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Although HUD has, over the past 18 years, produced over 28,000 new Indian housing units, it is estimated that more than 60,000 additional units will have to be supplied before the problem can be brought under control.

The problems facing the Indian and Native housing program, however, are not simply numbers of units. The costs of this housing is substantial.

A recent HUD region IX study shows that Indian housing units average almost twice the cost of comparable section 8 non-Indian housing units.

Coordination between HUD, the Bureau of Indian Affairs, the Indian Health Service and the Farmers Home Administration continues to create major difficulties in the administration of the program.

The quality and capacity of Indian housing authorities, in many instances, is a significant impediment to effective program operations. I would be remiss if I did not also raise a question about the basic direction that the program should be taking. As I mentioned earlier, there are substantial difficulties in securing private credit on reservations, consequently, the Indian housing program has had to address not only the needs of lower income families, but those of the more affluent.

A longer range concern to the committee is whether Congress intends that the Indian housing program should be used to aid all reservation Indians or only those whose incomes are low and who are living in substandard housing.

To deal with this issue during these hearings, the applicability of the credit assistance programs of the Farmers Home Administration and the FHA will have to be explored.

A set of problems as complex as those confronting the Indian housing programs are not easily resolved. That will take the combined efforts of the administration, the Congress, and most specifically, the Indians and Native Americans themselves, an effort that to date has not been forthcoming.

It is our job here today to examine the progress which is being made so as to better assess the need for remedial legislation.

Our first witnesses today will appear in a panel, that panel being comprised of Mr. Clyde T. J. McHenry, Deputy Assistant Secretary for Public Housing and Indian Programs at the Department of Housing and Urban Development, Mr. G. Ronald Peake, Chief, Division of Housing Assistance, Bureau of Indian Affairs, U.S. Department of the Interior, Mr. William F. Pearson, Director, Office of Environmental Health, Indian Health Service, U.S. Department of Health, Education, and Welfare, and Mr. Kenneth Latcholia, Deputy Administrator, Farmers Home Administration.

Gentleman. I am pleased to welcome you to the subcommittee and I think we will proceed in any order that you see fit.

Do you have a preference? If not, we will start with the representative of the Department of Housing and Urban Development.

STATEMENT OF CLYDE T. J. MCHENRY, DEPUTY ASSISTANT SECRETARY FOR PUBLIC HOUSING AND INDIAN PROGRAMS, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT; ACCOMPANIED BY IRVIN SANTIAGO, SPECIAL ASSISTANT TO THE SECRETARY FOR INDIAN AND ALASKAN AFFAIRS, AND JOHN SHAW, DEPUTY DIRECTOR OF THE OFFICE OF INDIAN HOUSING

Mr. MCHENRY. Thank you, Mr. Chairman, and members of the committee.

With me today is Mr. Irvin Santiago, the special assistant to Secretary Landrieu for Indian and Alaska Native programs, and Mr. John Shaw, the Deputy Director of the Office of Indian Housing within the Office of Housing at HUD.

I am pleased to appear before you to discuss the efforts undertaken by the Department of Housing and Urban Development to meet the shelter needs of Indians and Alaskan Native citizens.

Over the last several years, the Department has made true progress in providing increased housing opportunities for Indian and Alaskan Natives. Since fiscal year 1975, almost 12,000 units of housing have been made available for occupancy, and construction has begun on 19,000 units. Further, funds have been reserved for over 32,000 units.

For this fiscal year alone, our goal is to realize starts on some 5,000 units and to complete construction on 5,000 more. In addition, we have set aside funds which are sufficient to reserve 6,000 units of housing.

Our fiscal year 1981 plans will be reviewed by this subcommittee in greater detail when our authorization hearings begin in 2 weeks.

Briefly, however, the Department's request for fiscal year 1981 will be for funds sufficient to reserve 4,000 units of Indian housing. We feel that this level of activity is realistic and sufficient given the number of reservations still in the pipeline. That is, the backlog of Indian housing units reserved but not started.

Consequently, the Department believes that at this time, the most prudent course of action would be to concentrate our efforts on increasing the number of units reaching construction, and thereby reducing the backlog.

Housing production, of course, has not been our only focus. We have tried to improve the operation of the Indian housing program, and have undertaken several efforts in that regard. For example:

First, revision of the Indian housing regulation. The revised regulation became effective on December 6, 1979. Some of the principal improvements provided in the new regulation are: Additional procedures to facilitate the establishing and revising of separate prototype costs for Indian areas; provision of operating subsidy to IHA's for mutual help projects under specified circumstances; strengthening and clarifying the responsibilities of mutual help home buyer families and the IHA's in the maintenance of homes; establishing a means for Indian preference in contracting without the use of price differential; and providing more Indian Housing Authority input into housing design.

Second, expanding the public housing modernization program to Indian housing homeownership projects. Amendments to the Depart

ment's modernization regulation also became effective on December 6, 1979. Essentially, this regulation provides that if a home buyer family determines that its unit is in need of modernization with respect to eligible modernization work items, and if the home buyer family agrees to a proportionate extension of its home buyer agreement with its respective Indian Housing Authority, modernization funds may be expended.

