But we don't do anything about the fact that these very poor people continue to live in our cities and rural areas and across our country. So we can end up with local housing policies, which makes it much easier for the housing authorities, whether assisted by the mayors or assisted by anybody else, to work better. But, if we do that by abandoning the basic commitment to the country to help the poorest and most vulnerable people in the country, I don't think in the overall scheme of things that anybody that creates these policies ought to sleep any better at night, because we haven't achieved anything. All we have done is get a little bit wealthier people involved in who lives in public housing.

And that is something I would appreciate you, as I see you nodding your head, maybe I would just ask you to comment on it.

Mr. GOLDSMITH. Well, I think it is a very good observation. I don't particularly view it as my responsibility or yours to provide housing for folks who can afford it on their own. So operating public housing and mixing the economic populations is kind of a strange way to go.

I view my role-let me back up just a second. I think your observations are very helpful. We have the twelfth largest city in the United States, we have got about 850,000 people, and we have got a very high percentage of the poor in our metro region live in my city. And our city already has property taxes higher than the suburbs, education which is a little bit worse, and crime which is worse. So I cannot be entirely responsible for the shelter care for those who are poor. I do believe we need Federal help.

We have thousands of people receiving vouchers for public housing in our community. So I think we agree on the responsibility that it is our responsibility to help those who are poorest.

What I want to do is not be in the business of running public housing. I want to be as a partner with the Federal Government, responsible for delivering shelter care to those who are poor. And so to the extent that we think about running projects and mixing populations inside these projects, I think it is the wrong model.

I think the right model-and let me just do this, and I will stop talking. Our current HOPE VI grant in Indianapolis allows us to take down two public housing communities and create a series of duplexes inside our public neighborhood, sense of family and community, still accepting responsibilities, taking money we were spending before in the project and using it for people.

So what I would rather do is take the Federal dollars and direct them to people based on income levels or poverty or some other standard you set up for me rather than running the projects, and that is why I was shaking my head yes, because I don't think just mixing the populations inside these buildings is really the answer to anything.

Mr. KENNEDY. Well, I don't think, Mr. Mayor, that anybody would have a problem with developing alternative models to the 300-, 400-, 500-unit apartment buildings where you just end up putting the poorest of the poor.

I don't know exactly what the HOPE VI model is you are talking about. I think those are the kinds of things we want to see encouraged by public housing along the way.

I think the way this specific bill is written would, in fact, turn over a tremendous amount of power without any responsibility to serve that lower-income community as a result of the block grant proposal. When we look at projects, or public housing like DC., or Detroit, or New Orleans, which have largely been turned over to the mayors, we haven't seen the kind of leadership that perhaps you have shown in Indianapolis.

So I think you should just recognize that we have got our job to do here and we have got to make sure that the kind of policies we end up pursuing end up allowing the kind of flexibility you are pursuing but

Mr. GOLDSMITH. Could I make one observation, not in terms of having the last word, but in terms of agreeing? Whenever the number of folks that are in public housing currently in a communitysay it is 5,000-it should be our responsibility to continue to provide shelter care for 5,000. And so if one-third of those folks move out and move into single-family or duplexes, then we can provide care for those percent who move out, and if they are replaced inside a project by 1,000 people who are higher income, that is not really what you should hold me accountable for. What you should hold me accountable for is maintaining shelter for the number we fix as the current base when the community grows over time.

Mr. KENNEDY. Mr. Mayor, I wish we had had you last year, because what you just advocated is one-for-one housing, and that is a concept that got blown out of the water about a year-and-a-half ago. But thank you.

Chairman LAZIO. Thank you, Mr. Kennedy.

I just wanted to reflect on the fact that the normal flexible program proposal is an effort to do exactly what I think the Mayor would like to have done; that is, to have a request by a mayor who may be faced with a dysfunctional housing authority or worse, work with HUD, because it is a performance agreement. The plan would have to be a credible plan approved by the Secretary that begins to focus on outputs, not simply the process.

