Page-by-Page Analysis of the
Public Housing Reform
and Responsibility Act of 1997, S. 462

Section 2. Findings and Purpose

Page 3, line 11 ff. Findings. We appreciate the recognition in statute that two of the problems plaguing public housing are the concentration of very poor people in very poor neighborhoods and disincentives for economic self-sufficiency. These are critical issues that the industry, Congress, and HUD must face and resolve.

Page 3, line 16 ff. PHADA applauds the bill's recognition that "the Federal method of overseeing every aspect of public housing ... aggravates the problems and places excessive administrative burdens on public housing agencies." We also support the basis for proposed solutions: consolidating programs, streamlining requirements, maximum authority with appropriate accountability for HAs that perform well, and rewarding resident employment and self-sufficiency. Further, we concur with the four purposes on pages four and five.

Section 5. Proposed regulations

Page 5, line 20. The bill calls for proposed regulations to be submitted by HUD to Congress within nine months of enactment. In our comments last year on S. 1260 we argued for a six month time frame with final rules within one year of enactment. However, S. 462 mandates that many rules, including the agency plan, be written through negotiated rulemaking -- something which PHADA strongly supports. Indeed this is one of the major improvements of the bill. Therefore we concur with the nine month time limit for proposed rules. This means, however, that HUD must be put on notice to begin the negotiated rulemaking processes immediately upon enactment. In addition, the Department should be given specific authority to contract with parties who could assist with the negotiated rulemaking procedures and with drafting those rules not included in neg-reg to expedite this process and to remove HUD's downsizing as an excuse for not getting the job done on time.

Section 6. Elimination of Obsolete Documents

Page 6, line 10. PHADA supports the elimination of all HUD rules and regulations within one year of enactment. We ask, however, that the bill go further and state clearly that should HUD not have new regulations, including those drafted through negotiated rulemaking, that all the provisions of S. 462 become self-implementing.

Section 7. Annual Reports. Line 18 ff. We strongly recommend that language be added to clarify that the entire report and database from which the report is derived be public. Housing authorities and industry representatives place great value on such data. It is extremely useful for policy planning and evaluation. Currently, those seeking public information, e.g., the MTCS, despite going through hoops and FOIA requests, are often frustrated in getting the information. This is public information and HUD plays it must too close to the chest.

TITLE I -- PUBLIC HOUSING

Section 102. Membership on Board of Directors.

Page 8, line 10. Required membership. We recommend that "(a)" and "(b)" of this section be deleted. The foundation for our position is that board membership should remain a state and local decision. This is in concert with the underlying philosophy of this bill and, indeed, of the majority party in many legislative initiatives. Board membership, both composition and method of selection, should not be dictated by the federal government.

PHADA has been, and remains, a strong advocate for resident initiatives and resident involvement in the quality of life at their public housing developments. Current law does not prohibit board membership for any resident or any participant in the Section 8 program. In fact, many housing authorities have residents serving on their boards. Thus, this section not only intrudes upon the legitimate authority of the locality acting within its state charter, but is unnecessary.

By enacting this provision, Congress may inadvertently do damage to state statutes. There may well be unintended consequences to such important issues as term, selection process, and qualifications.

If the Congress decides, however, to mandate such membership, PHADA much prefers the methodology in this bill to that in the House. We appreciate that the Senate bill does not change the current method of board appointment. We have two suggestions, however.

The first is to make clear what is already possible, that the pool of possible resident appointees includes any adult family member living in any housing owned, operated, managed, or assisted by the housing authority.

Secondly, we advocate that small housing authorities, i.e., those with less than 250 units of public or assisted housing, be automatically exempted from the requirement. Currently, the only exemption is for HAs that have paid board members. Small authorities, some with only a handful of units, are in a unique situation. Many of them have encountered great difficulty in organizing resident councils, receiving sufficient resident input on modernization plans, as well as on other resident-related activities. Mandating that these small agencies appoint a resident member is less than helpful.

Section 103 Rental Payments.

Page 9, line 1. PHADA has consistently supported the abolition of the Brooke Amendment. In our view, the federal government should not be able to have it both ways, i.e., cut subsidies on the one hand and restrict the rents that HAs may charge on the other. It is, after all, largely because of the federal preferences and the Brooke Amendment that public housing residents are at less than 17 percent of median income nationwide. This is not some mere statistic -- it represents very real and serious financial, management, and social consequences. It has led to massively increased need for subsidy, the virtual absence of working role-models, the paucity of two-parent families, and the demand for intensive social services without accompanying financial resources. While the abolition of the preferences contained in this bill is truly welcome, it will take time and money to reverse the situation and see increases in HA rental income.

