National Housing Law Project Housing Law Bulletin

Introduction

Although public housing and Section 8 tenant-based program changes and the restructuring of the Section 8 multifamily housing program are among the low-income housing issues debated during the first session of the 105th Congress, no conclusive action has yet been taken.¹ It is almost impossible to predict whether legislation will be enacted this session. Just as last year, the House and Senate have reached their traditional August recess without completing action on housing legislation, in part, perhaps, due to the drive to finalize the bipartisan budget agreement, which will guide spending until 2002, and the Fiscal Year 1998 appropriations process. Even the budget-driven reform of the multifamily housing program, intended primarily to end the "oversubsidization" of project-based Section 8 owners, is not assured, despite proceeding on multiple tracks -- through the budget reconciliation process, the appropriations process, and also as free-standing legislation.

The Funding Bills

The appropriations process for FY 1998 for funding the low-income housing programs is well under way. The July Bulletin discussed some of the details of the bills being considered by the House Appropriations Committee.²

Public Housing and Section 8 Certificates and Vouchers

For public housing and the tenant-based Section 8 program,³ proposed reforms will dramatically alter who is served, how much they will pay, what opportunity they will have to participate in management and operations decisions affecting their homes, their security of tenure, and a host of other issues central to the welfare of low-income housing residents and applicants. Among the issues to be resolved before the full Senate acts on its authorization bill are how shrinking housing resources will be targeted, and an amendment that would require applicants to agree to the release of their drug and alcohol treatment records as a condition of admission. It is an open question whether the Senate, once it completes action on its more moderate bill, can achieve compromise with the House bill's more radical approach.

Who Will Get Housing Assistance?

a. Eligibility

Income requirements -- No change. Both H.R.2 and S.462 continue to restrict occupancy for both public housing and tenant-based Section 8 to low-income families, i.e., households with incomes at 80 percent of area median and below.⁴ However, as a practical matter, with repeal of the federal preferences and the proposed shallower targeting requirements, extremely low-income families who now occupy the majority of units -- those with incomes at or below 30 percent of area median -- will find it increasingly difficult to gain admission. People on welfare and part-time and minimum wage workers in many areas of the country will be skipped over in favor of households with incomes closer to 30 percent of area median. In many regions, households at that earnings level, though by no means well off, are nonetheless better equipped to compete in the private housing market without housing assistance than those currently receiving it.

Non-citizens -- Elimination of the PHA option not to enforce. H.R.2 and S.462 eliminate PHA discretion to provide housing assistance to tenants and applicants regardless of their immigration status. The law had formerly allowed PHAs to opt out of Section 214 of the 1980 Housing Act, 42 U.S.C.A. § 1436a (West 1994). The elimination of that provision would prohibit HUD from providing financial assistance to non-citizens who do not have legal resident status.⁵

b. Targeting

The targeting provisions in current law, along with the federal preferences, assure that the bulk of federal low-income housing assistance serves low-income people. Under existing law, for public housing constructed prior to 1981, 75 percent of applicants admitted must be "very low-income" -- that is, have incomes no higher than 50 percent of area median income. For buildings constructed after 1981, 85 percent of those admitted must be at or below this income level.

Almost all recipients of a Section 8 voucher or certificate must be very low-income under current law. Coupled with the operation of the federal preferences -- which, until their suspension in FY 1996 and subsequent years, gave priority treatment to persons who were homeless, lived in substandard housing or paid a disproportionate share of their income for rent -- these income limits resulted in the bulk of assistance under the public housing and Section 8 programs serving extremely low-income persons.

Income targeting -- Fewer units for poorest households. Both the House and Senate public housing legislation would drastically alter targeting of federal low-income housing assistance, directing more of an ever shrinking resource to relatively higher income households.

Under H.R.2, PHAs would be required to reserve for extremely low-income families -- those at 30 percent of area median and below -- only a minimum of 35 percent of public housing units that become available. For tenant-based Section 8 units, at least 40 percent of units that become available must serve such families. Under current law, the majority of units that become available go to households under 50 percent of area median. As passed, H.R.2 includes a "fungibility" feature that would permit a PHA that exceeds its target on the Section 8 side to offset an equivalent percentage from public housing, thus reducing the number of families it admits to public housing at or below 30 percent of area median income in exchange for awarding more than 40 percent of the Section 8 units it administers to persons in this income range. This dramatic change was adopted at least nominally to create opportunities for more economic integration of public housing. The measure contains a provision prohibiting the concentration of low-income families in particular buildings or developments, with HUD power to review income and occupancy characteristics.⁶

The Senate bill, as reported by the Banking Committee, establishes a tier of targets. For public housing units that become available each year, 40 percent of the units must be reserved for extremely low-income families -- those at or below 30 percent of area median; 75 percent must serve families at or below 60 percent of area median. PHAs may adopt different eligibility standards with HUD approval. For tenant-based Section 8, S.462 reserves one half of the units to families at or below 30 percent of area median, with the same authority as in the public housing program for the establishment of alternative eligibility standards. Like the House bill, S.462 contains a prohibition on concentration of the poorest families in particular developments. The PHA plan, which under S.462 will govern all aspects of PHA operation, must set out how the PHA will create income mix within each project and in its scattered-site developments.

Unlike the House bill, S.462 establishes the same targets for the project-based Section 8 program as for public housing, i.e., 40 percent of the units to households at or below 30 percent of area median, and 75 percent for households at or below 60 percent of median.⁷ In both the House and Senate bills, HUD is authorized to establish income limits above or below 30 percent of median to address unusually high or low family incomes in a given area.

Both H.R.2 and S.462 pay lip service to aiding working families and those seeking to make the transition from welfare to work. However, H.R.2's exceedingly weak targeting and S.462's only moderately better targeting, when compounded by the loss of federal preferences, will shut out those most in need of housing assistance for the foreseeable future. In many, many metropolitan areas, 30 percent of area median income is well above minimum wage levels. Therefore, the targets in both bills will permit PHAs to meet their quotas without renting to any minimum wage workers, much less to welfare recipients.

