National Housing Law Project Housing Law Bulletin

Senate Takes More Moderate Approach to Public Housing Revisions

On March 18, 1997, Senator Connie Mack, Chairman of the Senate Banking Committee's Subcommittee on Housing Opportunity and Community Development, and four co-sponsors introduced public housing reform legislation¹ that largely tracks the measure adopted by the Senate in the 104th Congress.² In his statement on introduction, Senator Mack expressed his strong desire that public housing reform proceed on a bipartisan basis. Some modest changes from last year's Senate bill been made, designed to reflect staff agreements reached last summer between the House and Senate when a conference on the House- and Senate-passed versions seemed possible.

Rents

The Senate subcommittee, unlike its House counterpart, has once again taken a more moderate approach to public housing revisions.³ One of the most significant differences is the Senate bill's retention of the Brooke Amendment. Public housing authorities (PHAs) would be authorized to establish rents less, but not more, than 30 percent of the tenant's adjusted monthly income.⁴ Last year's measure, S.1260, gave non-troubled PHAs virtually unchecked discretion to set any rent they desired for families with incomes above 50 percent of area median.⁵ The provision in S.462 provides the best of both worlds. It eliminates the disincentives to work created by use of the 30-percent rule as a floor and it still guarantees that tenants not be charged an unaffordable rent for public housing. In addition, it avoids the unnecessary administrative complexity of the "choice" system that H.R.2 would create.

There is one part of this provision, however, that could be better drafted. The provision on ceiling rents (§ 103(b)) would grant the PHA authority to establish ceilings and charge them "notwithstanding paragraph (1)." Paragraph (1) is the provision that limits tenants' rents to no more than 30 percent of their adjusted income. If a ceiling rent could be charged "notwithstanding" the 30-percent cap, the cap would not work to keep public housing affordable to poor people.

Working families' rents

Income disregards favoring working families that were adopted last year have been included in this year's measure.⁶ That provision would protect people who go to work after having been unemployed for one year or more from rent increases for 18 months. The provision also provides that, after those 18 months, any rent increases would be phased in over three years. That deferral of rent increases is desirable because it would allow the newly employed family to get settled for a period before they have to deal with increased rents.

In the bill's definition of adjusted income, however, there are two points at which the protections for employed tenants could be improved. First, the definition would allow elderly families, but not working families, to deduct excessive medical expenses.⁷ At a time when many public and assisted housing tenants will be moving from welfare to work, one of their greatest difficulties will be dealing with medical expenses for their families. Those who do incur excessive medical expenses should have the same income adjustment that the bill currently allows to mitigate the effects of those costs for elderly tenants. Such an adjustment for working families existed up until 1981 and should be restored.

Second, the permissive exclusions of some earned income authorized by the bill⁸ will not remove the work disincentives if the PHA chooses not to exercise those options. Mandatory deductions for work-related expenses are needed to ensure that the tenants' rents will not exceed 30 percent of their take-home pay. When employed tenants' rents are based upon gross income, working tenants can end up paying higher rents than welfare recipients with incomes equal to the employed tenants' take-home pay. Under the proposed Section 3(b)(5)((E) of the United States Housing Act, a PHA could create additional adjustments to exclude withholding items such as FICA and income taxes, but it would not be required to do so. To ensure fair treatment for all employed public housing tenants, PHAs should be required to follow adjustments to earned income prescribed by the statute, or at least by HUD.

Minimum rent

The Senate bill again imposes a minimum rent of up to $25, an approach that, while harmful to the most impoverished families, is still preferable to H.R.2 which requires minimum rents from $25 to $50, with PHA authority to grant waivers in certain cases. Nonetheless, it must be remembered that minimum rents affect only the poorest of the poor in America. Only public housing tenants with adjusted incomes below $83 a month are affected by a $25 minimum. All other tenants pay at least $25 under the 30-percent-of-adjusted-income test. Those with adjusted incomes below $83 are people living in states with the very lowest welfare grants, people who have been disqualified from SSI or welfare, such as lawful immigrants, people who never qualified for AFDC because they have no children, and people who are caught temporarily without income during the transition from earned income to welfare, SSI or unemployment compensation. The minimum rent provision should be deleted from the bill.