However, PHADA also recognizes the political reality that there is little chance that Brooke will be abolished. Hence, PHADA supports the change in language from last year's legislation to permit HAs to charge "up to" 30 percent of the adjusted income for rent. This would permit HAs to charge less rent under certain circumstances, and therefore, offer a more attractive deal to working families. This we recognize as a welcome improvement. By itself, however, it will do little quickly to mitigate the current situation. When taken in conjunction with income targeting, it is clear that HAs and the families they serve will continue to be at serious risk for some time to come.

Page 9, line 8. Authority of PHAs. PHADA supports maximum flexibility for housing authorities to implement ceiling rents. Amending the 1937 Act to include the phrase "that reflect the reasonable market value of the housing,..." would represent a major improvement over current law if S. 462 actually permitted this level of flexibility. However, the rest of the language remains essentially unchanged, making it almost impossible to set ceiling rents at the market level. This is in starkly inconsistent with the stated earlier statements regarding findings and purposes.

Housing authorities wishing to use ceiling rents would still be required to ensure that they are not less than the actual monthly operating costs plus a deposit to a replacement reserve. While we appreciate the fact that the amount of the replacement reserve portion would continue to be determined solely by the HA, continuing to tie ceiling rents to the authority's operating costs bears no direct relationship to the market value of the unit. Simply put, any system that sets the ceiling rent above the market rent will be a system on paper only.

For ceiling rents to work, HAs must have the flexibility to set ceiling rents that compete with the private market. In doing so they would obviously consider their costs to operate and replace units -- just like the private market. There would also be the risk of losing money -- just like the private market. There would also be the opportunity to recoup money by retaining higher-income working families -- just like the private market. Minimally, a standard which is used in many other shallow subsidy programs, e.g., bond financing, tax credits, etc., reserves equal to 75 percent of operating costs, should be considered.

Page 9, line 19. Minimum Rent. This is the first place in the bill that directly deals with the temporary authorizations in the appropriations process. While the authority to implement rent reforms on a year-to-year basis is certainly less than ideal, it was appreciated. The temporary nature of these authorizations has been a major disincentive to HA participation. The reason is clear: many housing agencies do not want to change their policy one year if they may have to change it again the next. Minimum rents is a case in point.

PHADA continues to support charging a minimum rent, although we strongly encourage the committee to change the term to reflect what it actually is, total tenant payment, or TTP. Last year's appropriation's measure authorized a minimum rent up to $50. In a recent survey, just over half of PHADA's members were charging a rate above the $25 defined in this bill. Half of PHADA's membership participated in the survey. This phenomenal response rate is indicative of the level of interest and concern housing authorities feel over the authorization issues. Even if all non-PHADA members charged only $25 or less -- a situation that is not likely-- fully one quarter of the industry would have to change their established policies and lower their minimum rent. Rather, we strongly encourage you to modify this bill to authorize up to $50.

Page 10, line 1. In general. PHADA appreciates the flexibility this bill would give to HAs regarding permitting police officers to reside in public housing, particularly beginning with line 6, "The number and location of units occupied by police officers ... and the terms and conditions of their tenancies, shall be determined by the public housing agency." We strongly urge the Senate to keep this flexibility in any conference with the House. HUD's current method of micro-managing this important function is an example of "aggravating the problem." Conversely, this granting of additional authority is a good example of the "streamlining" described in the bill's purpose.

Page 11, line 7. Transition Plan. This description of the transition rule is the same as in the current version of the 1937 Act with the addition of "(C) equal to the fair market rent for the are in which the unit is located." This is an improvement but, since this only covers the transition to a final rule, the real action remains elsewhere. Please refer to our comments above on the final version of ceiling rents.

Section 104. Definitions

Page 12, line 5. Single Persons. PHADA supports the change from "the Secretary shall" to "the public housing agency may" give preference to single persons who are elderly or disabled persons before single persons who are otherwise eligible." This is consistent with giving more authority and discretion to local housing agencies. The deletion of "displaced persons" from the list is also appropriate for the same reason. The same is true for line 11; the deletion of "regulations of the Secretary" and insertion of "public housing agency plan" in the definition of "families."

