Madam Chair, Ranking Member Capito and
Members of the Subcommittee, my name is Keith Kinard and I am the Executive
Director of the Newark Housing Authority and am a Board Member of the Council
of Large Public Housing Authorities (CLPHA).
CLPHA is a non-profit public interest organization whose members,
located in virtually every major metropolitan area, are the largest Public
Housing Authorities (PHAs) in the nation.
These agencies act as both housing providers and community developers
while effectively serving over one
million households, managing almost half of the nation’s multi-billion dollar
public housing stock, and administering one quarter of the Section 8 Housing
Choice Voucher program.
Newark
Housing Authority (NHA) has over 12,000 public housing and housing choice
vouchers. In my time at Newark and previously in Pittsburgh, I have overseen the preservation,
development, demolition, disposition, and rehabilitation of thousands of units
of public housing.
We have been asked to comment today on
the discussion draft of two legislative proposals, the “Public Housing
One-for-One Replacement and Tenant Protection Act of 2010” and the “Public
Housing Preservation and Rehabilitation Act of 2010”. However, before I turn to the specifics of
these proposals, I want to note that within the public and affordable housing
community we know there are no greater champions of public housing than
Chairman Frank and Subcommittee Chairwoman Waters. The two of you have consistently, over the
years, not only led the way in supporting and preserving this critical and
scarce housing stock, but you have also been in the forefront of efforts to
defend its programs and protect the people they serve, all the while ensuring
that much needed funding for public housing is maintained and increased when
possible. As an on-the-ground
practitioner and public housing stakeholder, I, and my colleagues, are indebted
to you for your commitment to the preservation of public housing. I know we share many of the same goals. I
want to preserve and protect the housing I manage today. I want to build, develop, redevelop, and
purchase even more affordable housing. I
also want to provide tenants a transparent set of protections that will empower
them against arbitrary and capricious actions.
I
believe that some of the problems that this draft legislation is trying to
address are the result of very early efforts of public housing redevelopment
and do not accurately reflect what is happening today when public housing
authorities redevelop a property.
Unfortunately, I believe that without major modifications, or large new
sources of federal funding, the one-for-one legislation would negatively impact
the very residents it is seeking to protect.
At
first glance, NHA may seem like we’re been doing exactly what you want to
stop. Since 2005, NHA has received
approval for 1,032 units to be demolished at four different developments. However, to date, we have only demolished
106. Since I arrived at Newark in 2006, we have
built and occupied 398 units of affordable housing, including 263 units of new
public housing. I currently have another
226 units in development of which 69% percent may qualify as replacement
housing in this legislation. We also
created long term affordable housing by issuing several hundred project-based
vouchers to private developers who have built or rehabbed over 600 units. I have plans and hopes of building another
1,500 units but we have development gaps of over $125 million dollars and that
scenario assumes that NHA wins 9% tax credits for every application
submitted. I just heard that both of our
latest applications did not receive tax credits which will make the gaps even
larger. This bill as drafted would
increase the number of units that NHA would have to build and make it even more
difficult to build affordable housing.
As currently drafted, I am not even sure that NHA would be able to build
units in our jurisdiction and stay in compliance with the guidelines related to
areas of low concentration of poverty.
I
would like to share with you the tale of two developments. Felix Fuld and Seth Boyden. Felix has been approved for demo, it has 286
units. It has a physical needs
assessment of over $41 million required to make the units viable. It had a high density of residents below the
poverty level, it is a high crime area, it has high operating and repair
costs. The development was not viable
under the asset-based management rules.
I met with the residents in a large community meeting in December 2007
to discuss the results of a working group, which included resident
leadership. The result of those working
group meetings was that NHA and the resident leadership wanted to submit an
application to demolish Felix Fuld.
When
I announced that NHA wanted to demolish Felix, the residents actually
applauded. Now that was not the reaction
I expected. However, the residents knew
this was the right thing to do. I made
them a promise that night, that they would be going somewhere better, be it
other low-rise public housing or newer scattered site public housing, or a
section 8 voucher, they would be going someplace better in both the short term
and the long term. I gave them a right
to return, but only if they remain lease compliant. I provided them with all that Uniform
Relocation Act (URA) requires and more.