Welfare sanctions

Section 110 of the bill would prohibit a PHA from reducing the rent or increasing the assistance of a family if its welfare income is reduced as a sanction for not meeting the welfare department's self-sufficiency requirements or because of welfare fraud. The adversely affected family would be granted a right of review through the PHA's grievance procedure. The PHA would be required to enter into cooperation agreements with the welfare department for information sharing about residents' efforts at achieving self-sufficiency and possible welfare fraud and for securing services for public and Section 8 housing tenants.⁹

The provision barring reduction of rent for tenants who have committed welfare fraud has already been enacted as part of the welfare reform bill.¹⁰ The ban against a rent reduction when a family's welfare grant is reduced as a sanction - even if there has been no fraud - is new. Such a provision banning rent reductions in sanctions cases was specifically excluded from last year's welfare reform bill, and for good reason. The welfare bill authorizes welfare grant reductions in the absence of fraud, for example, in cases where minor children do not stay in school or a parent does not pursue a G.E.D. A reduced welfare grant is a severe sanction in itself because the family will have less money to pay for the necessities of life covered by the 70 percent of income not devoted to housing. Simultaneously denying the family a rent reduction to 30 percent of its new, lowered income will almost surely lead to its eviction. Once evicted from public or assisted housing, the family will soon become homeless and the children likely will be placed in foster care. In that situation, the chance that the family will ever become self-sufficient will be just about nil. Effectively removing people from their homes and separating them from their children would hardly seem to further the long-term goals of the welfare reform statute or the country. Therefore, the part of this section unrelated to welfare fraud should be eliminated.

At the very least, if it is retained, the right to review mentioned in the statute should be strengthened and clarified in two important respects. First, in the grievance process, the affected family must be guaranteed access to all the relevant documents upon which the welfare department made its determination and the PHA is seeking to act. Second, in the grievance procedure, the issue to be decided should not merely be whether the welfare department imposed a sanction (which will be uncontested in most cases), but whether the tenant failed to do something required by the welfare self-sufficiency program. Otherwise, mistaken imposition of sanctions will never be corrected in the grievance process. Third, the burden of going forward and of persuasion in the grievance hearing should be upon the PHA.

Targeting

Targeting may present the watershed issue that determines passage of public housing revisions in the 105th Congress and stalemate. The Senate bill's public housing targeting differs vastly from that of H.R.2, which makes the lion's share of housing assistance available to families up to 80 percent of area median and permits PHAs to meet targets on the basis of the PHA's entire tenancy profile rather than on the basis of new households being admitted.

As with last year's Senate bill, S.462 provides for tiered targeting in the public housing program, directing 40 percent of units on an admission basis to families at 30 percent of area median income and below.¹¹ Of all units rented out each year, 75 percent must go to families at 60 percent of median and below. For Section 8 units, 50 percent must go to families with incomes at 30 percent of area median and below.¹² The inadequate targeting of Section 8 assistance to the poorest families is purportedly among the reasons the measure was not introduced on a bi-partisan basis.

Those who argue for continued targeting on an admission basis maintain that a fair share of public housing should remain available to those with the greatest need, and that public housing should not be converted into a predominantly moderate-income housing program.

Skipping

Even with its focus on admissions, as opposed to occupancy profiles, the Senate bill's targeting provision alone will not ensure poor people a fair share of public and assisted housing in most metropolitan areas. It is easy to understand why if one looks at the actual dollar figures that constitute 30 percent of the area median income in many areas. In virtually all the Metropolitan Statistical Areas, 30 percent of area median is well above the income level of minimum-wage workers or welfare recipients.¹³ That is true even if the current statutory authority to adjust the figures downward in areas with unusually high incomes is retained. For example, in Oakland, San Jose, Boulder, Denver, Bridgeport, Hartford, New Haven, Wilmington, Washington, Chicago, Minneapolis-St. Paul, Boston, Newark, Trenton, and Seattle, 30 percent of median income would exceed $16,000 annually for a family of four.¹⁴ In contrast, welfare grants are beneath the $7,500 per year level in the states with the highest grant levels, and full-time work at $5 per hour works out to only $10,400 per year.

If all a PHA has to do is rent 40 percent of its units or provide 50 percent of its vouchers to applicants with incomes beneath $16,000 a year, minimum wage workers or welfare recipients would not be ensured access to public housing or vouchers in these cities or in most of the MSAs at any time. The PHAs could meet their 40- and 50-percent shares required by the bill by renting to persons earning more than the minimum wage, skipping over applicants with minimum-wage jobs or welfare income. In order to work for the lowest income applicants, the targeting provision would have to be amended to bar PHAs from skipping over some applicants in the zero-to-30-percent range and taking applicants in that range with the higher incomes.