Page 12, line 20 - page 13, line 13. Adjusted Income. While PHADA understands the reasons behind maintaining the child exemption at the current level of $480, we are greatly disappointed that the bill retreats from granting the medical exemption to any family member, not just the elderly and disabled heads of household. Such a deduction is critical to remove a disincentive to work. Those moving form welfare to work will loose their medicaid coverage one year after they begin working. Families on minimum wage are often in jobs with little or no health insurance. In our view, not granting this exemption is penny wise and pound foolish. We urge you to reconsider this issue.

Page 13, line 19. PHADA strongly supports the flexibility the bill would give HAs to adjust income by "any other income that the public housing agency determines to be appropriate, as provided in the public housing agency plan." This is an example of the broad flexibility needed at the local level combined with the local and federal accountability that the agency plan provides.

page 14, line 9. Earned Income Deductions. First we strongly recommend the granting of a complete exemption of earned income for formerly dependent children, aged 18 - 22, of heads of households who are now working. Such a deduction would go a long ways to encourage self-sufficiency and towards breaking the inter-generational cycle of dependency.

Second, in whatever deductions are granted, it should be clear in statutory language that housing authorities must not be penalized through offsetting cuts in PFS.

As noted in our public testimony, we have serious questions about a 100 percent earned income disallowance for previously unemployed residents . While we have long been a supporter of providing incentives for residents to seek employment, we believe this is the wrong approach. There are several problems with this approach.

The morale problems it will create among current residents who have been working consistently. To them, and to others, it would appear that those who have not worked get rewarded while those who have worked, notwithstanding all the disincentives, get nothing extra for their efforts. This is an element of basic fairness.

More fair would be an earned income deduction across the board at a percentage set by the housing authority. Since this would already be permitted by language immediately preceding this subparagraph, PHADA urges the Senate to drop the 100 percent/18 month earned income adjustment.

There are a couple of other problems with the 18 month disallowance. It could prove a disincentive to those already working, i.e., some may quit their jobs for a year in order to qualify in the future. Also, there is nothing to indicate that it would not pay for a previously unemployed individual to cycle in and out of jobs to take the maximum benefit possible.

If the Senate wishes to maintain the earned income adjustment for previously unemployed residents, we strongly urge something less than 100 percent. A 50 percent exemption, while still unfair to those already working, would continue to provide a great deal of incentive with similar PFS savings, while mitigating the equity issue somewhat.

In addition, for ease of administration, we recommend that the language say that the exemption lasts until the second recertification after the employment, i.e., 13 to 24 months. This would help because HAs use an annual recertification schedule.

Page 16, lines 11 - 24. PHADA supports the amended language in this section which updates the Act to include alternative financing and clearly states that such projects are part of operations, as well as the associated functions of service coordinators and drug elimination activities. However, we offer a couple of technical corrections for clarity.

On page 16, line 12 we recommend you replace "fees and related costs" with "total development costs." On line 13 of that page, insert "low income" before "tax credits."

Section 106. Public Housing Agency Plan

In general, PHADA is in favor of many of the changes in this section of the bill, particularly the removal of many of the details in S. 2460 and the mandate for negotiated rulemaking. While it is true, "the devil is in the details," negotiated rulemaking appropriately removes those details from statutory language and fosters a more dynamic dialogue among all parties than ordinary rulemaking. We greatly appreciate the responsiveness to the concerns we raised on this issue last year.

Page 19, line 6. 5-year plan. A five year plan with the broad brush strokes of defining a mission and the goals and objectives of the housing agency seems appropriate to us.

Page 20, line 3. Annual plan. Annual plans with annual "updates" also seem appropriate to us. However, to assist in the transition we recommend that language be added to authorize the submission of any current five-year, annually updated, modernization plans to fulfill the requirements of the initial PHAP plans. This would provide the necessary time for HAs to adapt to an entirely new set of rules and conditions while ensuring that the transition goes forward. Having to provide the first annual plan sixty days prior to the initiation of the fiscal year will be almost impossible for the first HAs that encounter the change and very difficult for the remainder.

Page 21, line 11. PHADA does not dispute that the PHAP should be in conformance to the CHAS (or the consolidated plan). It would like to point out, however, that the HA Board acts as the representative of local government when it approves the plan. Therefore, a simple local executive "check off" box of conformance or non-conformance to the plan would seem to be sufficient. We support the Senate's concept that the review is for conformance only, not approval of the content of the plan.