I gave them 180 day notice to move.
I gave them housing counseling to help decide what type of temporary or
permanent housing they wanted to choose.
During
the questions and answers that December night this is what I heard. How soon can I leave? Can I have a voucher now? Can I get a transfer now? I had to tell the residents that, “no, you
have to wait for HUD to approve the demolition otherwise you will lose your
rights to URA and right to return”. This
bill seems to lengthen this process – not shorten it, which is what my
residents wanted. Yes, change is hard
and there were tears shed about having to move on and move out of Felix,
but I have kept my promise, people are in
better situations now. What is
interesting, is that after meeting with housing counselors and going though all
of the implications of their choices - 51% have been relocated in public
housing, 38% have vouchers. So because
of the way relocation vouchers are distributed, I was able to serve, in
addition to everyone at the development, over one hundred new families from the
Housing Choice Voucher Program (HCVP) waiting list. I’m actually serving more families by getting
demolition approved at Felix. This bill looks like it would change that.
The
sad part is, right now, I cannot build back a new Felix, the gaps are too big
and the markets are too soft to be able put together a pro forma that works –
and that is not even trying to replace the units one for one. The “Public Housing Preservation and
Rehabilitation Act of 2010”
would help to close some of the gap, however, it does not go far enough. The “Public Housing One-for-One Replacement
and Tenant Protection Act of 2010”
will, if passed, further reduce any chance of Felix being rebuilt and any
residents returning to a new Felix unless there is a substantial new public
housing development fund created. I
would like nothing more than to be able to build back 286 new public housing
units. I believe that most of my
colleagues would agree with me. I would
not put them all back on the original site, as that would just reconcentrate
the problems that existed and contributed to the failure of Felix the first
time around. I believe that these are
the types of communities that need federal investment, rather than saying, “
you must build in areas of low poverty”.
These are the neighborhoods that need transformation. If I had the money, I would build them
back.
However,
without a serious public housing building war chest, if this one-for-one bill
passes, I am going to be left deciding what to do about the second development
in this tale of two developments. Seth
Boyden has 506 units of which only 220 are legally occupied. It also has at least the same level of
problems as Felix. It has over $50
million in deferred capital needs and is not a viable candidate for
rehabilitation due to high abatement costs, ADA upgrades, and unit reconfiguration
costs. The only real choices for Seth
Boyden are: 1) short term, band-aid approaches to keep the units online or 2)
demolish and rebuild something better.
The
residents at Seth Boyden ask me when will they get to move to something better,
like the residents of Felix. I would
love to let them move. However, I cannot
get people to accept offers of housing there.
So units stand vacant. I want to
move forward and promise these residents something better, but I have nothing
to offer right now. NHA has deferred
capital needs of over $500 million across our portfolio. We cannot afford to even demolish everything
that has been approved for demo. This
bill, if passed, would not help the residents of Seth, it would condemn them to
staying as the units continue to get worse.
These
are the kind of decisions that public housing authority executive directors
have had to make across the country.
Public
housing developments are not all alike and their preservation needs are
different. Some need only modest repairs
along with reliable future funding to be preserved, while others require
substantial, up-front capital investment and deep, long-term subsidies. Still
other developments may not be viable in their current form even with large
investments, in which case alternative affordable housing solutions need to be
implemented. The most recent comprehensive study of public housing capital
needs found a backlog of up to $32 billion. It also found that additional
public housing capital needs accrue at a rate of more than $2 billion per
year. Yet, the tools available to us,
annual appropriations for the public housing capital fund have been barely
above that. Further, the public housing operating fund has been seriously
under-funded for a number of years, resulting in the deferral of maintenance
work that adds to the level of capital backlog needs.
Despite
these funding shortfalls and other challenges, there have been significant
financial and legal innovations in the redevelopment of public housing in
recent years, typically involving techniques for mixing public housing funds with
private financing. For example, for more
than a decade PHAs have been using the low-income housing tax credit to
leverage private equity for public housing redevelopment projects. PHAs also have experience using
bond-financing, forming and participating in private ownership entities through
their affiliates with investors, and project-basing voucher subsidies to
develop affordable units. HOPE VI
projects now typically leverage tax credits, while other public housing
redevelopment projects have been undertaken without HOPE VI, but with tax
credits and other resources.
