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followed by more discussion about the referendum in the british house of commons from this week's session of prime minister's questions. housing and urban and development secretary julian castro testified today about hud programs, including initiatives to make housing more affordable. congressman jeb hensarling heads the hearing and this is about three hours. >> the committee will come to order without objection. this hearing is entitled the future of housing in america oversight of the department of housing and urban development. i now recognize myself for three

minutes to give an opening statement. as we approach the 50th anniversary of the founding of the department one can't help but be struck by president johnson's boldness as he launched the great society with these words. "we have declared unconditional war on poverty. our objective is total victory." hud was established one year later in 1965 to combat poverty and making housing more affordable by all. yet by every official measure, poverty and its consequences is as bad as 50 years ago. poverty rate today is essentially unchanged from when hud was founded. millions of more americans fall below the poverty mark including an unbelievable one out of five children. this is shameful. hud says its mission is to build quality affordable homes for all and yet according to inflation figures, the median price of new homes as doubled and median

rents have gone up by more than one-third. in other words, it's not just the poor who find the cost of housing beyond their means it's almost everyone. this is unacceptable. to make matters worse to achieve this unenviable record, hud is asking for a 9% budget increase. 1.6 trillion is more than $13,000 for every household in america, equivalent to the cost of feeding a family of four for an entire year. meanwhile, one of our greatest threats is namely the national debt clock. given the obama economy for the last six years, it's an open question whether housing vouchers and hud's mainstay is a long-term solution or simply creating a permanent underclass. for whatever good hud does it

clearly has not won the war on poverty. economic growth and equal opportunity can do that. in other words, the greatest housing program in america remains a good career path and a growing economy. not a hud program. if we truly care about the least of these among us, we can no longer measure success by the number of dollars appropriated to hud. that should be obvious. instead, success must be measured in the number of our fellow citizens who rise from lives of poverty and dependency to lives of hope self-sufficiency and pride. that's true success. it's time to bring a new focus and new ideas on how to best help the poor in our society. on this purpose which is a moral purpose, there should be no encouraged to hear our witness, secretary castro state that he believes in quote, evidence-based management style. directed to the goal of, quote giving every person new opportunities to thrive.

to give these opportunities, again, it is time to think anew not to add 9% to programs that have failed again in the words of president johnson to quote not only relieve these symptoms of poverty but to cure it and, above all, prevent it. i now yield three minutes to the ranking member for an opening statement. >> thank you, mr. chairman and welcome back secretary castro. today we gather to discuss the future of housing in america. but frankly if left to my republican colleagues that future looks very bleak for the population. mr. secretary, hud remains a critical part of our nation's social safety net. it is essential to ensure that families have a stable roof over their heads. but as we will see here today, my colleagues have no interest in strengthening our nation

national housing system. their priorities, that is on the other side of the aisle are clearly reflected in the funding bill which drives this agency down to historic lows undercutting programs which helped families reach housing stability. hud provides critical rental and homeless assistance for our country's most vulnerable populations, makes important investments in local community development and affordable housing initiatives and helps millions of families achieve the american dream of home ownership. all while ensuring fairness for historically disadvantaged communities, safe, decent and affordable housing is critical to ensuring that our young people are helping and successful. children who lack stable housing often fall behind. today hud is more important than ever in the wake of the foreclosure crisis. our nation is facing a

significant affordable rental housing shortage, although private capital has an important role to play on this front. it cannot be leveraged without reliable federal funding. to truly address the acute need for affordable rental housing and the epidemic of homelessness, it is absolutely critical that we fully fund and expand the housing and homeless assistance programs that have been so successful at hud. this year marks the 50th anniversary of the establishment of hud. and as i think about the next 50 years of housing in america, i believe that if we are truly serious about ending poverty and uplifting all communities we must reinvest in hud. mr. secretary i believe that the same principles also underline your vision for the future of housing in america and i look forward to hearing your testimony today. thank you and i yield back the balance of my time.

>> the chair now recognizes the chairman of housing and insurance subcommittee for two minutes. >> thank you, mr. chairman. welcome, mr. secretary. good to see you again. glad you're with us today. mr. secretary, i want to thank you for traveling to our city a few weeks ago to meet with myself and industry regulateors. i think the long-time executive director of the public housing authority put it best when he described the current state of play when he said the funding situation isn't changing and that you, mr. secretary, you take the initiative to introduce unnecessary burdens so people can do their jobs with the resources that they have been given. i visited sites run by two different public housing authorities. this last week, mr. cleaver and i held a roundtable with

advocates advocates to discuss the challenges. when it comes to low-income housing, the status quo is not acceptable. anyone who says there isn't a need for reform at hud isn't listening to the advocates or residence of public houses. you've been on the job for nearly a year now and the most significant action you've taken at this point seems to be a cut of one-quarter of revenue and as i stressed with your staff earlier this week when we met, i believe that continues to jeopardize homeowners and taxpayers. i have yet to see the changes necessary to build a stronger housing system for the american people. i know you and i have some discussions and i look forward to that as the committee continues to go on. again, i welcome and look forward to your testimony and talking with you shortly. thank you. i yield back mr. chairman. >> gentleman yields back the remainder of his time. the chair recognizes another gentleman from missouri mr.