Higher targets

Examining the actual figures that constitute 30 percent of the median income in most areas of the country also leads to the conclusion that more than 40 percent of the rented units should be set aside for people at these income levels. The zero-to-30-percent range of area median incomes leaves room to include many applicants who are working, including many who have incomes above the minimum wage. Substantially more of the units rented could be for applicants in this range without undermining efforts to increase the number of employed people living in public housing. For example, for the tenant-based program, the bill should target 75 percent of the admissions to people with incomes beneath 30 percent of the area median, and target all of the units to households below 50 percent of the median. Even in public housing, if 50 percent of the applicants admitted had incomes beneath 30 percent of area median, many of them would be working people with incomes well above minimum wage. In no way would all of that 50 percent of the applicants admitted have to be welfare recipients. All of the remaining half could have even higher incomes.

Preferences

S.462 (§ 107(b)) would also repeal Section 6(c)(4)(A) of the United States Housing Act¹⁵ which establishes the federal and local preference requirements for public housing. That current provision requires that half of the units rented each year go to federal preference holders and that, after a public hearing, a PHA can establish its own local preferences in accordance with local needs for the other half of the units. The bill not only would repeal that statute, but would replace it with a requirement that the PHA's plan only include its preferences, if any.¹⁶ That section contains no criteria whatsoever for acceptable preferences. Until that plan is approved by HUD, the bill would allow the PHA to establish any local preferences it would like for public or Section 8 housing.¹⁷

At a minimum, the statute should require that any preferences be consistent with meeting the needs of people residing in the community and of people on the waiting list identified in the plan. The statute should also require that the preferences be consistent with the local Consolidated Plan.

Set-asides for welfare recipients

As noted above, the Senate bill also contains a provision that would require PHAs to seek cooperation agreements with welfare departments in order to bring self-sufficiency services into housing sites.¹⁸ Greater cooperation between housing providers and the welfare departments will be vital in enabling welfare recipients to move from welfare to work. It is important to remember that housing authorities have something to contribute to this effort: public housing and housing assistance. PHAs will be more likely to secure assistance from the welfare departments for their tenants if they offer the welfare departments housing assistance for welfare recipients not currently receiving it. It would be better if the bill were amended to require PHAs to offer to help the welfare departments by setting aside public housing and tenant-based assistance to applicants receiving welfare. Targeting some housing assistance to welfare recipients will pay off in the long run by making more likely the successful passage of families through the transition stage.

Work Requirement

The Senate bill (§ 110) would require each adult resident of public or Section 8 housing to donate eight hours of work each month to the community where he or she lives. The PHA would be granted discretion to exempt people who are elderly, who have disabilities and cannot comply, who are working, attending school or meeting welfare work requirements, or who are single parents with children six years old or younger. In addition, the provision clarifies that the self-sufficiency provisions are not to "be construed to authorize any public housing agency to limit the duration of tenancy in a public housing dwelling unit or of tenant-based assistance."¹⁹

This provision unnecessarily duplicates requirements that already will be imposed on any non-working tenants who are receiving welfare. In doing so, it may even frustrate achievement of the goals of the changed welfare program if it ends up imposing conflicting requirements on the same people. The provision should be transformed into one that emphasizes tenants' voluntary participation in their communities, instead of mandating involvement. Experience shows that community involvement is more likely to succeed when the community members become involved by their own choice. Forcing tenants to attend tenant organization meetings, for example, is not likely to strengthen the tenant organization or build the community.

Demolitions

No significant changes have been made from last year's Senate bill for public housing demolitions. The provisions continue to afford inadequate protections for residents of developments slated for demolition. One of the grounds for sale of a project is expanded too broadly. Under current law, if a sale is justified on the grounds that it will allow the provision of other housing that can be more efficiently used as low-income housing projects, the alternative projects must provide as many units as existed in the project being sold. That latter requirement, which is essential to make the sale justifiable, is deleted by this bill. Sale of a 150-unit project in order to put a more efficient 50-unit project on the market - which the bill would allow - would leave 100 families without housing.