It is part of the reason why two years
ago, CLPHA convened a group
of stakeholders to forge a new paradigm for the preservation of public
housing. The Summit on The Future of Public Housing
developed a policy framework committed to the goals of preserving, improving,
and expanding the availability of housing opportunities for low-income
individuals and families. While the two
legislative drafts before us, at first glance, do not appear to have much in
common, in the larger context of public housing preservation they are two sides
of a coin. One side focuses on the
tenants who reside in public housing, the other focuses on the rehabilitation
and recapitalization of public housing.
Several of the ideas and proposals which came out of the summit are
reflected in these legislative drafts, and many of them are proposals which
CLPHA has long advocated, including a commitment to preservation; serving
low-income residents; greening and promoting energy efficiencies in public
housing; leveraging other financing resources, including tax credits for
modernization, rehabilitation and expansion of public housing; and serving the
elderly and other vulnerable populations.
In regards to the specifics of the
legislative drafts:
Public
Housing One-for-One Replacement and Tenant Protection Act of 2010
One-for-One
Replacement
In
1996, Congress repealed the one-for-one replacement housing requirement because
it prevented PHAs from making progress on alleviating conditions in the
nation’s most severely distressed and functionally obsolete public housing, and
which could not be built today under fair housing laws and other
requirements. This bill would
essentially reauthorize that requirement.
In Newark
my concern has been for families not units.
The places authorized for demolition are often experiencing high rates
of vacancies. These are the residents
that I want to promise something better.
The loss of the hard unit concerns me less, as the HCVP units are
serving more and new families through the demo/dispo relocation process.
CLPHA supports the preservation and
expansion of the supply of affordable housing and the use of both hard units
and vouchers in providing replacement housing.
Furthermore, CLPHA supports utilizing hard units and vouchers in the
goal of one-for-one replacement as long as there are sufficient funds to
provide one-for-one replacement. While
the legislation would require one-for-one for all units demolished or disposed
of, it does not authorize any additional appropriations to meet that
requirement. Additionally, the bill
reaches back and grandfathers in units demolished or disposed of after January
1, 2005. CLPHA recommends that only
units going forward as of the date of enactment of the legislation should be
affected and funds should be authorized for the program.
Also, the bill would impose certain
public housing rules and requirements on units that are not public
housing. We believe this provision will
have an adverse effect on the one-for-one replacement objective and will have
the unintended consequence of reducing the availability of affordable housing
opportunities. Nonpublic housing owners,
who will be reluctant to accept more restrictive and burdensome public housing
requirements on their units, may simply opt out of the voucher program.
Location
of Replacement Units
The
bill’s requirement that at least one-third of all replacement units for
demolished public housing must be constructed on the original public housing
location is too restrictive and may impose unworkable requirements on
redevelopment efforts. Also, where
replacement units are located should be determined by local market conditions
rather than the bill’s arbitrary proportion of one-third. Developers constructing replacement housing
units need to have the flexibility to structure phases of their projects taking
into account the availability of building sites, financing, types
of units (e.g., the mix is often different in units designated for the elderly),
and other local market factors.
If
an original site is highly concentrated by poverty and race, requiring PHAs to
provide at least one-third replacement housing on the same site, in the same
neighborhood, or even in an adjacent neighborhood may not afford the PHA enough
flexibility to create the public-private partnership with its attendant
mixed-financing component which so many of the redevelopment deals today
require.
Also,
the bill’s requirement that replacement housing units be provided in areas
having a low concentration of poverty within the jurisdiction of the public
housing authority—while good public policy—may be difficult to achieve in those
areas where the availability of land, land costs, neighborhood opposition and
other extenuating factors may be difficult to overcome. The ancillary conditions of furthering the
“economic and educational opportunities for residents” on top of the location
requirements simply adds another layer of difficulty.
