borrowing power, and overall wealth.
In 2004, more Americans achieved the dream of homeownership than
at any time in our nation's history. Today, nearly 70 percent of
American families own their homes - an all-time record - and minority
homeownership has surpassed 51 percent for the first time in history.
figure, however, points to a significant homeownership gap between
non-Hispanic whites and minorities. In June 2002, the President
challenged the nation to create 5.5 million new minority homeowners
by 2010. Since the President's challenge, 2.2 million minority families
have joined the ranks of homeowners, and we are on track to meet
the 5.5 million goal.
Administration is working to make homeownership more affordable
and more accessible. Government should do everything it can to help
families find the security, dignity, and independence that come
with owning a piece of the American Dream.
many Americans, high downpayments and closing costs represent the
greatest barrier to homeownership. To help overcome this obstacle,
the President proposed the American Dream Downpayment Initiative
to provide low- and moderate-income families with the funds and
support needed to purchase their first home. On December 16, 2003,
President Bush signed the American Dream Downpayment Initiative
into law, and since then, HUD has distributed $162 million in downpayment
funds to over 400 State and local governments. These funds have
already helped over 3,500 families purchase their first homes -
of which more than 50 percent were minorities. The 2006 Budget requests
$200 million to fully fund the Initiative.
families learn about the loan products and services available to
them and how to identify and avoid predatory lending practices is
critical to increasing homeownership. Housing counseling has proven
to be an extremely important element in both the purchase of a home
and in helping homeowners keep their homes in times of financial
stress. The FY 2006 Budget proposes $40 million for Housing Counseling
to assist over 700,000 families to become homeowners or avoid foreclosing
on their homes. This effort will fully utilize faith-based and community
remove two of the largest barriers to homeownership - high downpayment
costs and impaired credit - the Budget proposes two mortgage programs.
The Zero Downpayment Mortgage allows first-time buyers with a strong
credit record to finance 100 percent of the home purchase price
and closing costs. For borrowers with limited or weak credit histories,
a second program, Payment Incentives, initially charges a higher
insurance premium and reduces premiums after a period of on-time
payments. In 2006, these new mortgage programs will assist more
than 250,000 families achieve homeownership.
President is also proposing a new Single Family Homeownership Tax
Credit that could increase the supply of single-family affordable
homes by an additional 50,000 homes annually. Under the President's
plan, builders of affordable homes for moderate-income purchasers
will receive a tax credit. State housing finance agencies will award
tax credits to single-family developments located in a census tract
with median income equal to 80 percent or less of area median income
and will be limited to homebuyers in the same income range. The
credits may not exceed 50 percent of the cost of constructing a
new home or rehabilitating an existing property. Each State would
have a homeownership credit ceiling adjusted for inflation each
year and equal to the greater of 1.75 times the State population
or $2 million. In total, the tax credit will provide $2.5 billion
over 5 years.
you know, tax legislation is the responsibility of the Treasury
Department, but we will be working with Treasury's Office of Tax
Policy to ensure that the credit legislation addresses issues such
as disclosures, so that the credit operates smoothly.
Homeownership Voucher program, while still new, has successfully
paved a path for low-income Americans to become homeowners. Together
with pre- and post-homeownership counseling, strong and committed
collaboration among Public Housing Authorities (PHAs), local non-profits,
and lenders has proven to be essential in making the program work
for families across the country. The greatest challenge to the success
of the program is finding lenders who are willing to participate.
enterprises were chartered to help low- and moderate-income families
secure mortgages. HUD recently published a rule that requires Fannie
Mae and Freddie Mac to increase their purchases of mortgages for
low- and moderate-income households and underserved communities.
