Nahro 2011 Legislative Conference - Hud - 3/28/11

Secretary Donovan: Take our homeless programs, for example. There is broad bipartisan for what weíve been able to do on homelessness because weíve been able to show that it works. Housing keeps folks off the streets, but actually in many cases, itís less expensive to solve homelessness than it is to manage homelessness. When you look at the costs of somebody cycling in and out of prison, or in shelters, or in emergency rooms; when you look at all the costs, and not just whatís in the budget but when you look at all the costs, what you find is that itís a smarter thing to do, which is invest in the homeless programs, as a specific example, rather than something else. Another example is the work that everyone here has done, which is the recovery act. When we invested in greening the housing stock, what we typically find is that, in 5 to 7 years, we pay back that investment by savings through our cutting costs. So, I think what weíre finding is more we make the case for these programs, the more that everyone in this room can tell a story to our members of Congress, in particular the newer folks who donít know these programs as well that weíre finding some perspectives. Again, this doesnít mean we arenít going to have to make tough choices because the budget pressures are just more than what they were a couple of years ago but what it does mean is where we can show results, we are getting folks who are listening. HOST: I want to come back to homelessness in a second, but Iím really curious; what sort of environment do you find a lot of the newer members are coming from and group preconceptions are they having? It seems like often times what you hear from public housing is that if you hear it in the news at all, itís negative. Do you find some mental blocks there? Secretary Donovan: There is no question that there have been examples in the news lately, whether itís Philadelphia or other examples where the housing authorities have been under scrutiny. I think we have to do 2 different things at the same time. One is we have to make it clear that those examples represent a tiny fraction of the overall universe. The story is ìgood news is no newsî, right? I apologize from a reporter HOST: I liked it when they say either. Secretary Donovan: [laughs] there you go. Part of what we need to do is shine a light on the good news which is hard to do, but itís really important because 95% of housing authorities arenít in trouble. The vast majority of housing authorities are in good condition, its decent, safe housing at a reasonable cost for the taxpayer. At the same time, we also have to recognize that weíre all going to have to be as transparent as possible and weíre working on some things where weíre going to try, just as we did in the recovery act; transparency makes a huge difference. Any American can get on a website and figure out where we were spending the money; Iíd be paying a bunch of you to do reporting. But I will tell you it made a huge difference in terms of our ability to tell the story to Congress. We have to do the same thing; be as transparent as possible about what weíre doing, and where we find problems, we have to fix them and move on them quickly. As weíre tried to do in Philadelphia and other places. But there is no question that that scrutiny is going to make it harder for us on the public housing side and some think weíre all going to have to work together [tomorrow] a broad coalition to try and make sure that weíre responding where there are problems while also telling the good news. HOST: I was talking about creativity and the process; certainly you think that one bit of creative budgeting youíve done for 2012 is the particular HUD foundation mission. This is the billion dollar reserve proposal. Can you first tell us the status; where do you think thatís going to happen to that and the budget and secondly, can you defend that to a room thatís very skeptical? Will you? Secretary Donovan: Yes. [laughs] I actually wouldnít have proposed it if I couldnít defend it. I ran the 4th largest value program when I was in New York and we had our reserves that were taken down to a reasonable level to what Congress decided was a reasonable level or reserves. Even the voucher program to fund ongoing needs in that program. So this is not an idea that hasnít been done before. Weíve seen over 2 billion increase in our reserves. So in a world where we have to make incredibly tough choices and Iíll be clear; if we were in different fiscal times, we wouldnít have proposed it. This is something that, when we looked at all the options of how we were going to make the numbers add up, this felt to us a way to have the least impact on families who depend on the program. We did it cautiously knowing how much the reserves have grown. What we didnít have was all the information of what those reserves may be committed to. We are committed to working with housing authorities around the country on the hill to understand where are things committed, where they are not, and what is a reasonable level of reserves to operate under. I, in the end, think we have to be able to show that weíre using this money as quickly as possible and putting it to work. We felt that given the choices of an across the board cut or other options that we had, this was the most responsible way to try and meet what was a very difficult set of decisions. HOST: How considerate are you about the dangers it brings up on its own? Doesnít it create new problems? Secretary Donovan: We will not draw down beyond a level that housing authorities need to operate safely and effectively. Justice was done in the voucher program to establish a level of reserves thatís reasonable is what we need to do. I recognize that this is new proposal and thatís something weíre going to have to figure out with Congress and with all the members here what that level looks like and what that reserves are committed to. But again, in a world where there was already a presence for this; it has