In addition, only H.R.2 addresses income eligibility for the HOME and CDBG programs. Under current law, HUD caps the income thresholds in very high-income areas at a "national median income," rather than the 80 percent of area median used in the public and assisted housing programs. This cap has worked to assure that CDBG funds "principally" benefit low- and moderate-income households as required under the statute.⁸ The House amendment forces HUD to use 80 percent of area median as a threshold in high-income jurisdictions, permitting the use of CDBG funds to benefit households with incomes as high as $69,280 in Stamford, Connecticut, and $51,040 in suburban Chicago.

Preferences -- Permanently repealed. Both H.R.2 and S.462 adopt permanent repeals of the federal preferences for public housing and all Section 8 programs, authorizing PHA establishment of local preferences based on local housing needs. The House bill identifies the local Consolidated Plan as an appropriate source of information in identifying local needs and priorities. The disfavor with which federal preferences are held notwithstanding, both S.462 and H.R.2 adopt a sense of the Congress provision supporting the adoption of preferences for victims of domestic violence.⁹ The Senate report also urges PHAs to consider the burgeoning elderly population in the development of occupancy preferences.¹⁰

S.462 provides a somewhat stronger directive, requiring that the PHA plan setting out eligibility, selection and admissions policies, including local preferences, be consistent with the Consolidated Plan.¹¹

In contrast, H.R.2 requires that project-based Section 8 owners adhere to any system of local preferences adopted by the PHA in their jurisdiction.¹²

c. Site-Based Waiting Lists

Both measures sanction the use of site-based waiting lists as a way of enhancing resident choice.¹³ Each makes PHA utilization of site-based waiting lists subject to federal civil rights and fair housing requirements in order to avoid the contention that such authority may lead to the steering of residents to particular buildings based upon race.

d. Screening

Both measures enhance a PHA's ability to screen out persons with histories of substance or alcohol abuse or involvement in criminal activity. H.R.2 would impose a three-year bar on persons previously evicted for such reasons from federally assisted housing. For those evicted for less serious lease violations, the period of ineligibility would be for a reasonable time, at the PHA or owner's discretion. Persons convicted of intent to sell drugs after the date of H.R.2's enactment would be barred from admission. S.462 imposes a similar three-year bar for drug-related criminal activity in the absence of completion of a PHA-approved rehabilitation program.¹⁴

One of the most controversial provisions of S.462 is the so-called Grams Amendment. It would require as a condition of occupancy that each adult household member provide a release to allow the PHA to obtain treatment records for illegal drug use or alcohol abuse. As presently drafted, the bill would direct a variety of individuals and institutions -- including physicians, drug or alcohol treatment centers, medical centers, detoxification centers, and various law enforcement agencies -- to provide the PHA information regarding an applicant's current illegal use or pattern of use.¹⁵ This provision raises privacy concerns and is widely opposed by providers and healthcare professionals,¹⁶ although widely supported by PHAs as an additional screening tool.

As an additional means of screening out less desirable applicants, H.R.2 would also prohibit consideration of drug- or alcohol-dependent persons as having a disability or handicap for the purpose of determining eligibility for the federally assisted housing programs.¹⁷

How Much Will They Have To Pay?

a. Brooke Amendment Protections

The Brooke Amendment, which keeps housing affordable for the poorest residents by capping rents at 30 percent of adjusted income, was threatened in public housing legislation considered during the last Congress.¹⁸ H.R.2 retains the Brooke Amendment but also establishes an alternative "family choice" rent scheme. Residents may pay either an income-based rent, essentially 30 percent of income as authorized by the Brooke Amendment in existing law, or a flat rent set annually by the PHA that is based on the rental value of the unit but not greater than the actual monthly operating costs. The flat rent must also not serve as a disincentive for working families. A family which chooses the flat rent but then experiences a change, such as the loss of a job, a death in the family, loss of assistance or other circumstances determined by the PHA, is entitled to switch to an income-based rent.¹⁹

The Senate bill authorizes the PHA to establish rents at no more than 30 percent of the monthly adjusted household income, as provided in current law, but also mandates that PHA rental policies reward work and economic self-sufficiency.²⁰

Both the House and Senate bills provide for permanent authorization of minimum rents -- H.R.2 calling for a charge from $25 to $50, with PHA authority to provide hardship exemptions, and S.462 requiring minimum rents of up to $25 with no hardship waiver.²¹ If, upon a resident's hardship exemption request, the PHA determines that the hardship is temporary in nature, the House bill would bar the PHA from granting the exemption for 90 days. However, the applicant is protected from eviction for nonpayment during the 90-day period. If a determination is made that the request for exemption is valid, the exemption is to be retroactively applied.²²

b. Limits on Rent Reductions for Tenants Who Lose Welfare

Under the House bill, a family experiencing a reduction in benefits, either as a result of failure to comply with the work requirements of welfare reform or for fraud, is not entitled to have its rent decreased -- a change from current law.²³ The House bill encourages PHAs to exercise their "best efforts" to enter into cooperative agreements with agencies responsible for providing welfare assistance to families. The rules relating to the treatment of income changes as a result of welfare program requirements must be incorporated into each individual family's lease.

As with H.R.2, the Senate bill would prohibit the reduction of rents for families that have been sanctioned by welfare for their failure to comply with work requirements or in the event of fraud.²⁴ However, both bills make clear that termination of welfare benefits as a result of expiration of time limits will not bar the household from receiving a rent reduction. An amendment to H.R.2 confirms that if a family has complied with the conditions for receiving welfare benefits but is unable to find employment before running up against time limits, the PHA must consider that reduction in income in its rent determination. Similarly, the Senate bill provides that expiration of the welfare time limits is not considered a failure to comply with the requirements of the self-sufficiency program or workfare.²⁴

Both measures provide tenants affected by the sanctions provision an administrative grievance procedure.²⁵ S.462, like its House counterpart, encourages cooperation agreements between the PHA and agencies responsible for administering welfare programs.

c. Ceiling Rents for Higher Income Tenants

A major premise of public housing reform has been the desire on the part of policymakers to foster rent policies that will encourage and reward work. One such policy is ceiling rents, which will cap what may be paid by working families as an incentive for them to remain in public housing.

