The House Financial Services Subcommittee on Insurance, Housing and Community Opportunity met November 2, 2011 to discuss the Obama Administration’s proposed demonstration program, Rental Assistance Demonstration (RAD). The RAD proposal evolved out of the Obama Administration’s Transformation of Rental Assistance proposal and would help preserve public housing and projects subsidized by the HUD “orphan” programs (RAP, Rent Supp and Section 8 Moderate Rehab) by allowing Public Housing Authorities (PHAs) and owners to apply to convert to long term project-based rental assistance (either project-based section 8 vouchers or MAHRA type-project-based rental assistance). This would enable eligible properties to leverage private sector equity and debt to preserve and revitalize properties and make much needed capital improvements. Authorizing language has been passed in the Senate as part of the T-HUD appropriations legislation; however, it did not include funding or authorizing language for the HUD “orphan” programs. NH&RA’s Policy Leadership Committee has worked closely with HUD and the Congress to refine this proposal over the past two years and is advocating that the current legislative language be expanded to HUD’s original proposal, which included the HUD “orphan” programs in the demonstration.
Witnesses at the hearing included the Honorable Sandra B. Henriquez, Assistant Secretary, Public and Indian Housing, Department of Housing and Urban Development; Ismael Guerrero, Executive Director, Housing Authority, City and County of Denver; Steven C. Hydinger, Managing Director, BREC Development, LLC; and Charles Elsesser, Community Justice Project, Florida Legal Services.
Secretary Henriquez opened the hearing with her testimony that focused on how the current public housing system is broken and in great need of legislative action. “The U.S. has lost 150,000 publically owned homes due to demolition or disposition over the past 15 years, no sign that this trend will abate any time soon particularly in this economic environment” said Henriquez. The Rental Assistance Demonstration was created to invest in these properties by leveraging the work of both the private and public sector. The five key goals of the program revolve around creating longer term stability for public housing, leveraging private sector equity and debt, ensuring long-term affordability of public housing units, maintaining effective public ownership and creating resident choice mechanisms.
In addition to Ms. Henriquez’s testimony, Mr. Guerrero from the Denver Housing Authority agreed that the program’s best quality is the ability to leverage private sector equity and debt and stressed that PHAs would benefit most from a true conversion of public housing to Section 8 in order to avoid the type of program that multiplies rather than eliminates cumbersome rules and regulations. Steven Hydinger provided a private developer’s point of view that the RAD program is desirable because it mirrors many of the attributes of the Low-Income Housing Tax Credit (LIHTC) program but warns that project based Section 8 must be included in final proposal and longer term contracts are essential. In addition, Mr. Hydinger also contends that giving PHAs the discretion to be more creative in coming up with public housing financing solutions is desirable for private developers. However, Mr. Hydinger mentioned that a good fraction of the country’s current public housing stock is almost unsalvageable and suggested that PHAs must be open to working with private developers to fix these properties that are a drain on the communities they are supposed to serve. Lastly, Charles Elsesser provided testimony from the tenant’s and public housing community point of view in which he essentially agreed that the RAD proposal would provide adequate capital to make necessary improvements to public housing throughout the country.
Generally, members from both parties of the House Financial Services praised the program for it being a no-cost proposal and its resourcefulness in finding new sources of funding through the private sector. However, a few members of Congress raised questions and concerns to the proposal. Of note, Vice Chairman Hurt (R-VA) was concerned over what benchmarks HUD intends to use to measure success for the RAD program and whether the program will save taxpayer money. Congressman Clay (D-MO) raised issue over how the program intends to ensure that tenant’s rights are maintained and that neighborhood gentrification is prevented as much as possible. In addition, Congressmen Ellison (D-MN) and Cleaver (D-MO), who introduced the bill, shared some concerns over whether or not involving private sector equity and debt would privatize the nation’s public housing stock and in effect create a loss of public housing for those in most need.
Overall, members of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity expressed their approval of the Rental Assistance Demonstration proposal.
To view the entire webcast of the November 2 hearing, click here.