In
Newark there is
not one census tract that would qualify as an area with a low concentration of
poverty. The lowest poverty tract
contains the Airport. Within my
jurisdiction deconcentration means going from a tract with 50% poverty to one
with 25% poverty. I want to change a
neighborhood from one of desperate poverty to one that is thriving. We cannot just write these neighborhoods off
as not deserving of federal investment.
Maintaining
Rights of Public Housing Residents
The
section on “Other Requirements” in the bill would apply several current public
housing only requirements, including the requirements of CFR 24 Part 964 and
the public housing grievance laws, to any replacement unit provided for
temporary relocation. This major shift in policy would be overly burdensome for
private owners and would provide new protections for temporary relocated
residents that are not afforded to other residents – including other HCV
recipients - in their properties.
Part
964 has a number of protections for residents in each property including residents’
right to organize and “be involved and participate in the overall policy
development and direction of public housing operation” that are not currently
provided to housing choice voucher recipients. Private owners are unlikely to
continue participation in the program if their operations will be subject to
consultation with the resident council. Moreover, because private owners are
not currently subject to these requirements they do not have the staff
expertise to easily accommodate these new requirements. The change will be
extremely costly, burdensome and time consuming for them to alter their
operations resulting in increased rents and ultimately in increased program
costs.
Section
6(k) of the U.S. Housing Act of 1937 enumerates the various grievance rights of
tenants in public housing. These include the right to a hearing prior to
eviction, right to provide witnesses at a hearing, and other due process rights
in eviction proceedings that are not currently provided to housing choice
voucher recipients. The primary benefit of the voucher program is resident
mobility and choice. However, with this
choice, voucher recipients also must adhere to more restrictive lease terms
than are found in public housing. Extending the provisions of Section
6(K) to relocated voucher recipients would remove a private owners’ ability to
independently manage a property, provide separate sets of rules for different
residents, and again, would likely cause many owners to exit the voucher
program altogether.
Right
to Return
CLPHA
believes that any public housing resident who was lease compliant before, and
during demolition and/or disposition of their public housing unit during
temporary relocation, should be entitled to a replacement housing unit.
Also,
the right to return also needs to be better defined. The tenant should have to indicate if they
want to return by a date certain. The
current language is vague enough that ten years could go by before the family
could decide they want to return even though the property is fully occupied.
Tenant
Notification
Whereas
the bill requires a one-for-one replacement for units, it also would impose a
two-for-one relocation requirement for tenants.
The bill states that if temporary, off-site relocation is necessary,
each displaced family must be offered comparable housing “which shall include
at least one unit located in an area of low poverty and one unit located within
the neighborhood of the original public housing site”. This has the effect of requiring two units to
be available for each displaced family.
This is an onerous and unprecedented use of scarce housing resources in
a time of a shrinking affordable housing supply. Again, it would not be possible to meet this
threshold in my city.
Also,
the time allotted for a tenant provided with tenant-based assistance to search
for a dwelling unit due to relocation is not less than 150 days (5 months) with
the option for an undefined time extension.
Given critical timelines to meet contractual obligations in demolition
and redevelopment activities, CLPHA believes 150 days is a prolonged time and
recommends the period be shortened to 120 days (4 months) with no more than two
30 day extensions, for a total 60 day extension.
There
also needs to be clarity that while buildings cannot be demolished with tenants
in them, however demolition should be allowed at other buildings within the
project when those buildings are unoccupied.
One of our sites is over 3 acres and it makes sense to begin demolition
work at one end, even with residents at the other end.
Public Housing
Preservation and Rehabilitation Act of 2010
Leveraging
of Other Assistance
Capital
Fund Loan Guarantees – This provision represents a new tool that is
unprecedented and will be critical to achieving the goals set out in the Future
of Public Housing Framework. CLPHA has
long supported and promoted this approach in making capital available to PHAs
for the preservation, rehabilitation, development and expansion of affordable
housing.
The federal loan guarantee created by
this section authorizes the rehabilitation of public housing using the capital
fund as security and for repayment.
While the Capital Fund Financing Program (CFFP) can already be used for
rehabilitation and development projects, a federal loan guarantee will lift the
capital fund pledge to a whole new level.