S.462 authorizes PHAs to establish ceiling rents that reflect the reasonable market value of the housing, but which may not be less than 75 percent of monthly operating costs plus -- at the PHA's discretion -- a replacement reserve.²⁶ On the other hand, with its "choice" option, H.R.2 in effect mandates that PHAs create ceiling rents for all of their units, because they must offer the tenants a flat rent as an alternative to charging 30 percent of adjusted income.²⁷ Under H.R.2, the PHA may set the flat rent on the basis of the rental value of the unit, but not so high that it discourages working tenants from staying in the unit.

d. Other Work Incentives for Tenants Seeking Employment or Already Employed

Both measures address income adjustment and earned income and other disregards. Under current law, certain types of income are excluded from annual income for the purpose of establishing rent.²⁸ In addition, certain standard deductions apply.²⁹ H.R.2 continues some of the current mandatory exclusions from income, such as a standard deduction for elderly or disabled households, certain unreimbursed medical expenses for elderly families (deductions for non-elderly families would be subject to appropriations), certain child care expenses and child support and the earned income of minor household members.³⁰ S.462 would provide the same exclusions, except that non-elderly or disabled medical expenses, child support and alimony would not be excluded.³¹ However, the PHA is given broad discretion whether to establish exclusions from annual income -- including excessive work- or school-related travel expenses and earned income -- exclusions that would benefit persons making the shift from welfare to work.

What Will Be the New Rules on Evictions?

a. Grounds for Eviction

Good cause and tenant-based assistance -- Eroding protections. Formerly, certificate and voucher holders were protected from eviction without good cause, that is, unless the tenant was responsible for a lease violation or the landlord had a good business reason for not renewing the lease.³² FY 1996 and 1997 appropriations measures made that good-cause requirement apply only during the term of the lease, leaving landlords free to evict without cause once the lease term ends.³³

H.R.2 requires tenant-based leases to provide that, as with current law, a tenancy may be terminated during the term of the lease only in the event of a lease violation, violation of a federal, state or local law, or other good cause.³⁴ The Senate bill does the same, but it would allow the PHA to approve leases of as few as 30 days if that would encourage the landlord to accept the applicant.³⁵ Under the House bill, good cause for eviction from project-based housing is modified in the same manner as in the tenant-based program.³⁶

Crime, drugs and alcohol abuse -- Expanded PHA/owner discretion. Both H.R.2 and S.462 bar a family from eligibility for federally assisted housing for three years if the family is evicted for drug-related criminal activity, unless the evicted member successfully completes a rehabilitation program. The bar from eligibility for other serious lease violations is a "reasonable period of time" determined by the PHA or project owner.³⁷ PHAs and other owners are required to establish standards that deny admission to persons they determine are engaged in illegal use of drugs or where there is reasonable cause to believe such use or pattern of use poses a threat to the health, safety or peaceful enjoyment of others. The PHA or owner may consider rehabilitation of the household member in determining whether to bar admission. Under current law, criminal activity must take place on or near the premises in order to serve as the basis for eviction. However, the House and Senate measures would also sanction eviction from both public and Section 8 housing for off-site criminal activity by a household member.³⁸

b. Procedural Protections

Notice periods modified and shortened. Appropriations measures for the past two fiscal years have suspended the requirement that certificate and voucher holders receive 90 days' notice before eviction when the landlord decides not to renew a Section 8 contract for business reasons.³⁹ PHAs must currently provide public housing residents reasonable notice of termination in the event of threats to health or safety, no fewer than 14 days for nonpayment, and no fewer than 30 days in other cases.⁴⁰

Both measures would permanently modify the notice requirements. For public housing, H.R.2 changes the 30-day-notice period to 14 days in the event of nonpayment, a maximum of 14 days where health or safety threats are involved, or whatever is required under local law -- whichever is less.⁴¹ S.462 would generally require lease termination consistent with local law requirements, but the PHA may use an alternative reasonable time, which is no more than the lesser of local law or 30 days, in the case of health and safety or drug-related or violent criminal activity or any felony conviction.⁴² Under both bills, the 90-day notice for Section 8 evictions would be eliminated.

Minor changes in public housing grievance procedures. As with current law, H.R.2 authorizes PHAs to exclude from the grievance procedure evictions involving activities that threaten other tenants or PHA employees, or drug-related criminal activity, where HUD determines that the basic elements of due process are provided in the state court.⁴³ Tenants being evicted in all other kinds of cases would have a right to a grievance hearing, as long as they request it within five days of receiving the eviction notice and they have not had a grievance hearing on an eviction within the previous year.⁴⁴ The Senate bill makes no change in the administrative grievance procedure.

What About Community Work and Self-Sufficiency Requirements?

Under current law, recipients of federal housing subsidies are not required to comply with work requirements in exchange for assistance. Programs such as Project Self-Sufficiency and its successors, Operation Bootstrap and Family Self-Sufficiency, which have included the award of certificates or vouchers as an incentive, have been strictly voluntary. H.R.2 and S.462 codify the concept of "giving back" in exchange for housing assistance through a system of mandatory "contributions" by adult household members.