cleaver, the ranking member. >> thank you mr. chairman and ranking member waters and mr. secretary, good morning. the secretary visited the fifth district of missouri and visited the other side of our state with mr. luetkemeyer came to the better part of the state and spent time in kansas city. and so we're here today with the hearing entitled "the future of housing in america." i think it's always important to look to the future and hopefully this hearing will deal with the future more than the past or otherwise we are like somebody trying to drive a car looking through a rear-view mirror. i think we've got to go to the future, figure out the things that we can do. that would be important. but if we look at the past i

think it's important for us to think about the fact that when the economy teetered on the brink of catalysmic collapse, home sales ground to a holt and prices skyrocketed. our economy has slowly improved. the bureau of labor statics announced that the economy added 280,000 new jobs and the 63rd consecutive month of an increase in housing. the national association of realtors stating that sales of existing homes including single family homes, town homes and kond men yes, ma'ams, roez rose from 6.1% in 2013.

there are things that we can do better but i am very pleased, mr. secretary, that the department of hud is doing a lot of things well. i yield back mr. chairman. >> the time of the gentleman expires. at this time, it is my pleasure to welcome the honorable julian castro back to our committee. the secretary was sworn in as the 16th hud secretary on july 28th 2014. he's been introduced before. at the secretary's request, before i recognize him, to give an oral summary of his written testimony, the secretary has asked to be yielded a minute in order to offer a statement of honor on behalf of a hud colleague who passed away this week. so for that purpose, mr. secretary, you are recognized at this time. >> thank you very much, chairman

hensarling to representative waters and for members of the committee. thank you for giving me time to talk about one of our hud family that passed away earlier this week our chief financial officer, brad huther. brad really set the gold standard during his career for public service over a career that spanned three decades. he was a leader whose intellect allowed him to master complex subject matter policy and whose integrity made him a champion will depend on effective government the most. after a development career that included time at the u.s. department of commerce, then the world intellectual property organization brad came out of retirement in 2014 to join us at hud and although he was only with us for a short period he made large contributions to our department and to its work on

behalf of the american people. he was an administrator's administrator, a man of integrity, folks that all of us respected and had confidence in and his passing is an incredible loss for the field that he did so much over his career to contribute to. and chairman i just wanted to say that our thoughts and prayers at hud are with mr. hurter's family and wanted to acknowledge him in front of this committee because i know he had the opportunity to work with many of you as well. >> mr. secretary on behalf of the house financial services family we issue our sincere condolences to your colleague as part of the hud family. on the gentleman's passing. at this time mr. secretary i will recognize you for an oral summary of your written testimony.

please know that your written statement -- your complete written statement will be made part of the record. again, welcome. you are now recognized for your testimony. >> thank you again. mr. chairman we gather today at a very special moment for hud. this year marks our 50th anniversary. i think all of us would agree that much has changed since 1965 but one thing hasn't. the important role that quality housing and strong communities play in the lives of the american people. where a person lives often shapes how they live, the jobs available to them the education that their children receive and the overall quality of life that they enjoyed. that's why all of us at hud come to work every day knowing that we can make a difference for others and i'm proud to say that we're making an impact in a number of ways. for example, hud along with our federal and local partners continues to make progress towards achieving the goals of

president obama's opening doors initiative to prevent and end homelessness. from 2010 to 2014 we've seen a 21% drop in chronic homelessness and 33% drop in veteran homelessness. we'll keep working until we reach that day when everyone who needs housing can find it in our great nation. we continue to make important strides in helping families of all income levels secure a decent place to call home. one example is our innovative rental assistance demonstration which has helped communities leverage nearly $1 billion in private market constructions to reduce repairs to public housing and with an additional $5 billion coming down the pipeline, it's clear that we're going to help ensure that public housing is quality housing for years to come. we're also helping more responsible families achieve their dreams of home ownership through our federal housing administration. fha served as a stabilizing force during the housing crisis and has provided access to

underserved borrowers. we built on this legacy earlier this year by making responsible home ownership more affordable by lowering half a percentage point to encourage new borrowers to enter the market the next three years while trying to strengthen fha's financial health. hud is making a tremendous difference across the board and we all must continue to work to do more. in fact under hud's current budget, we can only serve one out of four who are eligible for our assistance. we're examining our own system to see how we can effectively serve those that we serve. the deputy secretary has spent her first six months leading an operational and management review that we call deep dives which many of these findings in

hand, we're now taking action to improve how we do business to build on what is working and to adjust what needs improvement. one area of focus is our procurement process which can take over nine months to complete from beginning to end. these delays are unacceptable, which is why we have embarked on an effort to transform this process and reduce procurement days by 30%. in addition, by october 1st we aim to resolve 10 out of the 11 material weaknesses out of the financial review. we're also using shared service providers to minimize our back office function so we can serve our nation's families and communities. at the end of the day we know our work isn't about program names or static tis sticks or charts. we can all agree on one ink thisthing, the work that hud does does give

folks the opportunity to thrive. working with our partners we have given this opportunity for those who wanted a fresh start, veterans who needed a little support after adjusting life to after service and older americans who deserve to live in comfort and dignity. to families looking to buy their first home, put down roots and build for themselves and their children. we continue to look for new ways to extend these opportunities to all americans. our partnership with congress is essential to this work and we look forward to working with you to secure funding that invests in proven housing initiatives to build a stronger and better hud and to help more families achieve their own dreams through the strength of our partnerships, the power of our policy ideas and our hard work, i'm confident that we can ensure that the doors of opportunity are available to americans today, tomorrow and for the next 50 years. thank you very much. >> thank you, mr. secretary.

