Eileen Fitzgerald
Associate Administrator
Rural Housing Service, USDA
Washington, D.C.
Addressing the Council for Affordable and Rural Housing:
I think the multifamily program will continue and does continue to face a lot of challenges, but we feel we have made a huge amount of progress in the last few years. I think we have done a lot to clear up both it’s perception (which is largely perception), and some of the facts that there were problems in the 515 program. We’ve done that by emphasizing rehabilitation of the existing portfolio; we implemented the Reforms passed by Congress including prioritization of assistance, equity skimming, occupancy surcharges, subsidy layering, etc. This year we also implemented the 50 to 30 year reform.
In that Reform process, we tried to address many of the issues that came up between the Interim Final and the Final Rule published in December 1997. Wherever possible we incorporated additional flexibility. We are now in Regulation Reinvention; this effort started a couple of years ago as a somewhat smaller effort, when members of CARH and other Stakeholders, worked with a Comprehensive Servicing Strategy. Then we expanded it to include all of our 515 regulations. We’re making good progress on this. It is a daunting task; we’ve had many policy meetings — there are a lot of steps in that regulation. But, we are hoping to have a Proposed Rule this spring.
Prepayment and Preservation
I know that one of the major concerns for both of us is Prepayment and Preservation. We started to look at this issue in detail, including the regulations, Statutes and funding requirements. We hope in the Regulation Reinvention to have better clarity and consistency to our prepayment process, particularly across States. We are establishing an Office of Preservation in the National Office to focus on this issue; and that will become eventually part of a larger restructuring. But, we may initiate that Office before we complete any other restructuring of the staff in the National Office. And, we’re also looking at the Statute; I know, having talked to CARH and other organizations, that there are other folks also looking at what changes in the Statute might be required. One of the things I think is really important to emphasize is that the ultimate solution to Preservation and Prepayment has to deal with funding as well. No matter what we do with the Regulations and no matter what we do with the Statue, if there is not sufficient funding (it might be helpful if funding were dedicated to Preservation), these proposed strategies might not work. As you look at a lot of solutions, they involve increased Rental Assistance. The RA renewal costs are already going up dramatically. So, if we start adding to that significantly, that is a problem if we don’t have a commitment from Congress to agree that is part of the Preservation strategy. So, we hope to work with all of the Stakeholders, the development community and the tenant advocate community to come up with a solution in the future.
Industry Interface
We’re continuing to Reinvent through our Industry Interface. We are hoping it will reduce staff time and significantly improve our information and the quickness with which we get it. We are looking at some other integration of our system, so if there are other automation initiatives that we should be pursuing, please tell us. It is really critical that we stay up to speed with where the private sector is on automation; we should not be doing things that slow you down and holding you back. So, we need to hear from you what it is that we need to be doing on that.
Secretary Glickman has a major Civil Rights initiative. We at RHS will continue to focus on Fair Housing and compliance. I notice that there is a session on the HUD Memorandum of Understanding; we signed that Memorandum this past summer. Basically, it is to make sure that Fair Housing claims go to the proper channels. We hope the Memorandum will raise the awareness of Fair Housing in rural areas. And, to the degree we are having problems, address those problems.
We are also trying to make sure we are doing what we need to do with compliance. We are continuing to work with the Office of the Inspector General to try to make sure the problems they are focusing on are the real issues and not the unimportant issues. And, to make sure again that we can say to everyone that our program is effective and is managed well.
Tenant Support
One of the other pieces we have started to look at is tenant support. In our projects for the elderly, the support services are really there.
We’re looking to see what else we can do particularly in our family projects to facilitate that. I’m not talking about mandating that. Now, we’re allowing community rooms; in the past, we didn’t encourage any kind of linkages with the community on support services that may help people move toward self sufficiency. That is, one of the goals of the 515 program is to provide a safety net and to provide affordable housing, while, hopefully, people eventually move to self sufficiency. So we will be looking at other pieces like that to make sure we don’t have anything in our regulations that impedes that. Again, that is something we are looking for input on from you; if you have any suggestions.
Part of the focus on tenants is making sure they are moving to self sufficiency and the other is really to help tell the story of 515.