Under H.R.2, most public housing residents and Section 8 recipients (excluding the elderly, the disabled, persons working, attending school or training, or otherwise complying with workfare requirements) must work eight hours a month in the community. The requirement does not give rise to an employment relationship between the PHA and the resident/recipient. The community work requirement and rules related to the treatment of income changes resulting from welfare program requirements must be incorporated into each individual family's lease.⁴⁵

H.R.2 goes beyond the community work requirement by introducing for the first time in the 60-year history of the federal low-income housing programs the notion of time-limited assistance. It requires that, as a condition of occupancy, each household negotiate a non-binding target date by which it will no longer need assistance. The target date for transition out of assisted housing, however, does not sanction the PHA's eviction of the family or termination of its housing assistance solely on the basis of the family's failure to meet the target date. Although welfare time limits may be considered in negotiating the family's target date, the time limit for welfare and the target date for graduation from housing assistance are not considered coterminous. Just as with the community work requirement, certain categories of residents/recipients are exempt from the requirement for establishing a target date.⁴⁶

Although not requiring negotiated target "graduation dates," S.462 does impose a community work requirement. The Senate Banking Committee described this requirement not as punitive, but rather as an opportunity for residents to improve themselves and their communities.⁴⁷ Adult household members must perform eight hours a month of community service if they are not participating in a self-sufficiency program (including job training, employment counseling, basic skills training, workfare). As with the House bill, among those exempted from the requirements are persons who would have such an exemption under Title IV of the Social Security Act, i.e., Temporary Assistance to Needy Families (TANF) -- formerly AFDC -- or other state welfare program.⁴⁸

While the ideas of self-sufficiency and personal responsibility merit support, the community service requirements in each bill and the target graduation date in the House bill are troublesome. More focus should be given to assisting residents to assess their need for skills, education and job training consistent with economic opportunities available in their communities. The target date is misguided since even working public housing households have incomes too low to permit them to rent affordable private market housing. Some working residents will be permitted to remain in public or assisted housing, but others who become self-sufficient by becoming employed would face an end to their housing assistance when, in fact, their need has not diminished. Moreover, charging PHAs with administration of mandatory work requirements in legislation designed to maximize decontrol and deregulation is at best inconsistent.

Maintenance and Housing Quality Standards for Public Housing and Tenant-Based Assistance

Under existing law, PHAs must perform initial and annual inspections of privately owned units under a Housing Assistance Payments contract to assure that the units are decent, safe and sanitary.⁴⁹ With regard to PHAs' maintenance obligations for public housing, current law is much less specific.

H.R.2 requires that PHAs maintain their units in compliance with applicable local codes. Where local codes are not in effect for both public and Section 8 housing, HUD is to establish housing quality standards relating to habitability, including construction standards, maintenance, and health and sanitation considerations. The local housing management plan is to specify whether local codes or federal housing quality standards apply. Each PHA is required to make an annual inspection of every unit of public housing as well as each dwelling unit in the Section 8 program.⁵⁰ Unit inspection practices for the Section 8 program are to conform to private housing market practices.

S.462 makes no changes to existing law with respect to housing quality standards for the public housing program. For Section 8, units would have to meet either HUD-established housing quality standards or local codes adopted by the PHA, which at a minimum meet housing quality standards -- and may exceed them -- and which "do not severely restrict housing choice." Units still would be required to be inspected annually. PHA-owned units, other than public housing, must be inspected by an entity other than the PHA -- such as a local government agency, nonprofit or private sector contractors.⁵¹

In sanctioning the application of local codes in lieu of federally established standards, H.R.2 increases the potential for lesser quality rental units to be included in the Section 8 program. No justification is apparent for qualifying housing that does not meet federal standards simply because less stringent local codes may be in effect, particularly when scarce federal housing dollars should be devoted to providing the highest quality housing possible.

The PHA Plan: What Does It Cover, What Does It Do, How Is It Prepared and How Is It Enforced?

Each bill vests most aspects of PHA operations and management in a comprehensive planning process with nominal resident participation. H.R.2's Local Housing Management Plan must be developed pursuant to HUD-prescribed regulations and submitted to HUD every five years with annual updates.⁵² The purpose of the plan is to set out the agency's mission, goals and objectives and to provide a snapshot of long-range capital needs. The plan must identify the jurisdiction's housing needs for households below 80 percent and below 50 percent of area median income, as well as financial resources anticipated in meeting those needs. Eligibility, rent, admissions and occupancy policies for both public housing and Section 8 must be set out in the plan, along with a demolition timetable for any units scheduled for razing. The plan also must set out how the PHA intends to coordinate its activities with agencies responsible for welfare reform.

Public participation requirements are to be met through a public hearing, and the PHA is directed merely to consider any public comments and make appropriate changes, with no direction as to which standard must be applied. The local government responsible for naming the PHA board is required to review and approve the plan as a prerequisite to its submission to HUD. Local government has 45 days in which to approve plans or they automatically are deemed approved. The PHA has 30 days to respond to local government objections or concerns.

HUD must review the plans and has discretion to make a determination of non-compliance only in limited circumstances, including (1) if the plan omits significant information, (2) if data available to HUD challenges information in the plan, (3) if federal law is violated or cost efficiencies are unlikely to be realized, (4) if the plan inadequately addresses the needs of low-income families, and (5) if capital improvement needs are inadequately identified or planned for.

The counterpart Senate bill creates the Public Housing Agency Plan which, while closely aligned with the Local Housing Management Plan, attempts to enhance resident participation through creation of a permanent resident advisory board.⁵³ The board's responsibility would include making recommendations in the development of the plan. These recommendations would be included as a part of the plan when submitted to HUD. If an existing resident council or organization is, in HUD's view, sufficiently representing the interests of residents, HUD has broad authority to waive the requirements for establishment of a resident advisory board. HUD has 75 days in which to disapprove a PHA plan, and HUD's failure to object results in the plan being deemed approved. A provision authorizing judicial review of PHA plan implementation is a critical missing link in making the PHA's planning process meaningful from the standpoint of affected residents. As the planning provision is presently drafted, it is debatable whether disaffected residents, resident organizations and other interested parties have meaningful relief when PHAs fail to live up to their plans.