been done on the voucher side, we didnít feel it was setting a presence or breaking new ground that had been emitting the kind of danger I think youíre suggesting. HOST: So I think the biggest question; the biggest thing for all these programs from the advocate side is that Congress goes much farther then you are proposing, in particular things like community block grants which seem under siege here in both the continuing revolution thatís basically before the Congress now and in the í12 budget talks already. How committed is the President to fighting for those block grants for housing programs in general compared to other parts of the budget? DONOVAN: He is very committed and he said in his state of the union address we canít balance our budget on the backs of our most honorable citizens, as clear as it can be. That means, now that weíre going to have to make tough decisions, heís going to be fighting theses issues to veto threats against the house bill and heís going to be fighting to be sure the programs are kept. Let me just go back to the point you were making about Congress can go farther. They can go farther on any of these things. We have fully protected the public housing capital fund and theyíre proposing a billion dollar cut for it this year. Not evaluated for next year, but this year right? So I think that thereís that risk. But what I would also say is I felt very strongly as we looked at options; that if we were to propose an across the board cut and the operating fund, the capitol fund, whatever there might be, rather than the way we proposed using the reserves, that we would end up setting sort of a new baseline for Congress to then cut further. I think that going in this year what we can say is this is full funding getting to a level to including that billion reserves; thatís full funding. We need to preserve that full funding level, not start taking an across the board cut which would end up being the new baseline for the following year. We made it very clear; this is what full funding is going to take; we need to try and meet that with a range of sources including some money from reserves but weíre going to maintain our commitment to a full funding of that level, which should be the baseline for next year and next year and next year, not some new lower baseline that could end up starting as a race to the bottom as youíre describing. HOST: The administration has taken some critiques particularly from the left; how itís handled from the negotiations the republicans from the budget so far? In your sense are you all doing this appropriately or have you given way too much already? DONOVAN: Look, the president has said very clearly, we need to be responsible. The American people donít want the Federal government shut down. They also believe that we need to reduce spending. Itís no question that the overall deficit is a problem today, but looking forward, can be a significant problem for the country if we donít start taking steps now. So you could argue about this program versus that program but overall the stance that the President has taken is I was elected to do the right thing, politically popular of not, and Iím going to stand up and make the decisions that I think I need to make, but Iím going to draw a strong line where I think folks are going too far. One of the things as we go into this debate to try to get a resolution within the next few weeks before the delayed date where our currency expires. Heís been very clear that we canít go too far. These issues veto threats at the end of the day; he will hold the line where he needs to hold the line. But that doesnít mean arguing; we have to take cuts and be responsible. In fact, what weíve proposed would bring overall monistic discretionary spending into the lowest level since Eisenhower as a share of the overall economy. So we think weíve been very responsible in terms of what weíve proposed and that we donít need to go significantly further than what weíve proposed. HOST: Well thank you. Now weíre going to take some questions from the audience so they should be making their way. [silence] itís sort of like the academy awards. OK. Weíre going to start with a light one. Youíre not listening on reserves. [applause and laughter] I doubt there is a question after this. Youíre not listening on choice neighborhoods; youíre not listening on TRA. Are we still your partners or not? DONOVAN: Maybe I can is there some clarification on where the questioner would have us solicit more on choice neighborhoods and TRA; I heard it on reserves. HOST: Umm, resident choice. DONOVAN: Resident choice. So on choice neighborhoods, I think weíve done a lot to make the program one that works for housing authorities. We just announced our first choice neighborhood awardees; more than 75% of the awardees and finalists were public housing authorities; we got a huge amount of interest in the program, and my sense, just as HOPE VI worked very well for public housing, this is a program that builds on the success from that. We made a whole set of changes and weíre open to having more discussion on it. On TRA, we proposed a very different approach this year thanks to the input of AHRA and many other organizations. We said very clearly that weíre open to different mechanisms for TRA; project-based vouchers or project based contracts, depending on local needs. We began working with many of your local organizations in state levels around the country to try and tailor what we would do; we said on the resident choice portion of it very clearly. We said on the resident choice portion of it very clearly that we understand the concerns that were raised last year. We made changes like saying no more than one out of three vouchers could be used for resident choice option. We said that there should be a two year wait for rennovating a property before choice might start and we said this year in terms of what we are proposing in the budget that we would very much be open to other ways to approach the choice option and to have it be a sort of