TESTIMONY OF SECRETARY SAMUEL R. PIERCE, JR. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE: IT IS A PLEASURE TO APPEAR BEFORE YOU TO TESTIFY ON THE FISCAL 1986 BUDGET AND LEGISLATIVE PROPOSALS FOR THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. WHEN I BECAME SECRETARY OF HUD, I TOOK TO HEART PRESIDENT REAGAN'S CHARGE TO REDUCE THE SIZE AND COST OF GOVERNMENT WHILE CONTINUING TO HELP THE MOST NEEDY. TO BUILD A FUTURE OF HOPE FOR ALL THE AMERICAN PEOPLE, WE HAD TO HALT RUNAWAY INFLATION AND PROMOTE A STRONG AND LASTING ECONOMIC RECOVERY. THE ECONOMIC RECOVERY IS BOTH HISTORY AND CURRENT EVENTS. INFLATION THAT IN 1980 SEEMED STUCK AT DOUBLE DIGITS HAS BEEN REDUCED TO 3 AND 4 PERCENT THESE PAST THREE YEARS. THE STOCK MARKET THAT WAS ENTERING A RECESSION IS NOW SURGING TO RECORD HIGHS. THE HOUSING INDUSTRY, ONCE IN THE DEPTHS OF DESPAIR, IS BACK...HALE AND HEARTY. AND, I'M PROUD TO SAY, WE'RE HELPING TO HOUSE MORE NEEDY PEOPLE THAN EVER HAVE BEEN HOUSED BEFORE. THIS ADMINISTRATION IS DIRECTING OUR ASSISTANCE TO PEOPLE DOING THIS WHILE REDUCING THE NATION'S ASSISTED HOUSING DEBT. THE NOT BRICKS AND MORTAR. WE'RE CHART DRAMATICALLY PORTRAYS THIS FACT. - IN 1980, THE TOTAL ASSISTED HOUSING DEBT WAS BEING FORECAST AT $250 BILLION BY 1982 A QUARTER OF A TRILLION DOLLARS. IT HAD INCREASED 30 PERCENT BETWEEN 1977 AND 1980. CLEARLY, WE HAD TO REDIRECT THE NATION'S HOUSING POLICY TO SAVE US FROM AN ASSISTED HOUSING DEBT OF CATASTROPHIC PROPORTIONS, WHILE CONTINUING TO HELP THE NEEDY. AS A FIRST STEP, WE SWITCHED EMPHASIS FROM NEW CONSTRUCTION PROGRAMS TO THOSE WHICH UTILIZE EXISTING HOUSING STOCK. AS PART OF THAT EFFORT, WE DEVELOPED THE RENTAL REHABILITATION INITIATIVE AND THE VOUCHER PROGRAM WHICH PROVIDES HOUSING ASSISTANCE TO ELIGIBLE FAMILIES AT ABOUT ONE-THIRD THE COST OF NEW CONSTRUCTION. WITH THESE ACTIONS AND OTHERS, WE'VE BEGUN TO REDUCE THE ASSISTED HOUSING DEBT, AS THE CHART INDICATES. AT THE SAME TIME, WE'RE ASSISTING MORE FAMILIES THAN EVER. IN FISCAL 1981, HUD WAS ASSISTING 3.2 MILLION FAMILIES WITH HOUSING; IN 1986 THAT NUMBER WILL HAVE RISEN TO 4.2 MILLION...AN INCREASE OF APPROXIMATELY A MILLION FAMILIES SINCE I ARRIVED AT HUD. I'M PROUD OF THAT INCREASE. AND, I'M PROUD OF THE REDUCTION WE'VE ACHIEVED...AND CONTINUE TO ACHIEVE...IN THE ASSISTED HOUSING DEBT. I INTEND TO MAINTAIN AND IMPROVE UPON OUR PROGRESS ON BOTH THESE FRONTS. BUT PRESENT CONDITIONS DEMAND THAT WE DO EVEN MORE. TODAY, AS PRESIDENT REAGAN SAID IN HIS SECOND INAUGURAL ADDRESS: "WE HAVE COME TO A TURNING POINT, A MOMENT FOR HARD DECISIONS." IN MAKING THOSE DECISIONS, WE BENEFIT BY THE GROUNDWORK LAID OVER THE LAST FOUR YEARS. BY 1981, THE SECTION 8 NEW CONSTRUCTION PROGRAM HAD PRODUCED A CREAT NUMBER OF HOUSING UNITS. BUT, IT WAS EXORBITANTLY EXPENSIVE AND IT TOOK YEARS BEFORE ACTUALLY HOUSING ANYONE. I RECOMMENDED THAT