What New Threats Will There Be to Preserving Public Housing Units?

a. Limits on Development of New Public Housing

S.462 takes the rather extraordinary step of barring the use of public housing capital funds to increase the number of public housing units.⁵⁴ The one exception is that such funds may be used to support the development of mixed-finance projects; however, the cost of such projects may not exceed the cost of providing tenant-based rental assistance.⁵⁵ This approach unfairly compares the cost of short-term tenant-based assistance with hard units of low-income housing. Authorizing the use of grants for construction of mixed-finance housing reflects legislators' desire to create expanded methods for PHA development of replacement housing without supporting the traditional public housing program. It also enables them to address the needs identified in their operational plan. H.R.2 does not contain a comparable bar on use of capital funds for construction of new public housing.

b. Demolition and Sale of Public Housing

Under current governing law, several standards govern public housing demolitions. These include physical obsolescence rendering a project unsuitable for housing, as well as cases where a partial demolition will guarantee the useful life of the remainder of a project. Sale of a project may be considered where the immediate surrounding area has undergone a transition that renders the project unsafe, unworkable as housing, or not cost efficient, or where HUD finds other considerations that render a sale to be in the best interests of residents. Existing law includes the requirement that a demolition application be developed by the PHA in consultation with affected residents and their organizations prior to HUD review and approval.⁵⁶

H.R.2's standards for demolition or disposition include severe distress or obsolescence, a location unsuitable for housing, design flaws rendering rehabilitation not cost-effective, projected market rents that would not cover operating costs and replacement reserves, or where retention of the development is not in the residents' best interests. The PHA is required to confer with residents of the targeted development and local government representatives. The PHA must ensure relocation of displaced residents to other safe, clean, healthy and affordable housing, including the use of vouchers. The replacement housing must be, "to the maximum extent practicable," housing of the residents' choice. Demolition and disposition must await relocation, and resident relocation expenses are to be paid. Under "emergency circumstances," residents may be relocated in the absence of the required plan. Resident organizations have a right of first refusal to purchase, with 30 days to indicate interest and 60 days thereafter to obtain a financing commitment.⁵⁷

The Senate bill continues to require HUD approval of a demolition application, but the Secretary must act within 60 days of receipt of an application containing PHA certifications related to physical obsolescence of the targeted development and the unavailability of cost-effective rehabilitation, among other things. HUD could disapprove any application not developed in consultation with affected residents. The same right of first refusal for resident organizations in the case of dispositions appears in both H.R.2 and S.462.

The Senate bill exempts demolition and disposition activities from the protections afforded by the Uniform Relocation Act. The PHA must simply certify it will pay displaced residents' relocation expenses, that post-relocation rents will be affordable, and that demolition will await relocation of current tenants.⁵⁸

c. "Vouchering Out" Public Housing

Both measures contain both mandatory and voluntary provisions for conversion of public housing to tenant-based assistance. H.R.2's provision, as with the demonstration included in the FY 1996 Appropriations Act, establishes the following criteria for mandatory conversion of public housing units to tenant-based assistance: 300 or more units, a 10-percent or higher vacancy rate, and where the long-term viability of the development cannot be guaranteed and vouchers are more cost effective than maintaining public housing. In addition, a PHA could voluntarily convert to vouchers following development of a plan with resident and other consultation. The plan must be consistent with the local housing management plan and include both a community-impact analysis and a cost analysis that will demonstrate the efficiencies of conversion over maintaining hard units. HUD may disapprove a plan only if it is based upon inaccurate information, and the Secretary may waive the assessment and plan requirements in order to expedite conversion. Resident relocation requirements are similar to those for demolition.⁵⁹

S.462 repeals the FY 1996 Appropriations Act's mandatory conversion provision.⁶⁰ It establishes new criteria for mandatory conversion based on guidelines provided by the National Commission on Severely Distressed Public Housing.⁶¹ Most significantly, unlike the Appropriations Act and H.R.2, mandatory conversion is not limited to projects of 300 or more units. Nonviability, even with rehabilitation, and operational costs exceeding the cost of vouchers are additional criteria. Unlike with H.R.2, the PHA would be required to prepare a five-year plan, consistent with the local Comprehensive Plan, to identify projects to be converted and to set out the steps for implementation. HUD could step in to remove projects identified for conversion if the PHA fails to move forward with its plan. Protections under the existing demolition statute are made inapplicable to conversions. The voluntary vouchering provision requires that the PHA develop, with "significant participation by the residents," a conversion assessment plan similar to that in H.R.2.⁶²

c. Developing Mixed-Finance Projects With Future Loss Problems

H.R.2 authorizes the use of public housing capital funds as well as Severely Distressed Public Housing funds, combined with other funding, for the development of mixed-finance housing with the involvement of the PHA or a PHA-affiliated entity, a partnership of which the PHA is the general or managing partner, or any entity granting the PHA an option to purchase the project and maintain it as low-income housing for 20 years. A mixed-finance housing plan is subject to HUD approval and must demonstrate the PHA's ability to provide permanent financing commitments and comply with such other requirements as HUD may establish. The provision would cap rents for units developed under this scheme to low-income housing tax credit rent levels.⁶³

S.462 is similar except that it bars use of public housing operating and capital funds "in direct support of any unit" not rented to a low-income family. The Senate's provision also includes a 20-year low-income-use restriction.⁶⁴

e. HOPE VI and Its Progeny

H.R.2 replaces the Severely Distressed Public Housing Program with a new $500 million grant program for the demolition of obsolete or severely distressed public housing and to revitalize public housing sites, decrease the concentration of poverty and to provide vouchers to facilitate these activities. In addition to standard activities like demolition, moving expenses for displaced residents and management improvements, 10 percent of the grant funds may be used to leverage or directly provide supportive services to residents. Funds may also be used for economic development activities. Grant funds may be withdrawn from PHAs that fail to "proceed expeditiously." A priority for funding is to be provided to PHAs with current HOPE VI planning grants.⁶⁵

The Senate bill contains a competitive grant program, to sunset after FY 1998, for demolition, site revitalization, replacement housing and vouchers. Broad authority is given to HUD to impose grant terms and conditions, but such terms have to be similar to those of either the existing HOPE VI program or Section 24 of the United States Housing Act. The measure contains an unusual provision authorizing HUD to require that an entity other than the PHA carry out the provision in the interest of expeditiously implementing the grant.⁶⁶