Tenant and local government consultation

PHAs should have to develop their demolition or disposition plans in close consultation with the affected tenants and tenant councils. That consultation should include always providing the tenants with all the relevant information and with funding needed to secure necessary technical assistance. PHAs should be required to sit down and negotiate with the tenants in good faith about the future of their homes. Current law at least requires PHAs to develop their demolition or sale applications in consultation with the affected tenants and tenant councils. The bill would repeal that provision of current law. It should not.

Local government officials should have some oversight responsibilities when demolition or sale of a public housing development is being contemplated. They should at least have to certify that the demolition or sale is consistent with the locality's Consolidated Plan. The bill would require the local government to certify that the overall PHA plan is consistent with the Consolidated Plan.²⁰ That, however, is not specific enough to constitute effective oversight. The local government should have to approve the demolition or sale application, as current law requires.²¹

Relocation

On relocation protections, the Senate bill is extremely deficient. It would repeal the basic protection that displaced families must be relocated to decent, safe and affordable housing that is, to the maximum extent practicable, housing of their choice.²² Current law guarantees that assurance to tenants displaced by the demolition or sale of their public housing.²³ The bill would repeal that provision and include language requiring only that the PHA pay the tenants' relocation expenses and ensure that their rents after relocation do not exceed their rents under the United States Housing Act.²⁴ There is no assurance that the tenants will not be relocated into substandard housing.

The second defect in the relocation provisions of the bill is that it would make the Uniform Relocation Act (URA) inapplicable to tenants displaced from public housing.²⁵ The URA was passed in 1970 as a result of all the lessons learned the hard way from the destruction of neighborhoods by urban renewal and highway building in the 1950s and 1960s. It was designed to ensure that everyone displaced by federally funded activities would be treated equally and that the hardships of forced relocation would be mitigated as much as possible. We are embarking upon implementation of a plan for demolition of at least 100,000 public housing units and the conversion of others to vouchers. Tenants in those units should not be treated as second-class citizens as far as relocation is concerned. They deserve and need the protections of the Uniform Relocation Act as much, if not more, than others displaced by federal activities. The bill should be amended to delete the provision that would deny them their URA protections.

HUD's role

HUD's oversight of the decisions to demolish or sell projects paid for by the federal government would be reduced to checking whether the PHA made the proper certifications and to disapproving applications where the certification is clearly inconsistent with information HUD possesses. Under the Senate bill, HUD would be given only 60 days to make that determination. No longer will it be responsible for determining independently that the grounds for demolition or sale exist, that the displaced tenants will have a place to move to, and that the PHA has followed the required procedures. Complaints about too much HUD micro-management of the day-to-day operation of public housing do not justify eliminating HUD's role when the decision is whether to remove units from the $90 billion inventory of federally financed public housing. Such basic non-routine decisions are the very ones in which HUD should be involved.

One-for-one replacement

The one-for-one replacement requirement would be eliminated in all cases. The policy argument made for eliminating it is that it has created a bottleneck preventing the demolition of severely deteriorated projects that have become uninhabitable. The remedy should be tailored to the problem. One-for-one replacement should not be eliminated in sale situations, where needed housing is being take off the market for non-housing reasons. Only in cases where demolition is justified because the housing has become uninhabitable and cannot be rehabilitated should the one-for-one replacement requirement be waived.

PHA compliance

Current law provides explicitly that a PHA must not take any action to demolish or sell a project without complying with the statutory limits and securing HUD's approval.²⁶ An exception was added in 1995 for cases where a PHA consolidates occupancy in a building or project to improve tenants' living conditions or services.²⁷ The Senate bill would repeal that compliance requirement entirely,²⁸ but it should not. Without it, tenants would not be able to enforce the PHA's duties set out in the statute.²⁹

"Vouchering Out" the Public Housing Stock

Section 119 of the Senate bill would add a new Section 31 to the United States Housing Act which mandates conversion of certain projects to rental housing assistance. It is modeled on the mandatory conversion provision in the FY 1996 Appropriations Act³⁰ and contains certain important protections for affected tenants. First, it requires PHAs to consult with tenants when identifying projects for conversion. Second, it guarantees tenants a right to notice of the conversion, a right to relocation to public or assisted housing or receipt of tenant-based assistance and relocation counseling. It does not, however, ensure them relocation to decent, safe and affordable housing that is, to the maximum extent practicable, housing of their choice. Current law makes that guarantee to tenants displaced by the demolition or sale of their public housing units.³¹ The same guarantees should be afforded people displaced by conversions, especially since the rationale for the displacement is that vouchers are cheaper. Unlike the 1996 Appropriations Act, the Housing Act's new Section 31 would apply to all public housing projects, not just those with 300 or more units. Mandatory conversion should be applied only to the larger projects.