WE TERMINATE THE PROGRAM, AND THE CONGRESS AGREED. OUR PROPOSALS OF THE EARLY 80'S SOUGHT NEW MEANS TO ADDRESS THE LOW-INCOME HOUSING NEEDS OF THIS COUNTRY BOTH THOUGHTFULLY AND SENSIBLY. WITH VOUCHERS, WE HAVE AN ASSISTED HOUSING PROGRAM THAT UTILIZES EXISTING HOUSING STOCK INSTEAD OF FOCUSING ON NEW CONSTRUCTION. WE'LL SUBSIDIZE A FAMILY INSTEAD OF A BUILDER. WE'LL OFFER FREEDOM OF CHOICE AND A SHOPPER'S INCENTIVE FOR A FAMILY, INSTEAD OF FORCING IT TO LIVE IN A FEDERAL PROJECT. AND WE'LL SHELTER THAT FAMILY TODAY, NOT THREE-TO-FOUR YEARS FROM NOW ...THE AVERAGE TIME IT TOOK TO HOUSE A FAMILY UNDER SECTION 8 NEW CONSTRUCTION. THE AMERICAN PEOPLE HAVE A COMMITMENT TO PROVIDE DECENT, SAFE AND AFFORDABLE HOUSING FOR THOSE WHO ARE NEEDY. WITH THESE CHANGES AND NEW PROGRAMS, WE RENEW TAXPAYER CONFIDENCE SO WE CAN CARRY THAT COMMITMENT INTO THE FUTURE. MR. CHAIRMAN, WE CAN HELP ATTACK FEDERAL DEFICITS THROUGH A TEMPORARY PAUSE IN FUNDING NEW ASSISTED HOUSING UNITS. WE PROPOSE A TWO-YEAR MORATORIUM ON INCREMENTAL UNITS, KNOWING THAT WE HAVE A SUBSTANTIAL AMOUNT IN OUR PIPELINE WHICH WILL ADD 207,000 NEW FAMILIES TO THOSE WE NOW ASSIST. WE ALSO KNOW THAT, WHEN FULL FUNDING RESUMES IN FISCAL 1988, OUR PROGRAMS WILL BE ADDING NEW FAMILIES...WHO'LL BE HOUSED MORE QUICKLY...BECAUSE OF THE VOUCHER. THOSE PROGRAMS WILL INCLUDE: O A PERMANENT VOUCHER PROGRAM, FOR WHICH AUTHORIZATION IN FISCAL 1986 IS SOUGHT; O SECTION 202 HOUSING FOR THE ELDERLY; AND O RENTAL REHABILITATION, A PAY-AS-YOU-GO OF ITS PROJECTS. O INDIAN HOUSING WE PROPOSE TERMINATING THE RENTAL HOUSING DEVELOPMENT GRANT PROGRAM, OR HODAG. THIS PROGRAM WAS CREATED BY THE CONGRESS AND ACCEPTED BY THE ADMINISTRATION WITH THE UNDERSTANDING THAT IT WOULD BE A ONE-TIME, TWO-YEAR PROGRAM. WE HAVE FOUND THAT THE HODAG PROGRAM IS AN EXPENSIVE WAY TO SUBSIDIZE LOWER INCOME HOUSING. WE ESTIMATE THAT, OVERALL, 60 PERCENT OF THE HODAG FUNDS ARE SUBSIDIZING MARKET RATE UNITS AND 40 PERCENT ARE SUBSIDIZING LOWER-INCOME UNITS. THE NET EFFECT IS A COST OF $76,000 TO PROVIDE A LOWER INCOME HODAG UNIT. IN ADDITION, THREE-QUARTERS OF THE HODAG PROJECTS INCLUDE TAX-EXEMPT FINANCING, INCREASING THE FEDERAL COST EVEN MORE. WE ALSO HAVE FOUND THAT THE PROGRAM IS NOT WELL TARGETTED TO NEED. OVER 40 PERCENT OF THE PROJECTS FUNDED THUS FAR ARE LOCATED IN CITIES WITH A RENTAL VACANCY RATE ABOVE THE NATIONAL MEDIAN OF 6.34 PERCENT, ACCOUNTING FOR 43 PERCENT OF THE HODAG FUNDS. RENTAL VACANCY RATES IN THESE CITIES WENT AS HIGH AS 12 PERCENT. WE'VE MADE SOME TOUGH DECISIONS FOR FISCAL 1986 IN OUR PUBLIC HOUSING PROGRAMS. BUT HERE AGAIN, OUR PROPOSALS REST ON A FOUNDATION OF LONG-TERM PLANNING OF MANAGEMENT REFORMS AND USE OF A SUBSTANTIAL FUNDING PIPELINE. WE PROPOSE $1 BILLION IN OPERATING SUBSIDIES FOR FISCAL 1986, WHICH REPRESENTS 100 PERCENT OF THE PERFORMANCE BASE FUNDING FORMULA. |