Opportunities for Tenant Participation

Each bill offers some limited opportunities for residents to participate in PHA operations that affect the life of their communities. These range from enhanced opportunity for resident management activities to mandatory resident membership on PHA boards.

a. PHA Board Membership for Tenants

Both bills require most large PHAs to have a resident board member. H.R.2 would require one member elected by residents who is either a public housing resident or a recipient of Section 8.⁶⁷ Under S.462, salaried, full-time boards are exempt from the requirement of resident membership. In addition, smaller PHAs with 300 or fewer units may avoid the requirement if residents express no interest in board service.⁶⁸

PHA boards should have at least one duly elected resident member. The exemptions from the requirement for resident members in H.R.2 erode the ability of residents to have an effective voice in governance of their homes. Since policy related to public housing and tenant-based programs may differ in significant respects, one resident member is insufficient to represent the interests of both public housing and tenant-based residents and applicants. Rather, a representative of both the tenant-based and public housing programs should be required. Ideally, the public housing and Section 8 waiting lists should be represented as well, since policy decisions considered by the board will affect those households' ability to acquire housing assistance.

b. Resident Councils and Resident Management

As under current law, H.R.2 authorizes the establishment of resident councils (RCs) and resident management councils (RMCs), the former for general representation of residents' interests and the latter to manage the developments. RCs must have a democratically elected governing board and hold regular elections. RMCs must comply with state incorporation laws and be established by the vote of a majority of residents, among other requirements.⁶⁹

In the event resident management is chosen, the PHA contracts with the RMC pursuant to a contract that sets out the management responsibilities of each. The PHA is bound not to reduce funding for the first three years the RMC is managing a development, except that reductions and increases in tenants' income may be offset. PHA fraud, waste and mismanagement should not affect income to the RMC.⁷⁰

The final resident management provision of H.R.2 provides for the alternative management of troubled public housing through the transfer of management to independent managers at the residents' request. Funds for operations must be transferred to the manager -- who may be a nonprofit, for-profit, state or local government, or other PHA -- based on an assessment by the manager. Operations are to be governed by a contract between the PHA and the RMC, and the applicable local housing management plan is to apply to policies, management and operations, including demolitions, just as if the PHA were in charge of management.⁷¹

c. Tenant Participation in the Planning Process

H.R.2 requires citizen participation in development of the local housing management plan.⁷² The public is entitled to 45 days' notice of a public hearing, prior to which the plan must be available for inspection at the PHA's principal office. Comments provided by the public, including residents, must be considered and a summary attached as part of the plan. Local officials have 45 days from submission to review and approve the plan. If they fail to act within that time, the plan is deemed approved.

Counterpart language in the Senate bill requires the establishment of a resident advisory board to aid in PHA plan development. Recommendations of the resident advisory board are to be appended to the PHA plan. However, a resident advisory board does not need to be established if a representative resident organization is already functioning. The bill requires PHAs to amend plans upon the resident advisory board's demonstration of inadequate opportunity for comment. Any changes made to the PHA plan as a result of public comment are required to be made in consultation with the resident advisory board.⁷³

d. Tenant Participation at Other Important Junctures

In addition to the foregoing opportunities for resident involvement, S.462 authorizes limited resident participation in both the voluntary and mandatory "vouchering out" context and in the demolition/disposition process. With respect to demolitions, resident participation is limited to expressions of interest in the purchase of a project. As for vouchering out, the bill anticipates "significant participation" by residents in the development of a conversion plan, subject to the ability of HUD to waive the requirement for resident participation. For mandatory conversion to vouchers, a mere resident "consultation" is required.⁷⁴

H.R.2, as noted above, merely establishes the extent of resident involvement as one factor in selecting sites for demolition grants. No guidance is provided in the bill about the nature of the involvement or what weight, if any, is to be given resident views.⁷⁵

The efforts of both H.R.2 and S.462 fall short of creating meaningful resident participation, although S.462's requirement for PHA consultation with the resident advisory board in development of the PHA plan is preferable to the House bill's provisions. Meaningful resident participation must recognize the inherent inequality of the bargaining positions of residents and PHA management. The statute should require that the PHA negotiate with or, at a minimum, consult with duly authorized resident organizations and residents at each critical step in the process of the operation and management of the housing authority that has implications for residents. Minimum requirements for meaningful resident participation at each of these critical junctures would include the provision of complete information to residents, advance notice to facilitate resident preparation for decision-making, technical assistance, the promise of an opportunity to negotiate with the PHA concerning issues with direct and immediate impact, and the obligation of the PHA to fully inform residents of its rationale for taking a particular action. Meaningful resident participation becomes increasingly critical as federal protections are surrendered to local control and extensive deregulation of PHAs becomes a virtual certainty.

e. The Tenant Opportunity Program (TOP)

The House bill authorizes a new program emphasizing resident management activities rather than the resident empowerment focus in current law. An elected resident council must approve the creation of an RMC and work in concert with a public housing management specialist jointly selected by the resident council and the PHA to assess the feasibility of and help set up an RMC. Assuming the RMC can provide the necessary insurance and bonding, it may then enter a contract with the PHA under which their respective obligations must be spelled out. Both modernization and operating assistance would be available to the RMC and up to $100,000 per development could be used for "economic uplift" activities, including job training, economic development, security and related activities even beyond management training activities. A total of $15 million is set aside from the public housing capital funds for resident management activities.⁷⁶

Among the flaws in the provision is the broad authority vested in HUD, at the request of the PHA and RMC, to waive federal regulatory requirements unrelated to income eligibility, rents and other specific areas. In addition, HUD may require RMCs to utilize PHAs as contract administrators for the financial assistance awarded to RMCs under the provision.

