Subcommittee on Housing and Transportation

Hearing on "Affordable Housing Production and Working Families."

Mr. Chairman and members of the committee: Thank you for inviting me to share our ideas about the affordable housing needs of working families and possible solutions. As president of McAuley Institute, a women’s housing intermediary, I would like to address some special concerns of women working to support their families on small incomes. Mr. Chairman, I would also like to express my gratitude for the leadership you have shown as well as the dedication, knowledge and openness of your staff.

McAuley Institute, through technical assistance and financial resources, attempts to bring compassionate business acumen to the development of emerging, nonprofit housing development groups, most of them led by women working to improve conditions in their communities. Founded in 1983 by the Sisters of Mercy, McAuley is a faith-based institution headquartered in Silver Spring, Md. We have regional offices in Houston, Austin and Raleigh.

Overall, I believe two emphases are needed in federal policy. First, we need a large infusion of resources for production to meet the nation’s current affordable housing crisis. And second, we need to pay attention to the more nuanced housing needs of special populations like battered women and people who are homeless, those living with HIV/AIDS and those leaving welfare. Women and minorities make up a disproportionate share of these groups, and their plight is rooted in a history of racism, sexism and segregation. Federal leadership is warranted because the marketplace, state and local governments often lack either the will or the capacity to adequately respond.

In my testimony, I would like to make five specific recommendations and also highlight some of the successes that McAuley Institute has been a part of, through our nonprofit partners, at the grassroots level.

First, we believe that a trust fund would be the right choice to dedicate resources to expand our nation’s affordable housing infrastructure. We believe Congress should enact a national housing trust fund targeted to extremely low income people and sufficient to build, rehabilitate or preserve 1.5 million units over 10 years. We appreciate Sen. Kerry’s introduction of S. 1248 that would create such a trust fund.

Even on a scale of 150,000 units a year, it will take many years to assure a safe, decent affordable house for all. The shortage of units that are both affordable and available to extremely low income households (those with income less than 30 percent of the area median) is 5.3 million. In 1999, of the 4.9 million households HUD defines as having "worst case housing needs," slightly more than half were women or women-headed. 1.3 million were elderly households, including 62 percent women or women-headed; 1.8 million were households with children, 51.4 percent of them headed by women.

The social benefits of affordable housing opportunities are astounding. Jens Ludwig, a Brookings Institute fellow and Georgetown University professor, cited research at a conference last month indicating that the impact of housing vouchers on children’s reading tests was equivalent to that of reducing class size from 22 to 15.

Some object to a trust fund on the face of it, but this nation has long recognized the appropriateness of dedicating related revenues for such purposes as road building, airport operation and old age security. For affordable housing, we should look to the FHA and Ginnie Mae surpluses or the tax subsidies that now drive the over-production of McMansions and second and third homes. Assistant Secretary for Housing and FHA Commissioner John Weicher acknowledged in testimony before this subcommittee last month that these surplus receipts do indeed exist. Unless the excess not needed to guarantee FHA solvency is captured for another housing purpose, such as a trust fund for extremely low income households, these surpluses will continue to accumulate in the general treasury and be expended for non-housing purposes. FHA borrowers last year received a share of the surplus through reduced premiums. In addition, since they have already benefited from a federal program that enabled them to become homeowners, it is only fitting that the surplus, largely attributable to a strong economy, now be "recycled" to reach the millions of needy families who receive no federal housing assistance.

Assuring the Community’s Voice in Homeless Planning

My second recommendation, Mr. Chairman, is that all housing programs require transparent community planning processes such as one employed by continuum of care programs. In your draft legislation re-authorizing the McKinney-Vento homeless programs, we strongly support your position in favor of the continuum of care process and your proposal for new funding for permanent housing for the chronically disabled and homeless families. We strongly believe that decisions made in collaboration among public officials, community stakeholders and expert nonprofit providers are preferable to the vagaries of a block grant program.

About one percent of the U.S. population is likely to experience homelessness at least once during a year, according to a 2000 Urban Institute study. Persons in families, usually mothers and children, make up one-third of those homeless on any given night. We understand that your bill will propose an increased authorization level and a permanent national set-aside for permanent housing for the chronically disabled and homeless families. This is important because it is unbelievable that any child ever spend one night without a roof over her head. Families, mostly mothers and children, are the fastest growing segment of the homeless population, and affordable, permanent housing is ultimately what they need. At the same time, an emphasis on permanent housing for the chronically disabled is important because, over the long-term, those most susceptible to recurring bouts of homelessness are disabled persons who need ongoing medical and other supportive services.