the chair now yields himself five minutes for questions. mr. secretary, i'm sure you're well aware this year doesn't just mark the 50th anniversary of hud it also represents the 50th anniversary of the moynihan report, which many historians believe provided the impetus for the creation of hud in the first place. recently the urban institute published a report, the moynihan report revisited. are you familiar with the report or have you had an opportunity to view it? >> i have not had an opportunity to read the entire report. i did see some press about it, yes. >> mr. secretary in that report it states, after alluding to the alarming statistics of 50 years ago in the original report it goes on to say about those statics, quote, they have not only grown worse, they have grown worse not only for blacks but for whites.

and hispanics as well. so you weren't even board when hud was first created but after 50 years, $1.6 trillion, you requested 9% increase specifically what is the evidence, the statistical evidence that hud has made progress in achieving its original goal of eliminating poverty? >> yeah. thank you very much for that. let me give you two examples chairman hensarling. i see it differently. i do believe that we've made tremendous differences in the lives of americans because of the investments that hud has made. in fact, if we need proof of that, we can look at some of the question members who are here who grew up in public housing who have been very clear that the fact they grew up and had a chance to live in public housing is one of the reasons that they were able to achieve success.

>> mr. secretary, i'm aware of the stories and there are inspirations to us all but the statics that i see show that poverty is essentially unchanged after 50 years. let's start off with the statistical evidence. do you have statistical evidence that hud has actually played a role in eliminating poverty? >> yeah. i'll give you a couple of examples. one of the examples i mentioned is veteran homelessness. we have seen a 33% reduction in veteran homelessness and a larnlge part of that is because of hud vouchers that have been funded by this congress and the president has led that effort to effectively end veteran homelessness. another event -- >> over what time period, mr. secretary? >> we've seen a 33% reduction in veteran homelessness between 2010 and 2014. another example is our jobs plus initiative. there's been research done that has shown that individuals who went through jobs plus which

congress has also funded in the past and which we're requesting a significant increase because of it is effectiveness, we've seen that individuals who go through jobs plus tend to earn 14% more than individuals who do not. >> so why is the poverty level essentially unchanged in 50 years? >> mr. chairman, i believe that the answer to that is much larger than hud and its programs. >> let me ask you this, mr. secretary, in the limited time that i have. you and i have had private conversations and i've been encouraged by many things that you and i have spoken about. but i'm still somewhat unclear, at the end of the day, as secretary, how do you measure success at hud? how success measured? >> we measure success in several ways. you and i have continued to have conversations about how not just

measuring input but also measuring outcomes. one outcome is the fact that somebody has a roof over their head. that makes a tremendous difference in their lives. we've seen that, for instance, on the policy of housing first that tries to give veterans housing first so that they can stabilize themselves and then address other issues to get on the right track in life. however, i believe that we need to continue to measure when we invest in things like jobs plus, family self-sufficiency, the extent to which those individuals that go through those programs go on and get good job training and get a job to the extent to which they get a good education and they are able to -- >> mr. secretary, my time is winding down. let me ask you three specific questions. so in tracking people's right to rise, their ability to succeed number one currently, does hud have any way of tracking when an individual leaves the assistance of one pha and moves to another

does that have any way to track that? >> hud does track who is on the rolls. >> how do you track one pha that leaves to another? >> i believe we have an ability to track that, mr. chairman. >> okay. i would like you to share that with this committee. you have tracking when one leaves pha and becomes homeless? >> do we have any way of knowing when someone leaves the hud program whether they become homeless? >> i believe we have a way to track within a continuum of care how many individuals are homeless. as to whether that person -- >> if you would share that with this committee. is there any way that hud can track when people become self-sufficient and stay that way, say, three years five

years later? >> i would be glad to share with you the evidence that we have on that. >> sure. so you can track that? >> we have done some tracking of self-sufficiency, particularly on the family self-sufficiency program. >> i look forward to seeing that. i am way over my time. i yield to the ranking member for five minutes. >> thank you, mr. secretary. we are delighted that you are here with us this morning and we thank you for the way that you have come into your position and the leadership that you have provided thus far. and i am very pleased to hear from members on both sides of the aisle how generous you have been in visiting their communities and how you have been so very very helpful. i think i want to ask you a little bit about the rental housing and home ownership crisis that we have.

in the current rental housing crisis, rent has taken a larger share of income and families are facing greater challenges in saving for a down payment and being able to own a home this could have serious negative consequences for the housing market. just this week again the urban institute released a major study that predicts that the home ownership rate will continue to decline through 2030 and a major rental surge is upon us a surge that we're truly not prepared to meet. the home ownership rate will decrease for nearly all age groups and african-americans will fall further behind all racial groups in home ownership. what is your vision for how we solve this problem and how can hud, given the proper resources enable more families in this country the opportunity to own a home or affordably rent one? >> yeah. thank you very much for the question ranking member waters.