Over the years, the capital fund has experienced declining
appropriations while demand for the program has grown. Recently, Standard & Poor's Ratings Services assessed the long-term
credit implications of the CFFP appropriations risk following the
Administration’s FY2011 budget proposal and determined that federal budget
deficits may increase the appropriations risk to the CFFP in future years.
CLPHA recommends broadening the security
and repayment sources beyond the capital fund by extending the pledged amounts
to include the Public Housing Operating Fund and Section 8 voucher funds. This would have the effect of minimizing
pressure on the Capital Fund while expanding the potential for leveraging
additional funds. A simple modification
to the bill language under “(D) Use of Funds” by adding “, 9(e), or 8(o)” after
“section 9(d)” would accomplish this action.
CLPHA commends the authors of the bill
for their explicit wording in the loan guarantee. The particularly strong and unequivocal
language, which provides that the “full faith and credit of the United States
is pledged to the payment of all guarantees…and the validity of such guarantee
so made shall be incontestable in the hands of a holder of the guaranteed
obligations”. Congress has not put the
full faith and credit of the United
States behind public housing debt
obligations since passage of the U.S. Housing Act of 1937. This federal guarantee should give strong
reassurance to lenders, bondholders and other stakeholders in making funds
available for public housing preservation.
Energy
Performance Contracting Financing - CLPHA is pleased the bill enables a
housing authority to receive the full financial benefit for reductions in utilities
costs resulting from energy conservation improvements. This provision provides a real incentive for
housing authorities to reduce energy consumption while also increasing the
likelihood that there will be long-term program savings. Furthermore, the ability to access upfront
capital without the necessity of a third party guarantee will reduce the costs
of energy conservation measures and encourage lenders to loan directly to
housing authorities.
This is one that the NHA is currently
taking advantage of and believes that these changes will enable us to do even
more. We have really changed our mindset
about green building and green practices.
Everything we build now we are looking to make as energy efficient as
possible. We are installing renewable
energy sources onsite to lessen the cost to the development and the
residents. New Jersey has very generous state
incentives that allow us to put solar power in many developments that may not
make financial sense in other states.
These types of incentives could be federalized and made easier to
monetize for a non-profit public entity such as a housing authority. Right now, we have to go through some
gyrations to get the benefit for the incentive program. It is similar to the hoops we have to jump through
to see the value of the tax-credit program.
When you are a non-profit and don’t generate large taxes that need to be
offset, you have to go to a market to sell the credits. The market for the solar credits is still not
mature and changes could be made to strengthen or expand the market – or allow
us to bypass the market altogether by converting the SRECs (Solar Renewable
Energy Credits) to grants.
Requirements
for Properties with Housing Tax Credits – This provision allows public
housing and converted units using tax credits the option to retain ownership
and to maintain an active management role. We
agree with the importance of maintaining the role of PHAs and ensure the
long-term affordability of housing assisted by this provision.
Grants
in Lieu of Housing Tax Credits
This provision authorizes a housing tax credit exchange for
rehabilitation of qualified public housing units. CLPHA has previously recommended making tax
credit equity available to public housing on an expedited basis and we strongly
support this provision.
Capital
Fund Flexibility
CLPHA has long advocated the repeal of
the so-called “Faircloth Amendment” which prohibited the development of new
public housing in many communities.
Given the scarcity of affordable housing in communities all across the
country, this repeal is long overdue. We
thank the authors for including this provision in the bill.
Grants
for Conversion of Public Housing Projects to Assisted Living Facilities
CLPHA is pleased the bill includes this
new grant authority which also includes an authorization for
appropriations. The language in the bill
conforms closely to that found in the original authorizing statute for the
federal elderly assisted housing program.
To be consistent with the assisted housing language and to provide
greater clarity, however, we recommend including the phrase, “which may be
provided by third parties” before the period at the end of the subsection (d)
Funding for Services. This would ensure
that licensed third party providers may provide services, particularly when a
State does not require licensure by a facility.
In closing, CLPHA would like to thank the
Subcommittee for holding this hearing and express our commitment to working
with Congress on these issues. We
believe that through cooperation and collaboration, we can be successful in
preserving, protecting and expanding affordable housing opportunities. Thank you for your consideration of our
remarks.