Mr. Chairman, I know you have been a visitor at McAuley Village in Providence, R.I., whose executive director, Sr. Dolores Crowley, served on our board of directors at McAuley Institute. McAuley Village is an excellent example of how comprehensive, individualized services, along with safety and security, and help young single parents achieve self-sufficiency. With an average residency of 21 months, 60 percent of McAuley Village’s residents have found jobs in such fields as engineering, nursing, banking and cosmetology. Some have started their own businesses and others have bought their own homes.

About half of homeless women are fleeing domestic violence, bringing me to our third recommendation. Women fleeing a batterer or sexual predator need not only a place to live, but a sanctuary for protection. To meet their particular needs for security, privacy and personal support, the Senate should act on the VAWA housing assistance authorization, at $25 million, which recently passed the House as part of the Child Abuse Prevention and Treatment Act (H.R. 3839) and is now pending before the Senate Committee on Health, Education, Labor and Pensions. This provision, originally passed as part of VAWA 2000 but never funded, provides for support services and up to 12 months of cash assistance for transitional housing for domestic violence survivors in danger of becoming homeless.

To go a step further, the committee should consider drafting a companion bill to the Domestic Violence and Sexual Assault Victims’ Housing Act (H.R. 3752) introduced by Rep. Jan Schakowsky. This measure would authorize $50 million for housing, including construction, and appropriate services for battered women. This measure would provide a continuum between emergency shelter and independent living, either in the form of transitional housing production or financial assistance for security deposit, first month’s rent and transitional rent assistance. The legislation has bipartisan support. Women need both full funding of McKinney programs plus a new initiative to address the particular needs of all women escaping domestic violence.

Fourth, we believe Congress should act to make housing available as a support service for those who recently or soon will be expected to leave welfare. Although housing assistance can greatly increase the ability of families to become gainfully employed, only 30 percent of welfare recipients receive any form of housing subsidy. The Manpower Demonstration Research Center’s evaluation of the Minnesota Family Investment Program, found the greatest impact on employment and earnings to be among families that received housing assistance in addition to other TANF benefits and services. Their employment rates were 18 percentage points higher and quarterly earnings 25 percentage points higher.

Senator Kerry’s bill, S. 2116, the Welfare Reform and Housing Act (S.2116) would give flexibility to states to treated housing assistance as a work support, or "non-assistance" under TANF, in the same manner as child care and transportation assistance paid with TANF funds are now. In addition, S. 2116 would authorize a $50 million HHS-HUD demonstration of innovative "housing with services" programs for TANF recipients facing multiple employment barriers, including homelessness, unstable and precarious housing.

Iowa Department of Human Services data show that 52 percent of recent welfare leavers had insecure housing arrangements two years later. Of the leavers, 24 percent were unable to pay the rent or mortgage, 19 percent were doubled up and eight percent were homeless. Under such precarious circumstances, obtaining and keeping steady employment becomes extremely difficult. The demonstration program would address not only the housing situation but, through appropriate services, health and mental health and skill deficits facing some of those who remain on welfare.

An example of such a housing and services approach is provided by one group McAuley works with in Philadelphia. The Women's Community Revitalization Project (WCRP), builds housing and manages services for women who have numerous obstacles to self-sufficiency -- limited fluency in English, education deficits, lack of work experience, physical disability, the lack of constructive children’s activities, and traumas left from domestic violence and crime. (Domestic violence is a factor in the need for assistance by nearly half of all TANF cases.) In this eastern part of North Philadelphia, approximately 70 percent of residents receive public benefits and the remainder support their families on less than $16,000 a year.

WCRP, like some other nonprofit groups, does not take a developer’s fee. This allows the group to rent units for as little as $150 per month. Four years after becoming WCRP tenants, only 30 percent of the women remain on public assistance. Such success comes from services tailored to each individual. Many of the social, education and employment services already exist in the community, but others like child care are provided in conjunction with the housing and case management. Frequently, WCRP staff are called on to assist in crises arising from illness, domestic violence, loss of employment or economic support, child abuse, suicide attempts, and conflicts between tenants. The case manager also helps resolve potential lease violations before they occur. As a result, the program has experienced very low eviction rates. WCRP encourages tenants to join the WCRP board, advisory committee and other committees that play a role in management.