These new goals will push the GSEs to genuinely lead the market
in creating homeownership opportunities for those traditionally
underserved by the mortgage markets, particularly first-time homebuyers.
addition to increasing the housing goals annually from 2005 through
2008, HUD's rule establishes new home purchase subgoals in each
of the three goal areas. This is intended to focus the GSEs' efforts
on the purchase of home mortgages, not refinancings. HUD projects
that over the next four years, GSEs will purchase an additional
400,000 home purchase loans that meet these new and more aggressive
goals as a result of the new rule.
the primary federal agency responsible for the administration of
fair housing laws, HUD is committed to protecting the housing rights
of all Americans, regardless of race, color, national origin, religion,
sex, familial status, or disability. This commitment is reflected
in HUD's budget request for FY 2006.
goal of HUD's fair housing programs is to ensure that all families
and individuals have access to a suitable living environment free
from unlawful discrimination. HUD contributes to fair housing enforcement
and education by directly enforcing the federal fair housing laws
and by funding state and local fair housing efforts through two
programs: the Fair Housing Assistance Program (FHAP) and the Fair
Housing Initiatives Program (FHIP).
FY 2006 Budget will provide $23 million through FHAP for state and
local jurisdictions that administer laws substantially equivalent
to the Federal Fair Housing Act. The Budget also provides $16 million
in grant funds for non-profit FHIP agencies nationwide to directly
target discrimination through education, outreach, and enforcement.
FY 2006 Budget requests $583 million to fund Native American Block
Grants (NABG). These grants are used by tribes and tribally designated
housing entities to develop new housing units to meet critical shortages
in housing. Although NABG funding has been reduced in FY 2006, HUD
expects that all program requirements will be met, including new
housing development, housing assistance to modernize and maintain
existing units; housing services, including direct tenant rental
subsidy; guaranteed lending; crime prevention; administration of
the units; and certain model activities.
Society's Most Vulnerable
Chronic Homelessness. The Administration is committed to the
goal of ending chronic homelessness, and has aggressively pursued
policies to move more homeless families and individuals into permanent
housing. A chronically homeless person suffers from a disabling
developmental, physical, or mental condition or a substance abuse
addiction. They have been homeless for a year or more, or they have
had repeated periods of extended homelessness. They may occasionally
get help and leave the streets, but they soon fall back to a life
of sidewalks and shelters.
indicates that although just 10 percent of the homeless population
experiences chronic homelessness, these individuals consume over
half of all emergency homeless resources. Housing this population
will free Federal, State, and local emergency resources for families
and individuals who need shorter-term assistance.
In July 2002, the President reactivated the Interagency Council
on Homelessness for the first time in six years, bringing together
20 Federal entities involved in combating homelessness. Since its
inception, the Interagency Council has helped State and local leaders
across America draft plans to move chronically homeless individuals
into permanent supportive housing, and to prevent individuals from
becoming chronically homeless. Today, 47 States and more than 200
county and city governments have joined the Federal effort.
Budget provides a record level of resources for permanent supportive
housing for homeless individuals who have been on the streets or
in shelters for long periods. The 2006 Budget provides $1.44 billion
for Homeless Assistance Grants ($25 million of which is for the
Prisoner Re-Entry Initiative), $200 million more than in 2005. Altogether,
the Administration requests $4 billion in 2006 for Federal housing
and social service programs for the homeless, an 8.5% increase.
for Special Populations. Housing Opportunities for Persons with
AIDS (HOPWA) provides formula grants to States and localities to
provide housing to ensure persons with AIDS can continue to receive
health care and other needed support. The program also provides
competitive grants to nonprofit organizations. In FY 2006, HOPWA
will fund an estimated 25 competitive grants and will provide formula
funding to an estimated 124 jurisdictions and in total will provide
an estimated 67,000 households with housing assistance.
FY 2006 HOPWA funding request represents a 5 percent decrease from
the FY 2005 funding level. The reduction was one of a number of
difficult choices the Administration made in formulating the FY
2006 Budget, but one which is in consistent with the goal of restraining
spending in order to sustain economic prosperity. HUD is seeking
changes in the HOPWA formula that will improve the targeting of
the program, so that HOPWA better supports those whom it was created
to serve - the most vulnerable persons, and individuals who are
homeless or with very low incomes - ahead of other low-income households.