you're correct that what we see out there in the united states right now is an affordable housing rental crisis. a good example of this a good demonstration of this was in the latest worst-case housing needs assessment. what that found was 7.7 million low-income households who either are paying 50% or more of their income in rent are living in substandard housing or both of those things. and those families, by the way, are families not on any government assistance right now. another report was released last week by the low-income housing coalition that was fascinating in what it found. it said that in no decent size city in the united states could you afford a two-bedroom apartment, a decent two-bedroom apartment working minimum wage

full time. and that in the vast majority of communities, you can't even afford a one-bedroom apartment. so what is hud doing about that? that's why we have requested additional section 8 vouchers for instance because we lost 67,000 section 8 vouchers to a sequestration. it's why we seek to stretch our resources as far as we can through initiatives like r.a.d. it's why we believe in properly funding both capitally and funding for public housing and why we look to be innovative in communities with initiatives like choice, neighborhoods and proper zones. we want to take a wholistic approach to making opportunities more possible for americans and as i mentioned early on, right now we're only serving one out of every four people that qualify for hud services. so we see there is a tremendous need out there and we want to do

something about it. >> thank you very much. national housing trust fund we have a deficit of over 7 million affordable available unit and we all know that barney frank worked very hard. i worked with him to get the national housing trust fund. we don't seem to have much support from our friends on the opposite side of the aisle. we must find ways to fully capitalize the trust fund and defend against republican attacks to abolish the program including the latest attack in that house funding bill. can you speak to this issue quickly? identities.

it's the same message that we heard and what i heard again last week. regulations strangling their ability to deliver services. and let me just give you an example of some of the things that they were talking about here. i see an advocate here and i'll give you some of his ideas. number one recognize how you can use it for what you have more eefficiently. if the program works, expand it. regulation is costing too much money. figure out how to minimize it. raise the minimum rent. another one talked about flexibility. it's going to be very important and for them to be able to utilize their assets that they have and to be able to serve the people that they are supposed to. another comment they had is there is an inconsistency of regions of hud offices especially with regard to transportation issues.

it's hard for one agency, one area to look at another area and see that they are getting to do something that they are not and that's a problem within your agency. so i guess my question to you is, i know you're trying to look for some ways to improve services and so these are some suggestions that we have. are they something that you can work on with us? >> absolutely. let me say i also enjoyed the opportunity to visit jefferson city to hear from folks in the real estate industry and also some of the advocates, including pha representatives. it was very insightful to hear from the concerns of a smaller pha. and let me say unequivocally, as i mentioned that day to you personally, we're ready to work with you and with the entire committee and congress on some of these issues. i'll give you an example of that. one of the things mentioned is the administrative burden done related to income verification. why do we require income

verification every year for certain residents making the same income basically year after year? that is a good question because 56% of our households that are hud assisted are elderly or disabled. so we're supportive of a change to that that would only require income verification every three years for folks where 90% of their income is fixed income sources. and with regard to mtw and the other issues that you mentioned, we are working on that and in this budget, for instance we've proposed an increase of 15 mtw agencies that would have greater flexibility and we're willing to look at these other issues as well. >> we're looking forward to working with you on those issues. you made a comment that there were 67,000 hud vouchers that you said were cut out of the budget. in my discussions with the individuals in the industry they talked like there were 200,000 that went unused.

is that true? >> economy not familiar with that, no. >> they didn't have the funds or add menstruate tif opportunities and they couldn't utilize all of that. >> that may have been true some time ago. when we went through sequestration, phas had to pull vouchers back instead of letting them out on their feet. you can't use that voucher. so we're trying to get back to where we were before. >> these are people on the ground using these and they are saying that they are left unused because of the problems that they have to deal with, the restrictions, lack of flexibility, whatever it is that is causing them not to be able to do that. so i think that's something that you need to look at. next question we haved a long discussion about the income that was cut back in january and again, it really concerns me

because, according to your report which i have right here, you're continuing to take in or lend to a group of folks who are probably more problematic from the standpoint that you're now going to the 640 to 679 credit scores, which is fine but by doing that, exposure to more risk which means more possible loss. if you look at the losses, i really got some problems here with some of the loss information in the report. one place it says you've lost $7.5 billion over the first half of the year. $15 billion this year and in another place it says that your loss ratio will probably go down, which is great but that number doesn't jive. but the bottom line is there seems to be a continued problem,

in my mind in terms of covering expenses. i hope this all works out. thank you, gentleman. i yield back. >> the chairman recognizes mr. cleaver, ranking member of the housing subcommittee. >> thank you. thank you. >> hit the button to the gentleman's right. >> thank you, mr. chairman. mr. secretary, i don't know how we are going to be able to erase this stereotype or the misinformation that seems to be eternally out here in the world that people who live in public housing move in and foregoes a stay for an entire lifetime. the facts don't match the

stereotype. if you have children living in multifamily property the stay is about 5.14 years. that's about the time that my family lived in public housing. and that's just so dramatically different than what people seem to want to believe and how it is perpetuated. do you have any idea of how we can erase that misinformation that seems to be all over the country and i think there is always some resentment from those of us who, in my case my father worked three jobs to save enough money to buy a lot to get a house and other people -- families were doing the same thing. but i don't know how we get that out. to my father, he's probably watching. thanks for everything.