WCRP’s model is similar to a variety of approaches that could be tested and evaluated as part of the demonstration authorized in S. 2116. The proposal would also allow up to ten percent of funds for testing approaches that would promote housing stability, employment retention and responsible parenthood among non-custodial parents.

While such a demonstration and treatment of housing as a work support are issues that can be addressed under welfare reform reauthorization, there are changes in housing programs that this committee should consider to facilitate the movement of TANF recipients to economic independence:

McAuley’s final recommendation is that Congress recognize the unique ability of nonprofits to develop affordable housing by encouraging the participation of nonprofit developers in any housing production legislation. Nonprofits could become even more productive and efficient if federal policy helped streamline the financing process and eliminate duplicative paperwork.

While the private market and tax policy encourage private developers to build larger and more expensive units, nonprofits are dedicated to long-term affordability, often for the lowest income families in a community. One nonprofit McAuley has worked with, Bickerdike Redevelopment of Chicago, is virtually the only developer of affordable housing in the city’s changing West Town according to a recent study by the University of Illinois at Chicago. Long-term affordable housing is only 7.4 percent of the present stock of this once economically and ethnically diverse neighborhood not far from the Loop.

Another example of the growing sophistication of these groups is S.A.F.E. (Stop Abusive Family Environments) in southern West Virginia, which McAuley has worked with for at least six years, helping the staff and board on strategic planning, project development, resource development and, now, homeownership counseling. (Our assistance has been funded under a HUD CHDO TA contract.) S.A.F.E. began by renovating a former school building to create transitional housing for 31 domestic violence survivors and homeless women with children. Now, the organization has not only helped hundreds of women working to recover from trauma and support their families, but has grown to become the county’s largest housing developer and, after the hospital, its largest employer.

S.A.F.E. has become a certified Community Housing Development Organization (CHDO) under the HOME Partnership Investment Act. Having built both homeownership and rental units, S.A.F.E. and a partner have created a low-downpayment mortgage product that will foster homeownership in a county whose median income is only $19,000.

Recently, the McDowell County Commissioner asked S.A.F.E., through resources S.A.F.E. would need to leverage, to provide for the relocation of 1,000 households to be impacted by an Army Corps of Engineers flood protection project. But just last week, we received a heart-breaking call from S.A.F.E’s director, Sharon Yates, who reported that the flood that struck her area the week before had taken 2,000 homes in addition to the five lives known lost. Suddenly, the looming housing shortage units has tripled to 3,000. Meanwhile, one of the many public and private partners S.A.F.E. has worked with, HUD’s Rural Housing Economic Development (RHED) program, stands to loose its funding, $25 million in fiscal 2003.

Funding must be protected for programs on which nonprofits like this depend to do their work – programs like the HOME Investment Partnerships, CHDO TA, the Community Development Financial Institutions fund, (CDFI), and USDA housing programs. Like RHED, most of these are cut or provided no increase in the administration’s budget request for fiscal 2003. The budget request would zero out RHED. The request for CDFI is $68 million, or 15 percent less than FY 02 and 42 percent less than FY 01. The request for the USDA Section 515 rural rental production program is $60 million, or 47 percent below the current $114 million. HOME would remain at the same level, but the administration would continue to cut the amount for technical assistance to nonprofit developers. HUD offered no funding for CHDO TA in its recent Super NOFA. The line item it comes from (for technical assistance and management information systems) has fallen from $22 million in FY 01 to $12 million requested for next year.

The nonprofit sector in housing and community development started to blossom only after 1987 passage of the National Affordable Housing Act which established and legitimized CHDOs. HOME-funded technical assistance has helped nonprofits become more sophisticated. The 15 percent HOME set-aside for CHDOs helped open the eyes of state and local officials to the effectiveness of nonprofits. In 1986, the year prior to HOME’s enactment, Low Income Housing Tax Credit was adopted and made a significant source of funds available to nonprofit developers.

In the past 15 years, there has been a tremendous growth in the number of CHDOs and CDFIs. Nonprofits have produced over 550,000 units, or one-third of the subsidized housing stock according to the National Congress of Community Economic Development. Nonprofits have succeeded, where others have not tried, in getting prices down so that units are affordable at less than 50 percent of median income. Units such as WCRP’s rent for as little as $150 per month. We also know from the GAO and elsewhere that nonprofits provide a quality product tailored to the particular needs of poor populations, including disabled and elderly persons and large families. Often this work is done under challenging environmental and political circumstances.