The Senate bill would create a new voluntary conversion option for PHAs. It has certain requirements that are missing from its section on mandatory conversions. These include requirements that the PHA assess the ability of the private market to absorb the additional voucher-holders, that the impact of the conversion on the neighborhood be considered, and that the conversion not be implemented unless it would principally benefit the tenants, the PHA and the community. As with last year's S.1260, the only grounds for HUD disapproval of the conversion plan would be that the Secretary finds obvious inconsistencies between the plan and the assessment or if contradictory information is in HUD's possession.³² The principles in this voluntary conversion provision should be added to the mandatory conversion section, or the two should be merged into a single voluntary conversion provision.

Housing Assistance for Non-Citizens

The Senate bill would repeal a provision in the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 that allows PHAs to "opt out" of the restrictions on providing housing assistance to non-citizens.³³ The Senate bill would merely allow PHAs to provide housing assistance to non-citizens prior to affirmatively establishing and verifying their eligibility. It would not allow PHAs to choose not to verify immigrant status at all.

Public Housing Agency Plan

Each PHA is also required to establish at least one resident advisory board that is representative of its residents. This board must make recommendations to the PHA on the PHAP's development, and these recommendations must be considered by the PHA in preparation of its final plan. A copy of the advisory board's recommendations must also go to HUD. HUD has the discretion to waive the requirement for establishment of a resident advisory board if the PHA demonstrates that a resident council or other tenant organization already exists that adequately represents tenants' interests. In this respect, S.462 differs from last year's bill which would have required that a local advisory board, comprised of not less than 60 percent tenants as well as other local government and community representatives, have input in the planning process. The rationale for this change was that the Comprehensive Housing Affordability Strategy (CHAS) already provides an avenue for local participation in the planning process for community members beyond the most immediate stakeholders - the public housing residents. S.462 would require a public hearing to be held on the plan, with PHA notice to the public 45 days in advance. The plan must be made available for public inspection during normal business hours at the PHA's principal office. The PHAP may be adopted only after the public hearing is held. In addition to the requirement for PHA consultation with the resident advisory board, the plan must contain the certification of the appropriate state or local official of the plan's consistency with the jurisdiction's CHAS. Among the specific requirements important to residents that must be included in the plan are: (1) identified funding sources, (2) rent policies, (3) selection and admission policies, (4) grievance procedures, (5) needed capital improvements, (6) demolition/disposition plans and timetables, (7) identification of buildings to be converted to vouchers on either a voluntary or mandatory basis, as well as how the such conversion is to be funded, and (8) resident economic self-sufficiency policies. HUD review of the PHAP is limited to review for content, consistency with information available to the Secretary, and existing law. The Department has 60 days to provide written disapproval of the PHAP or it is automatically deemed approved. The Secretary has a more visible role in the case of troubled housing authorities. High-performing and small PHAs may submit streamlined plans to HUD.

Operating and Capital Funds

As did last year's bill, S.462 consolidates public housing capital and operating funds into two block grants and mandates that HUD establish new allocation formulas through negotiated rulemaking.³⁵ Among the permitted uses of the capital fund are: (1) demolition and replacement, (2) tenant relocation, (3) economic empowerment and self-sufficiency, and (4) safety- and security-related capital expenditures. S.462 has refined the language in last year's bill regarding the provision of operating and capital assistance to resident management corporations (RMCs). The current bill stipulates that direct funding may be provided only upon petition by the RMC that is to assume primary management responsibilities, following a HUD determination that the RMC is capable of handling management responsibilities.³⁶

In order to keep rents affordable for the tenants and to maintain public housing in good condition, PHAs will have to receive operating subsidies that close the gap between what the tenants can pay and the costs of operation. Current law recognizes that fact of life by requiring HUD to embody in a contract the provisions regarding operating subsidies, thus guaranteeing their payment, subject to the availability of funds.³⁷ Although that guarantee is conditioned upon Congress appropriating sufficient funds, it reflects a congressional commitment that operating subsidies should be calculated to cover well run PHAs' costs that are not covered by tenants' rents.