he's 92. daddy. and -- but i don't know -- it's an insult to him and a lot of other people. how can we erase this? >> it's a great question and let me say that i enjoyed visiting with chairman luetkemeyer in his district and also visiting with you in your district, ranking member cleaver. you asked a great question. what we see every day whether it's in public housing or folks receiving a section 8 voucher, we see folks who want to work hard and want to get on the track to a better life. and we understand that our investment in public housing and in hud-assisted housing is a way to get them on that track. i reject the notion that somehow folks living in public housing are lazy or it creates a culture of dependency. the fact is that 56% of the

households that we serve are headed by someone who is elderly or disabled to begin with. and of the rest a significant number of folks are under the age of 18. they are children. of the folks who are working age, a decent number of those folks are working. and if they are not working, then they are required to do some sort of community service or be in school or go through job training and so this is very much an opportunity for folks to get onto the track of a better life that they want to get on. >> thank you. i agree obviously, with everything you've said. it's so frustrating to hear the contrary. let's talk about fha for just a moment. because it plays a major role for first-time home buyers. fha helps almost half a million people get into homes in 2014

and about one-half of them are brown and black american. do you believe fha as we're talking about the future, one of the agencies that absolutely must be preserved so we can continue to provide this kind of assistance to first time home buyers as well as others? >> fha plays an invaluable role in creating upward mobility for people of all income levels. it's a primary vehicle for first-time home buyers to get into a em hohome. for latin americans, 50% have an fha loan. we've seen the mutual insurance fund rise by 21$21 billion. it's on the right path. yes, we need to do everything

that we can to continue to strengthen fha and ensure that it's there to provide that opportunity for folks to reach the american dream. >> thank you. it may be also important to realize that those individuals qualified for the loan, that they were not just -- sure i know there's a few seconds left. we have to distinguish between the issue of affordability and access. we lowered the mortgage insurance premium and made it more affordable. that does not in any way change who qualifies for a en loan. the average credit score out there is 687. that gives you a sense of the closeness of those numbers. >> thank you, mr. secretary. >> the time of the gentleman has expired. the chair recognizes mr. garret.

>> it make it is unlawful to rent to any person because of race, color religion or sex or national origin and that is the law, as it should be. however, hud's rule based not on intent but solely statistical outcomes and treatment the results are the cost of litigation is strangling the market, the availability of credit is cutback on lending to potential homeowners, the very same potential homeowners who are trying to help. therefore, what it does is to reduce the supply of housing as builders back away from those vulnerable and punishing the people that we are trying to help. let's take a look at your

agency. in the 2014 fha annual report to congress, the status of mutual insurance fund it says fha indicated that single family endorsements for that year was 51% to as you put in your reports, to white, 17% to hispanics, 10% for blacks. statistically, is that not disparate impact? is that not your agency discriminating? >> i reject that premise. thank you, congressman for the question. >> then -- >> but you are misguided. >> let me ask you, is that a disparate impact? >> that's not the way it's been utilized or used. i believe in disparate impact analysis and if we look at the way it's --

>> is a 40% disparate impact a disparate impact? you're lending or endorsing to only 10%. >> this issue should never be involved in that context. you're completely taking it out of context. >> no. >> that's not the context that it's being litigated about either. >> no. because you're litigating against lepdnders and the like and people in the housing industry. i'm asking about what you're doing. is what you are doing disparate impact? >> what we need to do is preserve disparate impact analysis because it's important to determine whether there is a discriminatory impact and whether other tools can be utilized to have a better impact. >> what is a disparate impact? >> what percentage off is a disparate impact. >> i reject that notion

congressman. they are applied in very fact-specific cases. >> so what are the -- >> i reject the notion of a hypothetical that would never come up in the first place to try and analyze such a serious topic. >> so you cannot define for us what percentages are disparate impact even though your agency brings those autslawsuits? >> you know very well it changes in different scenarios, in different industries and as applied to different cases. >> exactly. isn't that the exact problem? >> i think that's part of the strength of the tool. >> no it's not a one-size-fits-all tool. >> so what you're saying is that if i'm a lender or a builder or home builder, i don't know what your charge against me is going to be because, as you just stated right now it changes from circumstances to circumstances? >> not at all. >> there is no clear definition of what disparate impact is? >> in the burden shifting that happens, if it's litigated actually gives the defendant an

opportunity to show that there's a legitimate business reason for why those statics are the way they are and then when they demonstrate that, it forces the plaintiff to actually have to come back and show that no you should be doing it a different way that would be more effective. so the burden shifting involved there protects the defendant. >> well the defendant only after he's been brought to court, hired attorneys gone through the expense of this and having to defend something that you just told me in this hearing that you don't have a definition of what it really means. >> that's not true. there are plenty of lawsuits thrown out summarily. so i'm not sure what you're talking about. >> only after the defense has to defend the charge of disparate impact. >> look at the track record and

it has had a good track record. >> what i've seen is disparate impact by your very own agency. >> the time of the gentleman has expired. the chair now recognizes gentle lady from new york, miss maloney, ranking member of the market subcommittee. >> thank you, ranking member and chairman for this important hearing and thank you hud for all you do for affordable housing in america. two programs that i'm constantly asked about is section 8 and section 202 program which does so much to provide housing for seniors and, according to your own study, seniors with low incomes are the most likely to pay more than they can afford for their housing than any other sector in our society and this program was very important not only to new york but i'd say the whole country. i'm concerned we don't have enough funding to meet the rising demand for affordable senior housing. the capital advance, the new