This concept applies not simply to housing but to a whole range of public services where we measure success, because I think people of good will can define what success looks like prospectively and then begin to measure the results.

One of your colleagues, Norm Rice, in Seattle, from the other side of the aisle, has talked about the concept of a seamless grant and integrating Federal resources, setting goals, and having the Federal Government back off and letting local leaders, whether it is the civic leaders or whether it is in the elective office, design the programs that fit the character of their local communities. That is one of the underlying principles and a major step that we are trying to take in H.R. 2.

Can you speak to whether we need to think more broadly than housing? It is a much larger issue. Is housing just a symptom of deeper poverty that we have to deal with in a much more holistic way than we have been dealing with it over the last 35 years?

Mr. GOLDSMITH. That is a very insightful observation, Mr. Chairman, and I am delighted to have the opportunity to respond.

Let me first say I don't think it was meant to be a confidential comment. When Secretary Cisneros was testifying several years

ago and he provided us the floor plan for HUD, I turned to him and said, "Why don't you just deed over the properties to me and tell the owner responsible for people in them to just get out of the way with the voucher money?" And he said, "Because I don't have the authority to do that. If I get the authority to do that then I would consider negotiating it.

So what we are advocating today and the reason we are excited about H.R. 2, is there are some very good managers in HUD, to give them the authority to entertain proposals from mayors and hold the mayors responsible. So that is what excites me about H.R.

2.

Your question is that every family is different. Some families need housing because the husbands are beating up their wives. Some families need housing because they are scared of the 17-yearold delinquents. Some families need housing because they have a person in their family with a severe disability. Some need housing because they don't have any money.

So to the extent you are not always solving the problem necessarily with the vouchers or with the public housing, so today you give me some money for social service, some money for Section 8, some money for HOME VI, some money for CDBG, some money for the homeless, and in the center of all this you have got this public housing walled off or isolated from the rest of those services, and the more flexible those funds, the more you can solve the problems of the individuals that need them.

So I would strongly urge the subcommittee to provide the vehicle to integrate the housing dollars with the other services that are often necessary to get people in the position they need to sustain themselves.

Chairman LAZIO. In your opinion, would it be more likely or less likely that you have local investment in housing and community development initiatives that now target moderately low- and very low-income people and families? What would you have if you had fungibility and flexibility and you had the type of concept you are talking about?

Mr. GOLDSMITH. Oh, dramatically more. I mean, I have got community development corporations; I have got leverage in the CDBG. You have lists playing with tax credit opportunities; you have got private investors. We have the City of Indianapolis actually buying property and doing the environmental remediation and making that available to people.

So as you mix and match funding sources with creative entrepreneurs, with city facilitation, then are you going to find a better match and leverage of those dollars. So I am absolutely confident that you could increase the number of units with the dollars now spent if you can be more creative in the way you use those dollars. Chairman LAZIO. I want to thank you very much, Mr. Mayor, for some very insightful testimony and for answering a great range of questions and of course for the wonderful work you are doing in Indianapolis. Thank you very much and have a safe trip home.

I ask the next panel to please come forward. I want to welcome the second panel. I appreciate very much your taking the time to prepare written testimony and agreeing to be with us here today

and make your presentations. I would like to introduce our next panel.

The first speaker will be the Honorable Susan Gaffney, who is the Inspector General of the Department of Housing and Urban Development.

Before coming to HUD, Ms. Gaffney was Chief of the Management and Integrity Branch at the Office of Management and Budget. I want to say from personal experience that Susan Gaffney is one the finest public servants I have had the pleasure to work with. Her assistance has been exceedingly constructive during the time that I have been Chairman of this subcommittee, and I appreciate that very much.

The next panelist is Ned Epstein. I am going to turn to the Ranking Member, Mr. Kennedy, to introduce Mr. Epstein.

Mr. KENNEDY. Well, I was going to introduce him when he was going to speak, but I will introduce him right now.