Unlike current law, the operating fund provisions in S.462 have no similar commitment.³⁸ The Senate bill would require HUD to establish the operating funds, but there is no provision guaranteeing their payment or their level of adequacy, even subject to the availability of funds. Instead, the concept of covering a well run PHA's costs that are not covered by rents is merely listed as one of the factors HUD may consider in setting the formula distributing the funds among the PHAs. S.462 should authorize sufficient appropriations to cover the PHAs' full operating subsidy needs and should require contracts guaranteeing payment of these costs, subject to funding availability.

Use Restrictions, Mortgages and Mixed-Finance Projects

There are currently two provisions in the United States Housing Act designed to ensure that public housing - in which the federal government has invested significant funds - be used to house low-income people for as long as it can be so used, unless HUD grants permission for demolition, sale or other use. One provision in the current law now prevents a PHA from selling without HUD approval any public housing projects for 10 years after the last year in which the PHA received operating subsidies for the project.³⁹ That provision is necessary to prevent PHAs from selling projects after the original 40-year Annual Contributions Contracts have expired. Current law contains a second provision that ensures public housing's long-term affordability to low-income people.⁴⁰ It mandates that a PHA's obligations regarding modernization funds for a particular project remain in effect for 20 years after the funds are accepted for the project.

The Senate bill would repeal both of these provisions.⁴¹ There are no comparable provisions in the capital or operating fund sections obliging the PHA to continue to operate projects as public housing either for 20 years after they have been modernized or for 10 years after they receive operating subsidies. Such provisions should be retained.

Mortgages

Use restrictions should also be protected in the new Section 32 that would allow PHAs to mortgage their projects or otherwise create security interests in them.⁴² Granting a lender a security interest in a public housing project creates the risk that the project will be lost should the PHA or other owner default and the lender foreclose. Congress should not allow PHAs to borrow against these properties, paid for by the federal government, without ensuring that lenders who acquire them at foreclosure will have to continue to use the property for the purpose for which the federal government paid. Otherwise we will face the same problems regarding the loss of affordable units and the federal government's investment in them that we experienced with the Section 221(d)(3) and 236 programs in the 1970s. The Multifamily Mortgage Foreclosure Act of 1981 provides a model for crafting a use restriction that would survive mortgage foreclosure.⁴³

Mixed-finance projects

A similar problem regarding the length of use restrictions will be created by the Senate bill's section on mixed-finance projects.⁴⁴ Subparagraph (b)(2)(A) of that section would require units in these mixed-finance projects merely to be available for public housing applicants for 20 years. To understand the inadequacy of this restriction involves going back a bit in history.

About 35 years ago, HUD's predecessor designed the Section 221(d)(3) BMIR (below-market interest rate) program with comparable 20-year use restrictions. Seven years later HUD did the same with the Section 236 program. Twenty years elapsed and the chickens began coming home to roost. Section 221(d)(3) and Section 236 owners began to exercise their option to prepay their mortgages and take their buildings off the low-income market. In an attempt to prevent massive displacement and shrinkage of the affordable housing supply, Congress created the preservation program, which is now suffering a slow death because it is believed to be too expensive.

It is important not to make that same mistake again with mixed-finance public housing projects. There is no need to grant private partners full ownership interests in these properties. They will participate as long as they qualify for the tax credits and they can get a market-rate return on whatever capital they contribute for their restricted ownership interests. The use restrictions placed on the properties should last as long as the properties can be effectively used as housing for low-income people. When that time comes, any proceeds from the sale or other use of the properties should be required to be reinvested in housing for public housing applicants.

The Senate bill's language regarding the number of units in mixed-finance projects that must be public housing units also appears inadequate to ensure that the taxpayers will be getting their money's worth.⁴⁵ The bill would require the percentage of public housing units in the mixed-finance project to be proportional to the percentage of total financial commitment provided by the PHA to the project. For example, in a $10 million project, if the PHA contributes one million dollars from its capital fund and the private partner brings in $9 million (most of which is borrowed money secured by a mortgage against the project), the statute might be interpreted to require that only 10 percent of the units be public housing. This would not be a reasonable trade-off, given that the PHA is providing almost all of the equity and the security for the lender. A more careful formula for setting the number of public housing units is required.