construction, i think, has been frozen, has very little in it and, aid cording to the aarp, for every section 202 unit that becomes available, there are well over ten seniors on a waiting list. can you describe what hud is doing to meet the demand -- the riding demand for affordable housing for seniors under the section 202 program? >> thank you very much, representative. i do appreciate the chance to speak to this because as much of a fuss is made over the idea of these millennials and young people and cities are changes these millennials, we all know that the fastest growing segment of the population are actually baby boomers turning 65 who are elderly and who are spread out in every single community out there and are a focus of the section 202 program. we are requesting an additional investment in section 202, particularly for a demonstration

project in this demonstration. this would allow us to show the linkage between our investment in housing for the elderly and a reduction in health care costs because we believe that it's important to show that, that that does exist and that hopefully that will inform policy in the future because by spending a little bit for housing and supportive services on one end, you could save money on the health care system on the other. that's the hypothesis. but more broadly as i mentioned a few moments ago, 56% of the households that we serve are actually headed by someone who 50% of the households that we all serve are headed by the elderly or disabled. that goes across hud. our service to americans is by no means limited to 202. it's also public housing section 8, and it is part of the reason that we're requesting greater levelsz3 of voucher and

funding for our traditional housing programs. >> thank you. the other hud programs that i'm interested in supporting additional support for is section three, the earned income disregard in public housing. these are important tools for the department and local housing providers to help families earn more income and achieve more economic mobility. can you talk about the importance of these programs and policies and how we can work with you and the administration to strengthen and expand them? >> i can. what we want is that we want the folks that we serve whether it is section 8 vouchers or in public housing we want -- and they're working age we want them to be able to have gainful employment and eventually not need our public assistance. i agree with folks on that

point. and one tool that we can use is section 3. section 3 says that when an investment is made let's say there is construction that a pha does, that the contractors make that effort to hire low income individuals in that area, including public housing residents. so this gives folks an opportunity to get a good job, to be able to provide better for their families and hopefully to use that to move up and out eventually. recently we promulgated a new rule on housing in section 3. this is an opportunity for low income individuals and we look forward to working with you the committee and congress to ensure that we can make the most of section three. because the fact is frankly that the track record is checkered for housing authorities out there in how much they have

utilized section three, and we want there to be consistency in the utilization of section three. >> the chair now recognizes the gentleman from texas, mr. nuegubaer. >> thank you. 20 years ago president clinton announced the national home ownership strategy. and he said it and i quote i want to say this one more time, our home ownership strategy will not cost the taxpayers one extra penny. it will not require legislation and will not add more federal programs to a growing federal bureaucracy. i think we can all agree that that vision did not turn out that way. if you recall back in february you and i had a conversation about the fact that you were about to lower your guarantee fee by 50 basis points. and the fact that you were still not meeting the federally mandated reserve ratio for the

funded fha. i guess -- and i think back then the number was point 4-1% the mandate was 2%. i wonder if you could tell us today, mr. secretary, what is the current status? >> yes, thank you very much, representative, for the question. i cannot give you that information because that won't be available until the next annual report. as you know that is done by an independent actuary. so we do not do that analysis, that analysis is done by a neutral third party. we expect to have that 2015 report in november of this year. >> mr. secretary, i want to make sure you understand it. so you don't know until the end of the period how you're doing? i mean mr. secretary you were the mayor of san antonio. and i can imagine the director of finance if you asked him you know, how are our sales tax receipts coming in line with our projected budget and he says i

won't be able to tell you that for a year, would that be an appropriate answer? >> what i would say is y'all can change that. that is set by congress not by me. i mean, change it if you want to go ahead and change it. >> let's be clear by that, we do put out a quarterly report. he asked my staff to go ahead and review the report, we would be glad to do that. however, to your question on whether or not we have an update on the capital reserve ratio the answer is no because -- >> well, let me ask you, are the premium revenues i believe what you told me by the end of february of 2015 you would be at 2% you don't have any idea where you will be at 2% at the end of the year? >> again, to correct the record, what i said at the end of february, we expected in two

years we would reach the 2% capital reserve. that is what i said in february. >> well, i mean, i think the problem a lot of us have is you know, you're running an organization that has a $42 billion budget. has a trillion dollar plus contingent liability. and we don't have -- we don't have the ability to track progress other than on an annual basis. >> that is not true at all. in fact we provided to chairman lukemeier, we do track statistics. however, you asked specifically -- >> let me ask you about the revenues. are the revenues on track to meet that goal? >> the answer to that is that they are encouraging so far. let me give you a precise example. >> i don't want to know if they're encouraging, i want to know if they are on track. are you going to meet the 2% at the end of the year? >> they are encouraging right

now. >> well, see, i'll -- >> i'll give you an example of why i say that okay? when you look at march of 2014 versus march of 2015, there were more borrowers on fha loans. we've seen as the quarterly reports have indicated, a significant uptake in re-financing. you have to understand this thing took effect january 26th. with the limited early data that we have we believe that we are on track. however, we will not get an official number on this, the assessment until around the thanksgiving time frame when that independent actuary gives us the report. >> so i think the thing that is troubling, a lot of my colleagues on the other side of the aisle talk about safety net. and you know to me, a safety net is something that provides -- to keep you from failing or falling or hurting yourself, so the

safety net that we have today is just made out of string. and i think you would agree that if i had a safety net i would rather have one made out of rope. and when you have a trillion dollars of the taxpayers on the hook and you only have 4.1% equity, the taxpayers are at risk. >> yeah, that is apples and oranges, you're conflating two things. i don't know how that works. >> mr. secretary, how is that apples and oranges? >> the capital reserve ratio is not a simple ratio on how we pay claims. we have more than enough to handle the claims the losses that we have in front of us. >> the economic present value of your liability. >> regular order, mr. chairman. >> the chairman can see the clock. chair now recognizes the gentle lady from new york, ms.