FY 2006 budget proposes to fund grants of $119.9 million for Supportive
Housing for Persons with Disabilities (Section 811). Section 811
provides assistance to expand the supply and the availability of
affordable housing for persons with disabilities. The Administration
is proposing the elimination of the program's new construction component,
resulting in a $118.2 million funding decrease from FY 2005. The
Section 811 program will continue to support all previously funded
housing subsidies under the program and up to 1,000 new housing
vouchers. The Administration intends to undertake a study of the
Section 811 program to determine the most efficient use of the limited
funding available for it.
Office of Lead Hazard Control and its Healthy Homes Initiative work
to eradicate childhood lead poisoning and prevent other housing-related
childhood diseases and injuries. The FY 2006 budget proposes $119
million to fund these two programs, a net decrease of $47.6 million
from the FY 2005 appropriation. The Lead Demonstration Project accounts
for $46.6 million of this decrease. Areas with high incidence of
lead poisoning have now developed greater capacity, and therefore
activities previously funded under the Demonstration program will
be addressed through the regular grant program.
Government More Effective
Community and Economic Development Programs. The Budget proposes
a new program within the Department of Commerce to support communities'
efforts to meet the goals of improving their economic opportunity
and ownership. This initiative will consolidate programs such as
Community Development Block Grants into a more targeted, unified
program that sets accountability standards in exchange for flexible
use of the funds.
Low-Income Housing Assistance. Another way in which the FY 2006
Budget will make government a better steward of taxpayer money is
through reform of the Section 8 Housing Choice Voucher Program.
HUD has three major rental assistance programs that collectively
provide rental subsidies to approximately 4.8 million households
nationwide. The major vehicle for providing rental subsidies is
the Section 8 program, which is authorized in Section 8 of the U.S.
Housing Act of 1937. Under this program, HUD provides subsidies
to individuals (tenant-based) who seek rental housing from qualified
and approved owners, and also provides subsidies directly to private
property owners who set aside some or all of their units for low-income
Housing Choice Voucher Program, the best known of the Section 8
rental assistance programs, provides approximately 2 million low-income
families with subsidies to afford decent rental housing in the private
market. Generally, participants contribute up to 30 percent of their
income towards rent, and the government pays the rest.
the past, funds have been appropriated for a specific number of
vouchers each year. These funds were then given to PHAs based on
the number of vouchers they awarded and at whatever costs were incurred.
2001, the Housing Certificate Fund, under which both the project-based
and tenant-based Section 8 programs are funded, consumed 43 percent
of HUD's annual Budget. That had risen to 57 percent in FY 2005,
and the trend line continues to increase dramatically in the Department's
FY 2006 Budget. This rate of increase, combined with an extremely
complex set of laws and rules that govern the program, has resulted
in a program that increasingly is difficult to sustain.
response to rapidly increasing costs, Congress recently converted
this "unit-based" allocation system to a "budget-based" system.
This made sense, but for the budget-based system to work, program
requirements need to be simplified and PHAs need to be provided
with greater flexibility.
Administration proposes to simplify Section 8 and give more flexibility
to PHAs to administer the program to better address local needs.
Building on changes in the 2005 Consolidated Appropriations Act,
the Administration will shortly submit authorizing legislation to
this Committee that expands the "dollar-based" approach. PHAs will
continue to receive a set dollar amount as in 2005, but they would
have the freedom to adjust the program to the unique and changing
needs of their communities, including the ability to set their own
subsidy levels based on local market conditions rather than Washington-determined
rents. Local PHAs will be able to design their own tenant rent policies,
and in turn, reduce the number of errors that are made and create
incentives to work. The Administration's plan will eliminate many
of the complex forms that are currently required to comply with
program rules, saving both time and money. Furthermore, the Administration's
proposal will reward PHAs for good management through performance-based
incentives. These changes would provide a more efficient and effective
program, which helps low-income families more easily obtain decent,
safe, and affordable housing.
Human Capital. After many years of downsizing, HUD faces
a large number of potential retirements and the loss of experienced
staff. HUD's staff, or "human capital," is its most important asset
in the delivery and oversight of the Department's mission. HUD has
taken significant steps to enhance and better use its existing staff
capacity, and to obtain, develop, and maintain the staff capacity
necessary to adequately support HUD's future program delivery. HUD
has revamped its hiring practices, and now fills jobs in an average
of only 38 days, instead of the 96-day average originally cited
by the Government Accountability Office. Moreover, HUD has synchronized
the goals and performance plans of its managers with the overall
aims of the agency, and is developing a new managerial framework
through recent hiring and executive training programs.
