FOR IMMEDIATE RELEASE: Wednesday, January 8, 2014

DCA Commissioner Constable Addresses Sandy Housing Recovery Before Assembly Housing and Local Government Committee



Chairman Green, Vice-Chair Jasey, and Members of the Committee, thank you for the opportunity to testify today regarding the progress the Department of Community Affairs (DCA) is making to assist New Jersey families recover and rebuild from Superstorm Sandy, the worst natural disaster in our state’s history. Joining me are Chuck Richman, Deputy Commissioner and Stacy Bonnaffons, Assistant Commissioner for Sandy Recovery.

Since Sandy hit in October 2012, I have had the opportunity to meet many Sandy-impacted New Jerseyans and listen to their personal stories. I fully recognize that too many remain out of their homes. That too many are still rebuilding. That people are frustrated. I hear their frustration and assure you that every day our singular focus at the Department is to get your neighbors and mine back into their homes.

As you may know, DCA is the lead state agency responsible for the administration of the federal Community Development Block Grant-Disaster Recovery (CDBG-DR) funds granted to the State by the U.S. Department of Housing and Urban Development (HUD). In January 2013, Congress passed a $60 billion Superstorm Sandy aid package, which included $16 billion in CDBG-DR funds available to New Jersey, New York State, New York City, Connecticut and other states. In the first round of funding, the federal government allocated $1.8 billion in funds to New Jersey. On March 5, 2013, HUD published the notice detailing the requirements for receiving and spending funds.

We moved quickly to develop an Action Plan that incorporated considerable input from the public, affected communities, elected officials, stakeholder groups and other State departments and agencies. On April 29, 2013, six months after Superstorm Sandy made landfall, HUD approved the State’s plan for our initial allocation. New Jersey did not receive authority to draw on these relief funds until May 21, 2013, less than eight months ago.

During this eight-month timeframe, DCA has worked aggressively to disburse these funds to Sandy-impacted communities and to benefit storm-impacted residents. Understandably, as we undertook this massive effort, we were not perfect. But, every day, we learn important lessons and constantly strive to improve our program delivery.

Indeed, we have been nimble enough to recognize shortcomings in our approach and to make meaningful programmatic and operational changes. For example, we have increased training for housing recovery personnel and are constantly improving IT systems to better serve our applicants. Additionally, when the federal government, after months of our seeking the regulation change, allowed homeowners to be reimbursed for money spent to fix their home, we immediately changed our procedures to not only allow 2

for reimbursement but to also allow homeowners freedom to choose their own contractor. As a result of these enhancements, the program has seen significant improvements since we launched in May 2013.

Notwithstanding our challenges, New Jersey is rapidly moving forward with our recovery efforts. In fact, by all objective measures, we are outpacing other Sandy-impacted states. We launched 17 CDBG recovery programs within three months of HUD approval. And, eight months after HUD released funds to New Jersey, we have awarded nearly $900 million of the $1.8 billion in relief funding, with more than 70 percent of the housing funds awarded to low-to-moderate income (LMI) households and communities. As we work to get the initial allocation to impacted residents and communities, we are simultaneously planning for the next allocation of federal Sandy recovery funding.

Now, I would like to outline the State’s progress in implementing some of the recovery programs for homeowners and renters, businesses, and local governments.

HOMEOWNER RECOVERY PROGRAMS

On May 24, 2013, just four weeks after receiving Action Plan approval, we launched two major programs for homeowners. First, the Homeowner Resettlement Program, which provides grants to affected homeowners who are committed to stay in their home county and sustain their community. The second program, the Reconstruction, Rehabilitation, Elevation and Mitigation, or RREM Program, is a construction-based program designed to help Sandy-impacted homeowners repair or rebuild their damaged homes. Because of the State’s extensive outreach, DCA received almost 23,000 Resettlement applications and more than 15,000 RREM applications.

Homeowner Resettlement Program

The Resettlement Program is a $180 million program aimed at encouraging Sandy-impacted homeowners to remain in the nine most impacted counties, as determined by HUD. It does this by providing $10,000 grants to eligible households as an incentive to remain in their existing home or in their impacted county.

Approximately 18,000 homeowners who applied met the program’s eligibility requirements. Of those, 16,800 homeowners – including every eligible LMI household that applied before the July 1 initial application deadline – have been awarded a Resettlement grant.

These numbers should be increasing relatively shortly because we have requested approval to move additional funds to both our Resettlement and RREM Programs and expect approval from HUD any day. When approved, we will add $35 million to the Resettlement Program, which will enable us to provide every eligible Sandy-impacted family on the program’s waitlist with a $10,000 grant.

Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) Program

The State has been able to get checks into the hands of New Jersey families rapidly in the Resettlement Program because there are fewer federal mandates requiring high levels of documentation and environmental reviews. By contrast, the RREM Program, which is the State’s largest CDBG recovery program, is highly regulated by the federal government and as a result takes longer for grant awards to be finalized and disbursed to homeowners. These bureaucratic requirements are mandated by the Obama Administration and are in place largely in response to the waste, fraud and abuse experienced in the Gulf Coast region post-Katrina.

Understandably, the RREM process, with its federal mandates, can be daunting for many homeowners. To help homeowners navigate the process, the State established Housing Recovery Centers in each of the nine most impacted counties, assigned trained Housing Advisors to every homeowner in the program, and established a toll-free hotline. However, even with the additional support the State is providing, the highly 3

federally regulated RREM Program is still a long and complex process for awardees. Let me take a moment to detail the reasons for the committee.

First, because there are income limitations, homeowners receiving a RREM award must meet with their Housing Advisor in order to provide income verification documents such as tax returns, pay stubs or Social Security benefits.