Unlike the House bill which emphasizes resident management activities, S.462 authorizes $25 million for direct grants to resident organizations, including RCs and RMCs, for supportive services and resident empowerment activities, including physical improvements for common space for the provision of services, service coordinators, work readiness and related skills training, and childcare, transportation and a range of economic development activities. Resident management, stressed in H.R.2, is only one element of eligible activities.⁷⁷ The capacity of a grant applicant to provide supportive services and resident empowerment activities, its ability to leverage additional funding for services, and the likelihood of the creation of a "high quality" supportive services program other factors for awarding grants.

Funding

a. Public Housing Capital and Operating Funds

Both bills abandon the current public housing funding accounts -- comprised principally of operating subsidy, modernization and development monies -- in favor of capital and operating funds.⁷⁸ Under each bill, capital grants are generally available for the range of activities currently funded under the modernization and development programs, including rehabilitation, site redesign, vacancy reduction, deferred maintenance, demolition and replacement, management improvements, tenant relocation, safety and security, and economic empowerment and self-sufficiency activities. Eligible activities under the operating fund include routine preventive maintenance, anti-crime and anti-drug activities, services, including service coordinators for the elderly and persons with disabilities, public housing tenant management activities, mixed-income developments, and costs associated with the community work and homeownership programs.⁷⁹

H.R.2 authorizes $2.5 billion for fiscal years 1998 through 2002 for the capital fund, and $2.9 billion for that same period for the operating fund. The measure emphasizes PHA flexibility by permitting use of up to 20 percent of capital funding for operating purposes. Small PHAs administering fewer than 250 units of public housing would enjoy complete fungibility among the funds. S.462 also authorizes the transfer of up to 20 percent of capital funds to operating use, but, unlike the House bill, does not confer fungibility authority on small PHAs.

The restrictions on use of capital funds for public housing development represent a significant departure from current law. Public housing is held in such disfavor by policy makers that, even though the program is undergoing dramatic changes to make it more "efficient," more rather than fewer restrictions on use of public housing funds are likely in the future.

a. Funding Authorized for Tenant-Based Assistance

H.R.2 authorizes an appropriation of such sums as may be necessary for fiscal years 1998 through 2002 for its choice-based housing program.⁸⁰ With the need of Section 8 renewals representing a huge proportion of total housing assistance need this year and in the coming years as a number of contracts expire, Section 8 contract reserves held by the PHAs are a vulnerable target for funding. Both bills seek to take advantage of the reserves by requiring PHAs to surrender any excess tenant- and project-based Section 8 contract reserves to be used for new contracts as well as for contract renewals and amendments.⁸¹

The House Bill's Flexible Grant

H.R.2 expands on the Moving to Work demonstration authorized in the FY 1996 Appropriations bill⁸² by establishing a mega-block grant to local governments to permit them, upon application, to receive and combine funding for low-income housing programs, subject to one-to-five-year performance agreements with HUD. The locally run housing program must emphasize strategies that transition low-income families to work, reduce homelessness and expand homeownership. Although federal civil rights and fair housing laws would apply to the block grant, a number of federal protections would be abandoned. For example, rents would not be restricted by the Brooke Amendment as in current law, but would be subject to a standard of "reasonable and designed to encourage employment and self-sufficiency."⁸³

The Home Rule Flexible Grant would be administered in connection with a plan submitted by the jurisdiction, following a public hearing and comment period that included the comments of current and prospective residents. No reduction in the number of families served would be permissible, and the grantee would be required to ensure implementation consistent with welfare programs within the jurisdiction. Currently assisted families would have priority to be housed in units operated under the block grant, and rent increases for such families (but not new families) would have to be phased in over a three-year period. Rental assistance would be offered to families in an amount equivalent to the 40th percentile for rents for comparable units in the jurisdiction.

The grant would virtually assure reduced housing assistance for extremely low-income families in participating jurisdictions. Its reduced targeting requirements, as with H.R.2 generally, would likely result in assistance being directed to households at the upper end of the low-income spectrum -- i.e., 80 percent of area median, which in a number of jurisdictions can be higher than $40,000 a year. In light of the radical changes the grant would make to the delivery of housing assistance at the local level, the resident participation and public comment requirements are wanting. The enormous flexibility that would be afforded grantees in the name of efficiency, promoting work and changing income mix ignores the significant authority already vested in PHAs through their ability to establish local preferences, ceiling rents and other reforms already in place. The Moving to Work demonstration -- for which sites have yet to be selected -- should be given an opportunity to work and be evaluated before a step such as the Home Rule Flexible Grant, with its enormous implications for current and prospective low-income housing residents, is implemented.⁸⁴

Next Steps

Even assuming the Senate considers and passes S.462 after the August recess, it remains an open question whether the House and Senate measures can then be successfully reconciled. A major stumbling block to adoption of public housing legislation during the last Congress was the House strategy of total repeal of the 1937 United States Housing Act. Whether this approach will be favorably considered by the current Senate conferees is unknown. Aside from the likely targeting provisions and the House's Home Rule Flexible Grant program, the differences between the House and Senate legislation could be characterized as marginal, making the prospect of legislation more, rather than less, likely at some point. In any event, if action is not completed during the current session, the entire issue of public housing reform may be revisited in the second session of the 105th Congress.