Page 21, line 20, Needs. For those communities with a CHAS (those with more than 50,000 in population), and for some with a consolidated plan, the housing needs are already described in some detail. Since the PHAP must be certified in compliance with the CHAS, this subsection seems redundant. We recommend adding language that states, "For those localities with an active CHAS and those in which a consolidated plan addresses the housing needs, certification of compliance meets the requirements of this subsection."

We are concerned, however, that the CHAS not turn into a way of second-guessing HAs on local preferences, as has been the experience of some of our members. HAs have their own hearing process prior to local preference determination. The CHAS also has a hearing process. Some who have not gotten what they wanted from the HA in terms of preferences have then re-initiated their advocacy through the CHAS hearing where members have a generally less complete knowledge of the HA situation. We recommend that such a practice be prohibited.

Page 22, line 4, Financial resources. The inclusion of this item seems appropriate.

Page 22, line 7. Eligibility, selection, and admissions policies. We recommend that, in order to assist with the expeditious transition from the current system, that for the first annual submission, language be added to indicate that the HA's current approved Admission and Occupancy Policy for public housing, and Administrative Plan under Section 8, be sufficient for this subsection.

Page 22, line 13. Rent determination. An appropriate place for the description of rent determination is in the previous section, "eligibility, selection, and admissions policies. It could be deleted as its own item.

Page 22, line 18. Operation and management. We are very concerned that the description in this provision is much too broad and could include information that is not even required for submission at the current time. A "statement of rules, standards, and policies" could encompass anything from foundational policy to a memorandum of an executive director. We strongly encourage you to rewrite this provision to say that the HA would submit its Admissions and Occupancy Policy, it Section 8 Administrative Plan, and Board policies for inclusion in the plan. Alternatively, language like "equivalent to what is required under the 1937 Act prior to enactment of this bill" would help. To remain faithful to the goals of the bill, it is essential that HUD not have discretion to get involved in the day to day affairs of agencies that perform well. Except for procedures required by law and regulation, the internal affairs of a housing authority simply should not be HUD's concern.

Page 23, line 4, Capital improvements. Housing Authorities' current five-year modernization plan already addresses the requirements of this subsection. All CGP agencies have such a plan. In addition, many CIAP agencies possess written modernization plans. We recommend that, minimally, currently approved modernization plans be sufficient for the purposes of this subsection.

Page 23, line 9. Demolition and disposition. Here too, we believe that those agencies with currently approved demo/dispo plans should be deemed to have met the requirements of this subsection

Page 23, line 16. Designation of housing. We strongly support the inclusion of this topic in the PHAP. As members of Congress know, this potentially simple process has been turned into an onerous administrative task by intentional foot-dragging for the purpose of thwarting Congressional intent. As a result, very little housing has been so designated.

We recommend, in the strongest possible way, that this single item be exempted from negotiated rulemaking and made self-implementing. The Department has had long enough to implement an efficient program and has aptly demonstrated that it has no intention of doing so.

We have some concerns for the specifics as detailed in Section 7 of the Housing Act. The original authorizing legislation required that HAs detail any supportive services to be provided to the occupants of housing designated for occupancy by the disabled, not the elderly. Ironically, in trying to simplify the process, this distinction was dropped and HAs are now required to stipulate any supportive services provided for the designated population, including the elderly. We do not believe that such a description should be required but, that if Congress wishes to maintain such a requirement, that it be retained for housing designated for the disabled only.

Recently published news reports indicate that a soon to be released HUD study on fair housing indicates that federal housing policy should promote the separation of housing and mandatory support services. "Many persons with disabilities do need services. However, the choice of services should be their own, and not that of the service provider," the draft says.

Secondly, the designation process should be simplified for small agencies. While the CHAS is available for all localities with a population of at least 50,000, small agencies have to rely on their state consolidated plan to demonstrate need. Frequently, that consolidated plan does not address this issue with any specificity regarding need and geographical location. Small agencies then are faced with the situation of having to do considerable original research to demonstrate need when they are only designating a relative handful of units. In practice, small agencies are faced with a much larger administrative burden than larger agencies. We recommend that the demonstration of need be made optional for agencies located in jurisdictions without a CHAS.