Only Reason You Are in Business
I think that when you do housing construction, people get very focused on the physical building, and they forget that the only reason you are in the business is to help the people who are living in those buildings. And, clearly with all the Welfare-to-Work strategies, and all the Empowerment strategies, programs like 515 are critical for ensuring that people can do that. You cannot expect a single mother to get into a Welfare-to-Work program if she doesn’t have an affordable place to live with a permanent address. So we are trying to make sure that people think about 515 in that way.
On the elderly perspective, every time I am out in an elderly project, some one tells me "If I could not live here, I would probably be in a nursing home. Meals on Wheels comes here; I get my prescriptions delivered. I could not live independently totally off by myself." That would be a much higher cost to the government. It is not easy to quantify that because, so far, it is only anecdotal. It is an important message to be sending — that even though the program costs money, in a lot of ways, it saves a lot.
One of the ways we have been trying to tell the good news on this is through the Manager of the Year Award that we have worked on. We are continuing with that. The stories coming from the Award are just magnificent — of what some of the Managers of the Year are doing out there and the wonderful support they provide the tenants. We are including some of that in our Appropriations testimony and our Annual Report. If you have other stories and anecdotes of how we are really making a difference, we would love to hear them.
Section 538
On the 538 Guarantee program, we are working on the Final regulations now. We may be able to get an Interim Final Rule; that is what we did with the 515 Reform last year. That means when you publish it, it takes effect but then we can make additional changes. If we could do that, we could probably have a Notice Of Fund Availability (NOFA) by May. If we do get an Interim Final Rule, it will be because of all the disasters that have happened — the ice storm and the flooding. And, priority would go to Disaster Areas; that doesn’t mean we would go exclusively to Disaster Areas, but it would mean proposed projects in Disaster Areas would have a priority. Hopefully, we will know if that can happen within the next few weeks. We feel that it would be perfectly acceptable (and, if it is not, I would like to hear) to go with an Interim Final as opposed to a Proposed Rule because we have worked so hard with Stakeholders through this process. People are so invested in the Guarantee regulations that we hope that whatever we come out with, that nothing in the Interim Final will be highly objectionable or problematic.
Legislative Front
On the legislative front, we continue to work for a permanent and long term authorization for both 515 and 538. We responded to Congressional requests on a Civil Penalty proposal and have given them something on that. I know the tax-exempt issue is a big one on the 538 program; Office of Management and Budget (OMB) policy is that we cannot proceed with tax-exempts. If that is an issue that is important, it has to be addressed by the industry.
In staffing, we are continuing to try to improve our training. Rural Development took a very hard cut on the Salaries and Expenses budget this year, so our training capacity is somewhat limited; but, we are trying to do as much as possible. If you are seeing consistent problems, in the field staff or with untrained staff, on particular issues, it really helps us to hear that so we can use that to help prioritize our training. One of the things we are doing this year is a CD-ROM for staff who used to be out there as clerks in the field to just help when they are doing basic inspections. We realize that, particularly for staff who are working on this part time, there are some real fundamental levels of knowledge that is missing; so, hopefully, that will help you. So, you should encourage States when they are dealing with more sophisticated Workouts or problems to really try to have a few staff specialized in that.
Unfortunately, Chuck Wehrwein is leaving the Rural Housing Service February 9. It is a compliment to both RHS and the program that HUD has recruited him away to be the Deputy Assistant Secretary for Multifamily Housing. We will definitely miss him; he has brought a lot to the program and a lot of insights. We wish him the best. While we are hiring a successor for Chuck, Obie Baker and Pat Sheridan will rotate — Obie will be Director first, and then Pat will be Director. Jan Shadburn and I will be available to field any issues.
Finally, I will touch on the Budget. 515 is down to $100 million; 538 is up to $150 million; Rental Assistance is up at $583 million. Right now, that RA number covers all renewals, some new construction or rehab (we do not anticipate it will cover full new construction or rehab). We are looking at some esoteric issues of subsidy rates — as you know, 515 has a history of very high subsidy rates. On rehab or equity loans, if they were pulled apart and funded separately, we could get the cost down. Intuitively, we think we might be able to, but our budget office is going to try to divine those numbers for us. I cannot tell you how we would apportion that $100 million—that conversation is premature.