velasquez. >> thank you, this could not have come at a better time they just housed the spending bill, which if enacted if enacted will severely under-fund every hot program and jeopardize the how instability of vulnerable americans. the shortage of affordable rental housing is a huge problem in new york. under the new analysis we released this week brought the severity of the problem home. between 2002 and 2014 rent in new york city rose by 32% citywide. even after the effects of in inflation were removed. my question, mr. secretary, what

will happen to working families like in new york city if we do not have public housing? in new york city we have 615,000 people who live in public housing and section 8. these are hard working people. and if we don't provide that type of resources where will they go? and people you know i don't suffer from multiple personalities. i understand that if we want to tackle the issue of poverty it takes investment. if we want to tackle the homeless veterans it takes work to report. i am proud to report in new york city the number of homeless veterans in new york dropped by 40% last year and declined 75%

since 2012. why? because of vouchers. and homeless assistant grants. and because the city is putting also resources. that is what it takes. and so we want to tackle the issue of poverty in our country. what is it that we can show to demonstrate the effectiveness of the agency? it takes investment and the understanding that for the last 20 years this one issue that really is impacting americans. they're working harder. they're working two and three jobs. but there is one thing, and that is wage stagnation. while the 1% is doing extremely well, the rest 99%, are working harder and getting less.

so mr. secretary, if the funding bill that passed the house if enacted, how will this impact hud's efforts to address the affordable housing crisis? >> if the bill becomes law it will seriously injure, seriously damage our ability to meet the needs out there. as it is, as i mentioned earlier, we only serve a percentage of people who require housing subsidies. and the chairman had individuals to discuss the private partnerships, which i think is a very fruitful discussion that ought to be had. it was very clear in that testimony whether it was the public sector or private sector or nonprofit that said if hud doesn't do these things, who else will do them? there is no private market to serve people who are extremely low income. and those are the vast majority

of the people that we serve. and so whether it's is traditional housing or section 8 vouchers or rental assistance, we need to make an investment homeless, mothers with children who are doubling up. veterans who don't have a chance to have a place called home. those are the human consequences of the budgetary decisions that are on the table. >> so mr. chairman, mr. secretary, i would like to ask you about section three. i have been working on section three for many many years. that is containing election that is reflective of the rule you are putting out. but my question is if there is a tool that could empower

residents in public housing in section three without the proper oversight and without the proper training and investment it's not going to work. >> the time of the gentle lady has expired, we now recognize the chairman from michigan. >> sorry i'm kind of hidden behind one of my other colleagues here. so i wanted to quick -- bring up the situation with the lifetime myth about people using hud, and throughout the statistics with family with teens, i don't know if that is accurate or where he got that.

are you familiar with that statistic? >> yes i ranking member cleavers is not here right now, but what he was probably referring to, the working individuals, in the households that the individuals are disabled our goal is not to just get them in and out. but they do have a period of average stay -- >> i think it is completely different. earlier at the beginning, the chairman was asking specifically about -- and you couldn't answer whether we are tracking people from one pha as they exit that where do they go next? do they go to another public housing authority? do they move to another state? and you couldn't provide that

matrix. >> no, i said we'll get information on that. do i believe we are tracking that as well as we would like to? the answer is no -- >> it seems if we can dial it down to 5.4 years we ought -- you ought to be able to figure out how you are going to make sure that people are utilizing that service, really shift to what it's more of my concern how do we make sure we have an opportunity economy that eliminates poverty and breaks that cycle that may exist. you know i was a former licensed realtor. started my career in that. some of my proudest moments that i was involved in were not with my big sales. my first listing was a two-family house in holland michigan, that was very transitional. a hispanic family on top that shared an apartment.

in fact they are still friends today. and helping them transition into buying their own place. one that i talked about in this committee before is someone else who still remains a friend, jill whose husband had left the family and she moved from a trailer park into her first home. and i was able to help explain to her kids why and how important that was. and literally, sitting here 20 years later i'm getting emotional and choked up because that really is why you exist. you don't exist to just make sure that we're taking care of people temporarily. you exist to make sure that we are taking care of people long-term. and i don't mean getting into your system and staying in your system. what is the opportunity -- and i'm afraid that as i'm looking at this report it seems that the solution typically is then to just throw more money at it. and it's not only not

subsidizing the market i would hope, but as i mentioned, as my colleague started to go out how do we make sure that the people who are providing that, building it, have assurance and understanding what the ground rules are. what the guide posts are so that they're not going to get sued. and they're not going to have these questions as they linger over there. that, to me, is i think vital. the other -- quickly i want to hit in this remaining minute, on page 8 and page 9 i wanted to highlight a couple of things. one of them, to start with this a proven model for increasing public housing residents employment and earnings. i'm curious, are you providing that and can you share the matrix on that, as well? because i'm curious is this just web base? physical presence that people are having from hud? explain that because this is