1. H.R.2, United States Housing Act of 1997, H.R. REP. NO. 76, 105th Cong., 1st Sess. (Apr. 25, 1997), adopted, as amended, May 14, 1997; S.462, Public Housing Reform and Empowerment Act of 1997, S. REP. NO. 21, The Public Housing Reform and Responsibility Act of 1997, 105th Cong., 1st Sess. (May 23, 1997).
2. See Budget Outlook Grim for Low-Income Housing Programs, 27 HOUS. L. BULL. 100 (July 1997), and Congress Moves on Low-Income Housing Appropriations Bills, 27 HOUS. L. BULL. 104 (July 1997).
3. The Senate bill also revises the rules for project-based Section 8 developments. Notable, for example, are the provisions in the Senate bill (S.462) repealing federal admissions preferences (§ 202), adopting the same income targeting rules as those for public housing (pursuant to § 114, at least 40 percent below 30 percent of area median income, and at least 75 percent below 60 percent of area median), and various provisions on screening, leases and evictions (§§ 301-304).
4. H.R.2, §§ 222(a) and 321(a); S.462, §§ 114(a), (b) and (c), amending § 16(a) of the United States Housing Act of 1937, as amended.
5. H.R.2, § 708; S.462 § 404; see Use of Assisted Housing by Aliens Act of 1996 (Title V, Subtitle E, of the Illegal Immigration Reform and Responsibility Act of 1996, Pub. L. No. 104-208, 110 Stat. 3009, approved Sept. 30, 1996); Revised Restrictions on Assistance to Noncitizens (Interim Rule, 61 Fed. Reg. 60,535 (Nov. 29, 1996)).
6. H.R.2, §§ 222 and 321.
7. S.462, § 114.
8. 42 U.S.C.A. §§ 5301 et seq. (West 1996).
9. H.R.2, §§ 223(b) and (c) and § 321(d); S.462, § 406.
10. S. REP. NO. 21, supra note 1, at 43.
11. S.462, § 106, creating § 5A(c)(2)(B) of the United States Housing Act of 1937, as amended, and S.462, § 201.
12. H.R.2, § 601(f)(2).
13. Id. § 224(c), and S.462, § 109.
14. H.R.2, §§ 641-645; S.462, § 301.
15. S.462, § 301(d).
16. American Medical Association Resolution 245 (A-97), Disclosure of Addiction Treatment History in Public Housing Applications, introduced by the American Society of Addiction Medicine.
17. H.R.2, § 641(e).
18. For background information on the issue of minimum rent, see The Brooke Amendment Should Not Be Repealed, 26 HOUS. L. BULL. 17 (Feb. 1996); Minimum Rents: Issues and New Developments, 26 HOUS. L. BULL. 59 (May 1996); and Proposed Changes to Brooke Amendment Will Not Work, 26 HOUS. L. BULL. 79 (June 1996).
19. H.R.2, §§ 225(b) and (d)(2).
20. S.462, §§ 103(a) and (b)(2)(E).
21. H.R.2, § 225(d); S.462, § 103(b)(2)(B).
22. H.R.2, § 225(d)(1)(B).
23. Id. §§ 105(c)(2) and (3).
24. S.462, § 111, creating § 12(d)(2) of the United States Housing Act of 1937, as amended.
25. H.R.2, § 105(f); S.462, § 111, creating § 12(d)(2)(D).
26. H.R.2, § 105(c)(6); S.462, § 111, creating § 12(d)(2)(B).
27. S.462, § 103(b).
28. H.R.2, § 225(b)(1).
29. See, e.g., 24 C.F.R. § 5.609 (1997); 24 C.F.R. § 913.106(c) (1996) (public housing) and § 813.106(c) (Section 8).
30. 42 U.S.C.A. § 1437a(b)(5) (West Supp. 1996).
31. H.R.2, § 104.
32. S.462, § 104(a)(2).
33. 42 U.S.C.A. § 1437f(d)(1) (West Supp. 1996).
34. Pub. L. No. 104-134, § 203, 110 Stat. 1321-81 (1995); Pub. L. No. 104-204, § 201(e), 110 Stat. 2893 (1996).
35. H.R.2, §§ 324(2) and 325.
36. S.462, § 201(a), rewriting 42 U.S.C. § 1437f(o)(7).
37. H.R.2, § 601(f)(5).
38. Id. § 641; S.462, § 301(a)(1).
39. H.R.2, § 641(c); S.462, § 303.
40. Pub. L. No. 104-134, § 203, 110 Stat. 1321-81 (1996); Pub. L. No. 104-204, § 201(e), 110 Stat. 2893 (1996).
41. 42 U.S.C.A. § 1437d(l) (West Supp. 1996).
42. H.R.2, § 226(3).
43. S.462, § 107(f).
44. H.R.2, § 110.
45. Id. §§ 110(b)(1) and (4).
46. Id. § 105(a).
47. Id. § 105(b).
48. S. REP. NO. 21, supra note 1, at 21.
49. S.462, § 111, creating §§ 12(c) and (d) of the United States Housing Act of 1937, as amended.
50. 24 C.F.R. § 982.405.
51. H.R.2, §§ 232 and 328.
52. S.462, § 201(a); S. REP. NO. 21, supra note 1, at 38.
53. H.R.2, § 106.
54. S.462, § 106.
55. Id. § 110, creating § 9(e)(2) of the United States Housing Act of 1937, as amended.
56. Id., creating § 9(e)(2)(B)(ii).
57. 42 U.S.C.A. § 1437p (West Supp. 1996).
58. H.R.2, § 261.
59. S.462, § 115.
60. H.R.2, §§ 203(b) and 263.
61. S.462, § 120(b).
62. Id. § 120(a).
63. Id. § 116.
64. H.R.2, §§ 270-275.
65. S.462, § 119.
66. H.R.2, § 262.
67. S.462, § 118.
68. H.R.2, § 103(b)(2).
69. S.462, § 102.
70. H.R.2, § 234.
71. Id. § 235.
72. Id. § 236.
73. Id. § 106(e).
74. S.462, § 106 creating § 5A(e) of the United States Housing Act of 1937, as amended.
75. S.462, §§ 115 and 120.
76. H.R.2, § 262.
77. Id. § 237.
78. S.462, § 122.
79. H.R.2, § 202(a), and S.462, § 110, amending § 9(a) of the United States Housing Act of 1937, as amended.
80. H.R.2, §§ 203(a)(1) and (2), and S.462, § 110, creating §§ 9(c) and (d).
81. H.R.2, § 306(a).
82. H.R.2, § 308; S.462, § 211.
83. See Pub. L. No. 104-134, Department of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1996, Title II, § 204, 42 U.S.C. § 1437f, 110 Stat. 1321-381 (Apr. 26, 1996).
84. H.R.2, § 402.
85. It should be noted that S.462 repeals the Moving to Work demonstration in favor of its own provision on conversion of distressed public housing to tenant-based assistance. See S.462, § 120(b).