Sourcing. In April, HUD announced its first public-private competition,
focusing on the contract administration and compliance monitoring
functions associated with its assisted multifamily housing properties.
Through this competition and others that are being considered, HUD
hopes to realize cost efficiencies and significantly improve performance.
Financial Performance. HUD has striven to enhance and stabilize
its existing financial management systems operating environment
to better support the Department and produce auditable financial
statements in a timely manner. While still suffering from internal
control weaknesses, HUD met the accelerated timetables for producing
its performance and accountability report, and improved the reliability,
accuracy, and timeliness of financial systems. HUD is continuing
efforts to reduce its internal control weaknesses from 10 to 7 by
HUD completed security reviews for all of its information systems
in calendar year 2004, and plans are in place to eliminate security
defects by next year. HUD awarded its large contract for core IT
infrastructure, successfully resolving a protest that lasted for
Management and Performance. Today, public and assisted housing
residents live in better quality housing with fewer safety violations
than four years ago. HUD increased the percentage of projects meeting
its physical condition standards in public housing by 9 percentage
points (from 83 percent in 2002 to 92 percent in 2004) and in subsidized
private housing by 8 percentage points (from 87 percent in 2002
to 95 percent in 2004). HUD now turns around at least 45 percent
of public housing authorities classified as "troubled" within 12
months rather than the 2 years allowed by regulation. New rules
and procedures have virtually eliminated property flipping fraud
from the FHA insurance programs, and close monitoring will continue
to prevent such abuses. New rules and procedures have forced out
bad appraisers from the FHA program and our "Credit Watch" lender
monitoring initiative will continue to bar other individuals who
improperly raise the risk of loss in these programs. Since 2002,
HUD has worked with stakeholders to streamline their Consolidated
Planning process into an easy-to-use and helpful tool for communities.
Faith-Based and Community Initiative. HUD expanded its outreach
to community organizations, including faith-based organizations,
attempting to level the playing field for its formula and competitive
grants. HUD has removed all discriminatory barriers to participation
by such organizations. HUD's technical assistance has helped these
organizations understand the application process as well as the
responsibilities for implementation. These organizations are beginning
to compete more widely and effectively as shown in their success
in increasing the number of grants from 659 in 2002 to 765 in 2003,
a 16 percent improvement.
Improper Payments Initiative. At the beginning of the President's
first term, HUD committed to working with its stakeholders to reduce
the improper payment in rental subsidies by one-half by 2005. At
that time, over 60 percent of rental subsidies were incorrectly
calculated by program sponsors due to improper interviews, inadequate
income verifications, misunderstood program rules, and computational
errors. Other errors resulted from inadequate verification of tenants'
self-reported incomes. Four years later, HUD has achieved exactly
what it committed to do. There has been a 27 percent reduction in
improper subsidy determinations by program sponsors over the past
four years. More importantly, there has been a 50 percent reduction
in improper payments amounting to $1.6 billion.
in 2005, HUD will expand the verification of tenant self-reported
incomes to include recent wage data. This has the dual benefit of
both improving accuracy and providing more privacy because income
data will be matched electronically whereas current procedures require
a paper verification letter to the tenant's employer. These stewardship
efforts improve confidence that the right person is getting the
right benefit in a timely, dignified, and private manner as intended
under law. Because this is the first quarter that agency efforts
were rated, progress scores were not given.
of us share the goal of creating housing opportunities for more
Americans. We have done great work over the past four years, and
we should be proud of everything we have accomplished together.
But we should not be satisfied, because our work is far from being
look forward to the work ahead, as we seek to open the American
Dream to more families and individuals, and open our communities
to new opportunities for growth and prosperity.
would like to thank all the Members of this Subcommittee for your
support of our efforts at HUD. We welcome your guidance as we continue
our work together.