The section on mixed-finance projects regarding rents that are assisted under the Tax Credit program will also cause a severe waste of federal public housing funds.⁴⁶ That language would allow PHAs to set any rents they chose for tenants living in such projects, as long as the rents did not exceed the maximum levels allowed in the Tax Credit program. Unlike normal public housing rents, tax credit rents are not adjusted in accordance with tenants' actual incomes. Instead, the rents may not exceed 30 percent of either 50 or 60 percent of the area median income, whichever is elected by the landlord.⁴⁷ Where 50 percent of the area median income is above $24,000 per year - as it is in parts of Florida, Maryland, New York and Massachusetts, among other states - the PHAs could charge rents of up to $600 a month, regardless of the tenant's income. Not many minimum-wage workers or welfare recipients would be able to afford to live in those public housing units.

Certificate and Voucher Merger

The Senate bill would complete the merger of the certificate and voucher programs that HUD began administratively four years ago. The bill would consolidate the certificate and voucher programs into a single program of "tenant-based assistance."⁴⁸ The measure would permanently authorize changes to the Section 8 program made by recent appropriations bills, currently through the FY 1997 Appropriations Act.⁴⁹ These changes include repeal of federal preferences, and affording PHAs discretion to establish local preferences that are not inconsistent with the jurisdiction's CHAS. In addition, as in last year's bill, S.462 would repeal the requirement of 90 days' notice for business-related evictions and limit the good-cause-for-eviction requirement to the term of the lease - repealing the "endless lease" provision. Section 8(t) of the United States Housing Act - the so called "take one, take all" provision that prohibits discrimination against voucher holders by Section 8 landlords - would be permanently repealed.⁵⁰

There are at least two points regarding the merger upon which improvements can be made. First, under the Housing Act's new Section 8(o)(3), tenants would be prohibited from renting a unit if the family's share of the rent would be more than 40 percent of its adjusted monthly income. That language is apparently intended to prevent the family from paying more rent than it can afford. However, its effect will simply narrow the number of units that poor tenants may rent under the program. In cases where to the rents for the only standard units available rent are at levels that would require the tenant's share to exceed the 40-percent limit, the family would have to turn back its voucher, unused. This would effectively force the family into the unsubsidized market, forcing it to pay even more of its income for rent. The 40 percent cap should thus be eliminated.

Second, under the new Section 8(o)(7), landlords would be able to evict tenants at the end of the lease without cause, and PHAs would be able to approve leases of less than one year. If a PHA approves a month-to-month lease (which is the most likely alternative to a one-year lease), the tenant would be left with no protection against arbitrary eviction. At the end of the month, the landlord would be free not to renew the lease, without cause. At most, the landlord would have to give a 30-day notice opting not to renew the lease, but would not have to state a reason. If that provision is retained, we will have cured the so-called problem of the endless lease by authorizing, in effect, a leaseless tenancy. The bill should not authorize exceptions to the one-year lease requirement.

Legislative Process

¹ The Public Housing Reform and Responsibility Act of 1997 (co-sponsored by Senators D'Amato, Bond, Faircloth and Grams, and introduced in March 1997), hereafter referred to as S.462 or the "Senate bill."

² See S.1240, Public Housing Reform and Empowerment Act of 1995 (104th Cong., 1st Sess., introduced Sept. 14, 1995, and adopted Jan. 10, 1996). For background, see The Public Housing Portions of the Senate's 1995 Authorizing Bill, 25 HOUS. L. BULL. 151 (Sept. 1995); Senate's 1995 Housing Authorization Bill: Revisions to Tenant-Based Programs, 25 HOUS. L. BULL. 156 (Sept. 1995); and Both House and Senate Banking Committees Emphasize PHA Deregulation and Reduced Tenant Protections in Authorizing Legislation, 25 HOUS. L. BULL. 202 (Dec. 1995).

³ For background on H.R.2, Housing Opportunity and Responsibility Act, see House Introduces Low-Income Housing Program Changes, 27 HOUS. L. BULL. 1 (Jan. 1997).

⁴ S.462, § 103(a).

⁵ S.1260, § 103(a).

⁶ S.462, § 104(b).

⁷ See S.462, § 104(a), amending 42 U.S.C.A. § 1437a(b)(5)C) (West 1994).