Page 24, line 1. Conversion of public housing. We agree that this is appropriately included in the PHAP. Please refer to our comments on sections 22 and 31 later in this analysis.

Page 24, line 14. Homeownership activities. We recommend that this subsection be modified to state that it address any housing addressed under the public housing titles. Many HAs have separate, locally funded programs that should not be part of a federally-mandated, reviewed, and approved plan.

Page 24, lines 22-24. Similarly, insert "HUD-funded" immediately before the word "services" in line 22. It is inappropriate to include non-federally funded programs in a federal plan.

Page 25, line 19. Self-sufficiency and welfare reform coordination. While PHADA has some concerns and recommendations regarding coordination with welfare reform, we concur that this is a legitimate subject for the PHAP. Our concerns are detailed in the appropriate section later in this analysis.

Page 25, line 13. Safety and crime prevention. We also concur that this is appropriate for the PHAP. As in other parts of this analysis, we recommend that any agencies with a current Public Housing Drug Elimination grant be permitted to submit their PHDEP plan as their initial plan in lieu or reinventing the wheel.

We have specific recommendations for the HUD Public Housing Drug Elimination Program (PHDEP). We take the liberty of addressing this program in some detail here.

PHADA supports the elimination of most set-asides and separate programs. The one clear exception is the Public Housing Drug Elimination Program (PHDEP) or its equivalent. Since its initiation during the Kemp era, PHDEP has been a proven deterrent to drug and crime related activity in and near public housing developments. This program works. The issue is serious. Let's continue it on an ongoing basis.

Rather than a formula distribution of funds to all housing authorities regardless of need, desire, or capacity to use the money well, PHADA advocates that funds be distributed on a formula which considers both the need and the capacity of the HA to carry out the plan. A formula grant that includes all 3400 housing agencies, whether or not they have ever documented a drug problem would destroy the drug elimination strategy in any individual HA by radically diluting the total resources available. Small authorities would be given so few funds that they would have no practical possibility of a program at all, even to the point of paying a single policeman or youth worker.

Distribution on the basis of need should be the highest, but not the only, criteria. HAs which have a higher than average crime rate and have demonstrated their ability to craft and carry out effective programs, should receive a high ranking in the funding distribution than those with greater need but inadequate management abilities.

Unlike the current process in which HUD determines need based solely on murder and robbery statistics, the Uniform Crime Report (UCR) of the FBI should be used as it better demonstrates the need for crime intervention funding. Robbery and murder were selected, we believe, not because they bear any particular relationship to drugs in public housing, but because they tend to favor the largest housing authorities.

While the UCR covers broader areas than public housing developments, it is more accurate, objective and reliable then HUD's system and is reflective of the fact that drug-related crime is often present in many different types of criminal acts.

In addition to demonstrating a high UCR rate, HAs should be required to document criminal activity "on or near" the premises independent of the UCR. When a local housing authority relates its specific need to its program plan it shows competency in understanding the problems and designing the fixes.

We strongly advocate for grants of longer duration. The primary reason for this is not because the application process is so onerous (it is), but because the predictability of funding is essential to the success of the plan. Agencies planning one or two years at a time are severely limited as to the types of programs and the qualifications of the personnel who can be employed to run them. PHADA suggests five-year funding cycles with annual updates.

We recommend a two-tier system for distribution of available funds; one that provides adequate funding to both large and small HAs to effectively combat crime. We suggest a 75-25 percent split between large and small HAs. However, small HAs that can demonstrate that they meet or exceed the average crime rate via the UCR of the larger agencies should be allowed to receive increased funding from the larger pot. PHADA's research has consistently shown that between 160 and 200 small agencies have crime rates that would qualify them for the larger formula distribution. This demonstrates that many small agencies, particularly those along drug distribution routes, do indeed have problems at least as severe as agencies in larger cities. Often their need is compounded by having fewer law enforcement resources available on an ongoing basis.

Page 25, line 12. Annual audit. We agree that this is an appropriate item for the PHAP.

Page 25, line 14. Local Advisory Board. PHADA appreciates the change from "local advisory board" in S. 1260 to "resident advisory board" in this bill. We agree that the local advisory board is redundant and unnecessary since the PHAP must be certified to be in compliance with the CHAS.