Because we are charitable, tax exempt organizations, nonprofit intermediaries and developers have been able to bring billions of dollars from an array of sources to the task of affordable housing. Without nonprofits, these charitable contributions from foundations, community institutions and businesses would not be available for housing. The nation’s socially conscious investors would find other uses for the funds they put now into affordable housing. Nonprofit housing developers also have used the Community Reinvestment Act, Home Mortgage Disclosure Act, and Fair Housing laws to hold financial institutions accountable for serving and investing equitably in low-income and minority areas.

In addition, community-based nonprofits have learned to collaborate with institutional partners like hospitals and universities to develop housing and link it to human services and employment. These partnerships have resulted in larger-scale development than community organizations would be able to produce on their own.

Nonprofit organizations are maintainers as well as builders of affordable housing. According to NCCED, they manage 59 percent of the housing they produce. Because they are mission-driven, this stock is more likely to be maintained in sound condition and kept affordable for the long term. Nonprofit housing organizations also tend to provide a range of services, including health, recreation, social services and crime prevention. We found this to be particularly so among women-led community development organizations in our 1999 study, Women as Catalysts for Social Change. Nonprofit organizations, particularly those led by women, emphasize community planning and organizing to strengthen residents’ influence with government and private institutions. Nonprofits help empower residents to advocate for the benefit of the community.

Besides drawing capital into poor areas for housing and economic development, nonprofits like S.A.F.E. not only incubate small businesses but become significant employers themselves, all the time helping to develop skills and careers for community residents. Nonprofits have become an engine of social and economic change in areas the private sector has written off. S.A.F.E. has brought $2 million in investment into a county that, once the richest in West Virginia, is now the fifth poorest in the nation.

We need more CHDOs nationally, particularly in the many areas where none now exist. One unofficial estimate is that only 20 percent of communities which could use community development organizations have them. Many of these places are outside the largest urban centers. Many are in rural areas and small cities and towns, especially in the South. Often, these are places where there is little interest by the private or public sectors in building affordable housing or supporting community development. The 15 percent set-aside for CHDOs in the HOME program will continue to be an important means of getting federal support to new organizations in such areas.

In our experience, great potential arises daily out of faith communities, neighborhood organizations and even individuals who become inspired to do something for their neighborhoods. At McAuley, we do not have the staff to meet all the requests we get for technical assistance from people like this who want to start a new housing nonprofit. At times requests have outsized our capacity by a factor of seven to one.

Nonprofits encourage human ingenuity as people in communities struggle to solve real problems with very little financial capital. In places like San Juan, Texas, Proyecto Azteca has been trying to meet and improve deplorable housing conditions for Mexican immigrants, mostly farm workers, who earn $4,500 to $13,500 a year. In 1992, McAuley made Proyecto its first loan from our CDFI-supported loan fund and we have continued to provide, pass-through grants and hands-on CHDO TA for project, organizational and resource development. Since 1992, Proyecto has supervised the construction of over 160 self-help homes by the people who eventually purchased them. Production has grown from five to over 35 houses per year.

Recently, the organization has experimented with a new housing model known as "cascarones," or shell houses. The strategy is consistent with the self-help philosophy and a culture in which people are accustomed to buying only as much of a product that they can afford at the time. At $10,000 per unit, the cascerones are affordable to low-income families who then may finish them according to their needs and financial ability. Proyecto’s goal is to offer houses that even the lowest income colonia residents can afford. Like S.A.F.E., Proyecto has developed an affordable mortgage product with another housing organization and hopes to become a CDFI itself.

The cascarones strategy also helps Proyecto stretch its resources further in the face vast housing needs along the border, including the need to install water and sewer facilities, roads and drainage. As a CHDO, Proyecto has depended on HOME and USDA funds. For Proyecto, one difficulty with HOME is that funds may be used to buy land but not buy down leased property. Most of their clients own the structures on land leased from landlords.

In summary, Mr. Chairman, we hope that America’s low-income working families will see the fruits of the spotlight that this committee, the Millennial Housing Commission and others have thrown on our frayed affordable housing infrastructure. A dedicated source for investment in large-scale production will be critical to repair the gap. Nonprofit developers are ready and able to help as partners in this endeavor and, at the same time, to minister to the whole range of human frailties and obstacles that confront certain sub-groups of those who are inadequately housed.

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