⁸ S.462, § 104, amending 42 U.S.C.A. § 1437a(b)(5)(e) (West 1994).

⁹ S.462, § 110, adding 42 U.S.C. §§ 1437j(c) and (d).

¹⁰ See Pub. L. No. 104-193, § 911, 110 Stat. 2353 (1996).

¹¹ This means that 40 percent of newly admitted households must have incomes at 30 percent of area median income or below. This would be a significant difference from using the approach set forth in H.R.2, which uses the development's entire tenancy as the profile to which the 40 percent target would be applied.

¹² S.462, § 113.

¹³ The only exceptions are Gadsden, Alabama; Visalia, California; Ocala, Florida; Alexandria, Houma and Lafayette, Louisiana; Cumberland, Maryland; Hattiesburg, Mississippi; Las Cruces, New Mexico; Jacksonville, North Carolina; Johnstown, Pennsylvania; Sumpter, South Carolina; Brownsville, El Paso, Henderson County, Laredo, and McAllen, Texas; and Huntington, West Virginia.

¹⁴ HUD Notice PDR-96-01 (Dec. 17, 1996), Attachment.

¹⁵ 42 U.S.C.A. § 1437d(c)(4)(A) (West Supp. 1997).

¹⁶ S.462, § 106, adding 42 U.S.C. § 1437cA(d)(3).

¹⁷ S.462, § 107(h).

¹⁸ Id. § 112, adding 42 U.S.C. § 1437j(d).

¹⁹ S.462, § 110, adding 42 U.S.C. § 1437j(d)(3).

²⁰ S.462, § 106, adding 42 U.S.C. § 1437cA(c)(2)(B).

²¹ See 42 U.S.C.A. § 1437p(b)(1) (West Supp. 1997).

²² S.462, § 114.

²³ 42 U.S.C.A. § 1437p(b)(2) (West Supp. 1997).

²⁴ S.462, §114, revising 42 U.S.C. § 1437p(a)(4).

²⁵ S.462, § 114(c).

²⁶ 42 U.S.C.A. § 1437p(d) (West Supp. 1996).

²⁷ Pub. L. No. 104-19, § 1002(a)(6), 109 Stat. 194 (July 27, 1995).

²⁸ S.462, § 114.

²⁹ See Edwards v. District of Columbia, 821 F.2d 651 (D.C. Cir. 1987).

³⁰ Department of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act (1996), § 202, 42 U.S.C.A. § 1437l note (West Supp. 1997).

³¹ 42 U.S.C.A. § 1437p(b)(2) (West Supp. 1997).

³² S.462, § 115.

³³ Pub. L. No. 104-208, 110 Stat. 3009-546 (Sept. 30, 1996). For background, see Non-Citizens' Rights to Housing Assistance: The 1996 Statutory Amendments and HUD's Implementing Regulations, 26 HOUS. L. BULL. 170 (Dec. 1996).

³⁴ S.462, § 106.

³⁵ S.462, § 109.

³⁶ Id.

³⁷ 42 U.S.C.A. § 1437g(a)(1)(A) (West 1994).

³⁸ See S.462, § 109, rewriting 42 U.S.C.A. § 1437g(a)(1)(A) (West 1994).

³⁹ 42 U.S.C.A. § 1437g(a)(1)(A) (West 1994).

⁴⁰ Id. § 1437l(b)(2).

⁴¹ See S.462, §§ 109 and 112.

⁴² See S.462, § 120, adding a new section 32 to the United States Housing Act.

⁴³ See 12 U.S.C.A. § 3706(b) (West Supp. 1997).

⁴⁴ See S.462, § 118, adding a new Section 30 to the United States Housing Act.

⁴⁵ See § 30(b)(2)(B) of the United States Housing Act, added by S.462, § 118.

⁴⁶ See Section 30(c)(2) of the United States Housing Act, added by S.462, § 118.

⁴⁷ I.R.C. § 42(g)(2).

⁴⁸ S.462, § 201.

⁴⁹ Pub. L. No. 104-204 (Sept. 26, 1996).

⁵⁰ S.462, § 204, repealing 42 U.S.C.A. § 1437f(t) (West 1994).

⁵¹ The Housing Law Project's written testimony at that hearing is available on HandsNet at Legal Services/Substantive Law/Housing.