pilot assuming that there are resources available to fund vouchers. So we're going to look for ways to fund vouchers. All of those are ideas that came from NAHRO and other partners. So we've been doing a lot of listening on this. In the end, there is a broad coalition of folks that we work with, housing authorities, residents, folks on the Hill and in any way to get change if we're going to bring the broad tent together, the big tent that needs to support these programs to get them passed the bill of political coaliton around change. Many of you have been trying for a decade or more to get conversion or other options passed and if we're going to build that big tent that is going to get legislation passed, we're going to have to give a little on what pieces we want. But we're going to keep working and listening to try and get it done in a way that all of us can be excited. Host: A follow up to that. Given HUD's intention to access reserves to fully fund public housing in 2012. What can we expect in 2013. Secretary Donovan: Well I would certainly say that if we can continue the changes the President has made. If we can continue working to help this recovery happen, we will not be in as difficult of a position as we were in for 2012. I, again if you look overall at the budget. If you look at our commitment on the voucher program, if you look at what we did to be able to fully fund public housing capital fund, project based section eight. I think while it was a difficult decision to propose a seven and a half percent reduction to CDBG, I think many people have expected far bigger cuts given the budget situation and certainly a two thirds cut is being proposed on the other side of the aisle. I think what you will see is that we were able to protect so many of the priorities that NAHRO has and particularly following the commitment that we had in the Recovery Act and what we have been able to do over the last two years. I would expect that 2013 will again be a year where we can protect the vast majority of what we want to get done. Host: Why can't PHA's decided whether cuts in fact come from programatically? Why can't they just do it themselves? Secretary Donovan: I guess what that would lead to is an across the board cut which would fall equally on every housing authority and we felt the principal again which was done with the voucher program was to say, where there are excess reserves. That is a better way to go about it. A fairer way to go about it in terms of being able to meet the needs of all housing authorities as opposed to one across the board cut where we say, well you've got to meet this whether you have excess reserves or not. And so that was the approach we took. Again, if NAHRO, folks on the Hill feel differently there's certainly, our's was a proposal. It's not final, there's going to be a discussion with Congress over the next six months or so and we're going to be able to end up under the best budget we possibly can under these circumstances but we're open to those suggestions if we think collectively that there's a better way to go. Host: Okay. Hi from South Dakota, this next one starts, if we can't ask for funding, how about deregualtion of flexibility? Does HUD recognize the impact of what reduced in the section eight can cause? Secretary Donovan: There is no question and look, one of the things that we heard loud and clear from folks last year is that we talked about legislative proposals there is a lot we can do without legislation and so recently we started with a project we call delivering together which is brought together by 20 of our best career folks from around the country and we went out talked to, we interviewed many partners. And one of the clearest things we heard was that housing authorities feel like we collect too more information in too many different systems and that we go do a lot better in terms of the way that we regulate you, collect information. So we've started to look comprehensively at that data. There is a team, I meet with this team every two weeks and I've given them ninety days to come up with a list of all of the information we collec that we could eliminate. The information that we need to continue to collect, how can we get what now more than a dozen different systems consolidated into many fewer systems that are easier to use. And all of that we can go without any legislative authority. So that's something we've already started on and I can come back and report to this group on how we did in ninety days. It's also something I see as a first step that this team will then start to look at other places where we can simplify and streamline. That's also where we can all get movement on set of this year, we proposed in our budget. We came very close at the end of last session to getting passed servra passed this year. It ought to be a top priority for all of us to try adn get servra done in the budget this year. Host: I'm going to start paraphrasing these to make them a little quicker. When will PHA's under the reserve proposal ever again survive enterprenueral? Are you worried about? Secretary Donovan: I want to go back to something I said earlier which is if reserves are being held for a propose. If there is something that they are committed to then those are not reserves that we think ought to be used to fund the program. The real fundamental issue here is that if we have reserves that are not being used or that are taking years to be used that's what we're concerned about. Now if we go back and the data shows that those reserves are committed, we are completely willing to work to protect those and set standard that we do that. Again, this isn't having one voucher at the local level and knowing that having reserves and setting aside money because of these projects are long term projects. I know that very personally. The issue is if we have reserves that are not being used that are or were taking a long time to spend. Again, operating money not capital money, longer that we should, we have to, I think we should all be