$100 million you're putting into this. that can provide a whole lot of housing. >> thank you very much for that question representative. and let me say i agree with you on the premise that for folks who are working age and this is what the law requires that if they're not working they're either doing community service or job training or pursuing an education. job tracks does provide that, we would be glad to provide how we're doing that. and one thing i have said with this opportunity agenda that hud needs to get better at measuring the outcomes there. i would love working with that. >> amen to that. i know my time is expired but i hope you will get much better than that and provide that to the committee. >> chair has expired.

we recognize the gentleman from texas, mr. hin ohojosa. >> thank you very much, i'm late for opening a meeting and i must leave. >> without objection, the chair recognizes the gentleman from new york mr. meeks for five minutes. >> thank you ranking member and mr. chairman. mr. secretary, let me ask you first let me identify myself as a proud product of public housing. and my whole family, all of whom are doing fairly well now. i don't know how well we would have done or how my parents would have did what they did without public housing. and then when i think about my friends, some now who are attorneys and doctors and engineers and pharmacists, all products of public housing. but had it not been for that assistance so that they could move forward i don't know whether any of us would be in

positions that we're in. so i personally know the critical need and the significant importance of public housing, giving individual ss the opportunity to be successful in life. and i can't think of a better investment that we can make as a country, especially when we talk about, oftentimes when we're campaigning and the average everyday person and the poor person making sure they have a quality of life. there is nothing better than making sure they have a decent roof over their head so a child can get an education in their place where they can grow and become productive members of society. in new york i'm concerned because when i look at the

budget s budgets that the republican party is putting forward when i see it fails to put funds to the folks and the national housing trust fund and it shortchanges several assistance programs of very low income households, i get concerned about what is going on in new york a little bit. because you know, recently our mayor de blasio released a new ambitious plan to re-vamp the public housing authority and to rebuild and expand and preserve the public and affordable housing. the plan is to convert units to a project base section 8. and it is therefore highly dependent on subsidies. so as we move, and currently section 8 accounts for roughly two thirds of your budget and as the housing authority moves

through rad, i'm just wondering how they cope with demands across country. and how can the folks of my city of new york plan with them to preserve affordable housing concepts? >> random has been one way that we've tried to stretch resources by doing exactly what folks have suggested. that we engage with the private sector in this case so that they can renovate the public housing units. the fact is we have a $26 billion back log in renovations in public housing. and we lose 10,000 units every year to this repair. and in new york, you see that in spades. so that is why we're requesting a couple of things in this budget. $50 million for that rad program. we're also requesting additional resources in terms of salary and

expenses because the cap was lifted in fiscal year 15 to 185,000. we want to make sure we meet that demand. by the way we already have applications for rad that are around 180,000. so it is successful in getting interests, private public collaboration. what we see with rad, we leverage for every dollar of public money we spend we leverage $19 in private investment. but we need to do it right and we need to ensure that the resources are there that under-gir under-gird it, that we treat tenants right and you sort of have this public/private partnership. >> and so i guess what my nervousness is because i'm not sure what these budgets are looking like. i'm not sure that everybody has the same private level. as you move forward and we look -- i'm worried about the

under-pinning of the public sector continuing what it needs to match the private sector. because if we get into these scenarios and we lose the subsidies to keep them affordable, then what happens to public housing -- can you tell me -- >> i agree with you, if we're not careful then the public sector will not have the strength to engage the private sector so that we can fruitfully renovate. the private sector needs the public sector to do affordable housing. >> time of the gentleman has expired. chair now recognizes the gentleman from wisconsin, mr. duffy, chairman of our oversight investigation committee. >> thank you very much. mr. castro i just want to make a note that homelessness does not just exist in urban america. it also exists in rural america in places like my district in

wisconsin. we have held a homeless summit to bring the stakeholders from across our community trying to figure out where to address this problem effectively. trying to figure out where the bright spots are, what small agencies, what they do to effectively tap in to resources in the community. how they can effectively tap into government resources. and so it's a problem that we think we have to address. and my comments are in no way try to undermine the problem of homelessness across the country. i would note though, i do hear a lot about the regulations especially for small -- small providers in our community and listen, if you're a one or two-person organization it becomes incredibly difficult for them to navigate the rules and regulations. but, i want to move beyond that.

you're asking for more money, a 9% increase. that is in our present budget. why do you need more money when we have improved the homelessness in america? why do you need more public housing money? why do you need more section 8 housing money when we have had improvements in the economy and in the space? >> well, the fact is, for instance, let's take our vouchers through sequestration we lost several thousand vouchers. >> but have we had an improvement in this space? >> in homelessness we have seen an improvement and why was that -- >> but you're asking for that money -- >> the reason is we dedicated more resources to it. hud vouchers to the community's credit, the president and leadership, the reason that we've seen a reduction in veteran homelessness is because we actually invested --

>> and i appreciate your comments on veterans. and that is a nice number. >> okay, well, then let's talk about folks who live in rural areas. >> let's talk about it as a whole a whole -- then. what success have you had getting people out of the system as well as in the system -- it goes to the question asked that you come and ask for more money but you can't sit there and say today listen you guys this is what we're doing. we're bringing people in. they want help they all need help. let me finish here are the facts and numbers of how we have moved people out of the space of public assistance and into self-sufficient lives. but if you don't track people on how sustainable th