I want to just take a moment to introduce a good friend and someone who has worked very hard on a range of public housing issues, Ned Epstein. Ned used to be the Director of the Multifamily Asset Management of the Massachusetts Housing Finance Agency and is one of the premier advocates of housing, for affordable housing, for low-income people around the country. He was responsible for the fiscal and financial viability of the agency's $3 billion multifamily portfolio, and Ned has done a terrific job.

He was very, very helpful to us last year in developing some alternative thinking in how public housing management should be treated in terms of being held to market conditions. I very much appreciate him taking the time to be with us here this afternoon. Thank you, Mr. Chairman.

Chairman LAZIO. I thank the gentleman.

The final panelist is someone who is also no stranger to this subcommittee, or certainly to me. Joseph Schiff is President of The Schiff Group Housing Consulting Organization. He was Assistant Secretary for Public and Indian Housing for the U.S. Department of Housing and Urban Development from 1990 to 1993, where he was responsible for the overall operation of the Nation's public housing, Indian housing, and tenant-based programs.

Before coming to Washington, Mr. Schiff served as Manager of the HUD Kentucky Field Office, where he was responsible for the oversight and implementation of all of HUD's programs throughout the State of Kentucky. He knows HUD from top to bottom, and I look forward to hearing his views on how we can improve the management and oversight for these programs.

I also want to thank you personally for your constructive input in terms of H.R. 2 and many other housing initiatives that we have been discussing.

Without further delay, I will turn to you, Inspector General, for your presentation.

STATEMENT OF HON. SUSAN GAFFNEY, INSPECTOR GENERAL, U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Ms. GAFFNEY. Thank you, Mr. Chairman, and Members of the subcommittee. I am going to talk about H.R. 2 in relation to man

agement accountability issues. I am going to stay away from the policy issues that Mr. Gutierrez was talking about.

Over the last years, HUD's mission has become increasingly vague and broad. The current mission statement is that we are about creating communities of opportunity. At the same time that the mission has become more vague, the number of programs has consistently increased and the number of HUD staff has consistently decreased. These two things have happened with no apparent concern either at HUD or in the Congress about how the two are related.

We also have in HUD a culture that views management as administration having nothing to do with policy or programs. We also have a lot of internal system problems at HUD, and what this all adds up to is a situation in which good performance by HUD is simply an impossibility.

I am heartened by what I have heard Secretary Cuomo say about the situation. He recognizes it and he is putting forth a plan to address it, and it's the first time that has happened since I have been at HUD. But HUD's efforts will be to absolutely no avail unless the Congress steps up and does its part in terms of authorizing legislation, which it has not done for the past several years.

I believe that H.R. 2 is a move in the right direction. You have a very clear statement of purpose. What H.R. 2 is about is decent housing for low-income people. H.R. 2 also accomplishes a major consolidation of HUD programs, which will hopefully enable a decreased HUD staff to do a better job of monitoring oversight, and technical assistance.

House Resolution 2 further has a clear definition of actions that are required to be taken when entities are troubled or near troubled, so that we take those actions out of the political arena. You give greater authority to receivers and the HUD Secretary when taking over properties. This is terrific stuff. This is what should have happened years ago.

Now just one problem I want to talk about and that is the Housing Foundation and Accreditation Board. I fear that concept-I am not opposed to it. I am just afraid of trying to set up that new concept. A new bureaucracy is going to take a lot of time and trouble.

I believe that HUD has come to understand that we have got a bad problem on our hands with PHMAP, the current Public Housing Management Assessment Program. That system measures management processes, it does not measure the quality of housing. What we are about is decent, safe, and sanitary housing; but the PHMAP system ignores that whole area. So we have a situation where, for instance, Memphis is taken off the troubled list, and if you saw Memphis public housing you would cry. Camden is not a troubled housing authority, yet I have never seen anything like the situation of public housing in Camden, New Jersey.

But I think, finally, HUD understands this has to change and we need a new assessment system. I would say: can't we build on what we have, can't we try that without going right now to this concept of an accreditation board? But, other than that, I think it is so important that we get H.R. 2 enacted for all the reasons I have gone through.

Thank you, Mr. Chairman.