willing to say look we're going to be accountable and responsible. And I will tell you, everytime I go up on the Hill there is a question about why are these monies not getting obligated and not just in the operating fund. How do we make sure this money gets out as quickly as possible, how do we ensure that the program is reaching folks and benefiting folks as quickly as possbile and so I think we've all got to work together to figure out how to use that money as quickly as possible or be able to clearly say look here's what it's being set aside for. We are being entrepreneurially in this way and being accountable. It's not just folks at HUD asking these questions, it's folks on Capitol Hill that are saying why have the reserves grown they way they have, what is that money for and can't we put it to use as quickly as possible. Host: Alright, I think we have time for two quick ones and then we will be done. Grants seem to go to the large urban areas, how can smaller housing authorities have an opportunity when grants to more larger cities? Secretary Donovan: This is a great point and we've heard t his consistently. It's one of the reasons on Choice Neighborhoods for example that we not only did implementation grants but planning grants as well. One of the things we consistently hear is I'm a small housing authority, I just don't have the money to be able to put together an application. We're writing technical assistance perhaps and so we felt that putting aside, we had seventeen planning grants this year in Choice Neighborhood with a relatively small, $65 million for the total program that really, we saw as a way to help make sure that smaller housing authorities, smaller communities were going to be very competitive. The other thing we did was to set aside a certain chair of them to make sure that they went to smaller communities. Something we did in our Sustainable Communities program, it's something we've done in a range of areas to recognize that often times it's difficult for those smaller communities to compete with the larger communities. So couldn't agree more and it's the direction we are going, not just in Choice Neighborhoods but in a range of areas. Host: Last question and thank you all for being such an intent audience. In contrast to federal deficet, private capital market is said to be flushed with cash. For the past decade, housing practicioners have become adebt at leverage financing in order to access private capital so in the current discussion, can we broaden the topic to include way to make our assets more attractive to private investors. Secretary Donovan: Well certainly that's exactly what we're trying to do with our TRA proposal. The primary purpose is to be able to expand the types of tools and resources that housing authorities will be able to bring in to preserve public housing and to preserve other kinds of housing. Project based housing in the wrap programs on rehab. Other things we need to do though, one of the things we heard clearly last year when we talked about TRA was we need to expand the pot on tax credits. If we make public housing eligible for low income housing tax credits, there is already a loud demand for that. We need to figure out someway how to expand the pot. So one of things we proposed in our budget this year with Treasury was to create what we call basis host. Basically to say if you're federally assisted housing, public housing and other kind of federally assisted housing you will get an increase in the amount of corporate tax credits that you get when you use tax exempt bonds. And this is something that's been used in the nine percent bracket and it's something we thought was important to add. Because we heard folks and you're right, we need to expand the pie in some way. We worked with Treasury to do that so that's a way to get to the question to expand with the amount of resources that are available. The other thing I would say is that FHA Multifamily can be a very important piece of ensuring there is private capital. Particuarly in a market like today where capital has pulled back in many places after the crisis. Having an insurance program that makes sure that it can be available is a very important tool. And we dramatically expanded under Carol Galanate's leadership. The amount of work that we are doing with tax credit properties and I think it can be a terrific source for public housing if we are able to create the ability to bring in private debt and to allow our houisng authorities to be more entrepreneurial going forward. Host: Alright, one more question and they just said that you have time for one more. Will housing authorties be encouraged to sell vacant land? Secretary Donovan: Having worked at the local level, I don't think that is something we should be telling housing authorities they have to do. My experience is that we did a lot to try and develop vacant land we have in our public housing stock in New York City. We used it as a way to create mixed income without demolishing, we built new mixed income housing, we built senior housing. And frankly there was a lot of value there in some neighborhoods. It was a very good way, not only to create more mixed income but also to leverage resources to be able to put back into other purposes in the housing authority. So my experience is that it can be a very creative tool but it's something that really depends on the local needs. There might be places where having a vacant land as part of the development makes sense, it might be that there are public uses like a park or something else that might make sense. So, it's an area where my strong feeling would be there has to be local flexiblity. But we also have to give you the tools to be able to utilize that land in ways that are creative. As one of the things are we are trying to do with TRA is to change the trust structure in a way that would allow housing authorities to be more entrepreneurially to decide with local imput what should that land be used for. Host: Great. Well Mr. Secretary, thank you so much.