Next, the State must find out how much money the homeowner received from private insurance, the Federal Emergency Management Agency (FEMA), the U.S. Small Business Administration (SBA) and other sources toward an individual family’s recovery and rebuilding. HUD strictly enforces their definition of duplication of benefits.

Throughout this process, because of the limited funds from HUD, we have purposely prioritized primary homeowners with the most financial need and the most damage. To ensure we are providing that support to those needy homeowners, each of the 4,000 homeowners that received a preliminary award letter is required to provide a substantial damage determination letter for their property from their local flood plain administrator. This letter demonstrates that the property sustained Sandy-related damage equal to 50 percent or more of its pre-storm fair market value.

We also have to verify actual expenses and receipts that are related to any rebuilding work homeowners did previously because HUD will only reimburse work they consider "reasonable and necessary" between the date of the storm and the date homeowners submitted their RREM application.

Finally, before any construction can begin or payments made to homeowners, we must conduct fairly exhaustive environmental and historic reviews of each and every property because HUD demands confirmation that properties that have had homes on them must be newly confirmed to have no disturbance to the environment or historic and archaeological artifacts. This federally mandated review can take anywhere from two to six weeks for each property.

Even with all those steps, more than 4,100 families have been preliminarily awarded a RREM grant. As I previously noted, we expect HUD to allow us to move an additional $110 million to the RREM Program to enable approximately 1,000 more Sandy-impacted families currently on the waitlist to receive a RREM grant. We also intend to allocate a significant portion of future CDBG recovery funding towards serving homeowners on the waitlist.

To date, we have completed RREM grant award signings with over 1,000 awardees, committing approximately $100 million in grant assistance, including having sent out almost $20 million in reimbursement payments for rebuilding work already completed. Homeowners can absolutely count on these monies. Over the next month, we have more than 500 RREM grant award signing appointments scheduled and we continue to schedule dozens daily.

RENTAL RECOVERY PROGRAMS

In addition to the Resettlement and RREM Programs, New Jersey is taking bold steps to spur the development of affordable rental housing. This Administration has committed nearly $380 million in federal CDBG-DR funds for programs specifically designed for renters and rental property owners. These funds will increase the stock of rental housing in Sandy-impacted counties, repair affordable rental units left uninhabitable by the storm, and provide options for residents with special needs.

Now, I understand that there has been some commentary that the State is somehow short-changing renters in this recovery, but that criticism is unwarranted under any fair analysis. FEMA data showed that the 4

residences that sustained "severe or major" damage from the storm were 72 percent owner-occupied primary residences and 28 percent rental units. Notwithstanding, the State, in allocating its housing recovery money, committed funds, 67 percent to owner-occupied and 33 percent to rental units – a ratio greater than the FEMA damage assessment would indicate. The State over-allocated funds specifically for the assistance of renters. Therefore, suggestions that the Sandy-impacted rental population is inadequately addressed is simply unfounded.

As a result of our investments, the State anticipates that more than 7,000 new affordable housing units statewide will be created over the next two years. This is because of a robust fleet of affordable housing programs, including the Fund for Restoration of Multi-Family Rental Housing, the Landlord Incentive Program, the Landlord Rental Repair Program, and New Jersey Redevelopment Authority’s (NJRA) Predevelopment Loan Fund for Affordable Rental Housing. This also includes zero-interest loans and forgivable mortgages through the New Jersey Housing and Mortgage Finance Agency’s (HMFA) Sandy Homebuyer Assistance Program and Neighborhood Enhancement Program.

On the housing front, the State is allocating more than $1.15 billion dollars to recovery programs, including the Resettlement and RREM programs and the comprehensive suite of affordable rental programs. Of this funding 77 percent is targeted toward LMI households throughout New Jersey.

ECONOMIC AND LOCAL GOVERNMENT RECOVERY PROGRAMS

While today’s hearing focuses on housing programs, through the CDBG recovery funding, we have been able to assist communities in economic recovery by allocating $460 million to the New Jersey Economic Development Authority to implement Stronger NJ, which include grants, loans and long-term economic revitalization programs. Additionally, DCA allocated over $60 million to assist Sandy-affected municipalities maintain essential services, plan for their long-term recovery, and expedite zoning approvals for reconstruction. DCA also conducted nearly 40,000 inspections to assist municipalities avoid a backlog that would have prevented residents from quickly beginning to repair and rebuild their homes.

MOVING FORWARD WITH REBUILDING AND RECOVERY

As you are aware, the State will receive an additional $1.46 billion in federal CDBG-DR funding to continue our rebuilding and recovery efforts. Currently, the State is developing an Action Plan, which will detail how these additional federal funds will be spent. While HUD has clearly indicated it would like a large portion of this allocation directed to infrastructure-related projects and initiatives, the State still intends to direct a significant portion of this funding toward housing recovery programs as well.

We are designing the Action Plan in consultation with the public, elected officials, long-term recovery groups and other stakeholders across New Jersey. Since HUD published the recent notice, State departments and agencies have engaged in stakeholder outreach focused on how to best use the second allocation of CDBG-DR funds. We anticipate releasing a draft Action Plan later this month. Furthermore, once a draft plan is released, the public will have an opportunity to comment, both in writing and during a public hearing.

As the chief administrator of these programs, more than anyone I wish that this process could be faster, simpler, and easier. And I assure you, each and every day I demand DCA and all our partners scrutinize our procedures to assure New Jersey families that we are doing everything in our power to help them get back in their homes.

Mr. Chairman, I am happy to answer questions from the Committee.

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