Homeownership projects comprise some 70 percent of Indian housing units. Contract authority to support approximately $7.2 million in loan authority for Indian housing modernization work was set aside by HUD in fiscal year 1979.

We expect this same modernization level to be maintained during fiscal year 1980.

Third, Indian housing headquarters and field reorganization. In recognition of the need to provide specialized staff attention to Indian programs, the Assistant Secretary for Housing has established a separate Office of Indian Housing with nine employees. In addition, a separate staff is being established by the Assistant Secretary for Community Planning and Development to handle community development block grants, technical assistance, and 701 planning grant programs for Indian tribes.

As a next step, a restructuring of the field staff is underway to combine all Indian programs in six offices in order to aggregate a sufficient workload to warrant a separate staff with each of the various technical and functional areas represented.

These offices are located in the regional offices in Chicago, Denver, San Francisco, and Seattle, and the area offices in Oklahoma City and Anchorage.

We feel the field office restructuring will provide the continuous, specialized and intensive staff attention to Indian housing that is essential for expeditious and successful Indian housing development and management.

Fourth, interdepartmental agreement on Indian housing. The interdepartmental agreement between HUD, HEW, and Interior is currently being revised. HUD has submitted a revised draft of the agreement for Interior and HEW review.

A permanent working group consisting of members of the actual Indian program staff of the three agencies has begun to resolve interagency differences in the interpretation of the interdepartmental agreement. We have already begun to see progress from our efforts in this area.

In addition, HUD is currently initiating several programs to meet special Indian housing needs. For instance, two projects have been awarded grants for congregate services.

The Department has also reserved funds for a demonstration project comprising 24 small group homes for mentally and physically handicapped Indian people, including elderly and children.

These group homes are to be constructed and equipped as part of a joint initiative between HUD and HEW. HUD has also funded three IHA's to develop and implement their own project-based budgeting and accounting systems.

Despite our progress, the Department is sensitive to the fact that there are special problems unique to the construction and develop

ment of Indian and Alaskan Native housing. Foremost is the problem of cost. The Department's attempts at cost containment with respect to Indian housing must, however, consider several reasons for higher Indian housing costs, reasons which go beyond general inflation which is something over which we have little or no control. Principally, the reasons for higher Indian housing costs are:

Expense of transporting materials and attracting labor to remote locations. These costs are further aggravated in Alaska by reason of the shorter construction season and dependence upon terrain and weather conditions.

HUD assumption of costs for water and sewer facilities on individual homesites, as well as for community systems within the boundaries of the project—rather than being supplied by the Indian Health Service.

The primary type of shelter built is scattered site, single-family detached units designed to accommodate large families under the mutual help homeownership opportunity program.

Compared to the rental program, the homeownership program has a shorter term of ACC, higher interest rates, and therefore, a higher per unit annual contribution-although runout costs or total budget authority is less.

Unique risks associated with construction on Indian land. Access to trust land and inability to secure ownership of sites are risks which may cause developers to compensatorily inflate costs. The inability for mechanics liens to be invoked creates higher insurance costs and higher subcontract amounts.

Contractors for mutual help projects must factor into their cost estimates additional expenses for supervising and training of often unskilled mutual help participants who elect to contribute their required mutual help contribution through working on the project.

In response to the high cost issues we face, the Department has attempted to make prototype cost limits more accurately reflect conditions in Indian areas by establishing separate Indian prototype cost. This action should make prototype costs more sensitive to the factors unique to the development of Indian housing.

Further, the Department is considering actions in order to alleviate the problems associated with the delay in the publication of the annual updates and interim revisions to prototype costs. The Office of Indian Housing is attempting to deal with the problem by granting the IHA some flexibility with the prototype cost limit. That is, upon the evidence firmly supports the request and the design cannot be of the prototype cost. HUD will agree to revise the prototype cost if the evidence firmly supports the request and the design cannot be modified to reduce the cost sufficiently.

In conclusion, I would like to mention that the Department's fiscal year 1980 block grant funding level for Indian tribes and Alaskan Natives is $31 million; the estimate for fiscal year 1981 is $33 million. As detailed in the Department's community development block grant regulation for Indian tribes and Alaskan Natives, eligible uses of such block grant funds may include the rehabilitation or modernization of Indian Housing Authority, units. The decision to use CDBG funds for such activity, however, rests with individual Indian tribes. Mr. Chairman, I appreciate this opportunity to discuss with you the

directions in which the Department is moving to improve its Indian and Alaskan Native housing programs and increase housing production in that area.

As you can see, we have taken measures at the central office level, in the field, and with other Federal agencies to help meet Indian and Alaskan Native housing needs.

We have reached out to various groups and organizations in order to solicit their views and better understand their special needs. We hope, in the future, to further improve upon our current record, and make our Indian housing programs even more responsive to the need that exists.

I will be happy to answer any questions you or members of the subcommittee might have.

Thank you, Mr. Chairman.

Chairman ASHLEY. Thank you, Mr. McHenry.

At this point in the hearing record I should like to have included a letter from HUD Assistant Secretary Lawrence B. Simons, dated February 19, 1980, regarding a request for certain data on Indian and Alaskan Native housing programs.

[The Simons' letter follows:]

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