We also appreciate a provision that would waive this requirement except that the "may" on page 26, line 8 should be changed to "shall." Without that change, even if the HA demonstrated an organizational structure with a proven track record of providing active resident involvement, HUD could still insist on the development of a redundant resident advisory board. The current language would permit the sort of federal micro-management the bill is trying to eradicate. It could also seriously dilute the authority of the already established resident organizations.

Finally, we support the change in language from S. 1260 that would expand the source of membership from those residents living in public housing to the "residents of the dwelling units owned, operated, or assisted by the public housing agency (line 19)."

Page 28, line 5. Amendments. In our analysis of S. 1260 we asked the committee to consider adding the word "substantial" before amendment. We appreciate the addition of the word, "significant," which has the same effect. HAs should be able to make small or technical amendments without submitting them to HUD review and approval as well as a public hearing.

Page 29, line 7. Annual submission. Our concern here is not with the need for an annual submission, but for transition time. This would impact most strongly on the first group of HAs required to submit the plan. Sixty days is a relatively short time and disapproval could come days before the beginning of the fiscal year. We recommend language indicated that the first year of annual plan submission be viewed liberally as a transition and learning time with significantly more liberal approval criteria.

Page 30, line 16. Review and Approval. PHADA supports the limitations placed on HUD for the review and approval of the plan. This is consistent with the bill's devolution of authority to local housing agencies. We strongly encourage the insertion of language here that would maintain one of the best improvements to the Comprehensive Grant Program, i.e., the five-year complete fungibility, without HUD review, of work items. It would be a major step backwards if this flexibility was lost in the Capital Fund.

Also, as HA experience has unfortunately shown, language indicating that lack of time or the absence of a complete review is NOT sufficient for disapproval of the plan. On numerous occasions for a variety of programs, our members have received photocopied notices of such disapproval. A specific example is the limited budget approval process. Such practice completely undermines the intent of increased flexibility and streamlining.

Page 30, line 12. Approval. We appreciate having automatic approval of the plan if the Secretary has not disapproved the PHAP in writing within sixty days, except in the case of troubled housing authorities where either written approval or disapproval is required "in a timely manner (page 31, line 12)." PHADA also supports giving HUD the discretion to require additional information if the HA is at risk of being designated as troubled or already designated as troubled. Insufficient time to review the plan should not be sufficient for disapproval.

Page 31, line 18. Streamlined plan. PHADA requests that the word "may" be replaced with "shall." HUD has been talking about streamlining requirements for high performers and small agencies for years with insufficient progress. Let's not just talk about it anymore, let's do it!

High performers, especially consistently high performers, have demonstrated that they operate and manage well-run agencies. Why should they be held to the same level of detail as other agencies?

Similarly, small agencies will not be well-served if their field offices have the discretion, not the mandate, to streamline the process for them. It makes little sense to us that agencies below 250 public housing units should be required to use the same process and level of detail of the largest agencies. When one views the shrinking human resources assets of the Department, it only makes sense to mandate streamlined plans in these cases.

Finally, very small agencies, i.e., those with under 100 units of public housing, should be exempted entirely. This would go a long ways in reducing HUD's administrative burden while being responsive to the large number of HAs with only one administrative staff person who often doubles as bookkeeper and/or maintenance person.

Page 32, line 4 ff. Interim rule. Language should be inserted to indicate that the interim rule should be cognizant of the need for a one-year transition period and that, therefore, the parameters should be sufficiently broad to allow time for the Department and the industry to become accustomed to the new requirements.

Page 33, after line 23. Report. Another subsection should be added as follows, "(3) any recommendations for increasing the level of flexibility granted to public housing agencies with their public housing agency plans approved under section 5A...." Minus this language, the bill correctly assumes that HAs could have been granted too much flexibility but erroneously overlooks the possibility that they may not have been granted enough.

Section 107. Contract Provisions and Requirements

Page 34, lines 4-7. We support this change as far as it goes. HUD's discretion to include conditions, etc. on an ACC should be limited by the contents of the PHAP. We also agree that the following sentence of Section 6(a) of the Housing Act regarding playgrounds should be deleted.

Page 34, line 19. Performance indicators. HUD and the industry have recently completed revising PHMAP through the standard rulemaking process. There have been so many changes that this important program has become the perennial moving target. Housing authorities have not been given adequate time to adjust their data collection to keep up with the changes. Indeed, HUD is currently requiring agencies to submit new PHMAP certifications without the benefit of new forms or any guidance for what will be accepted. Even in this latest revision, after years of working to simplify this program, indicators were added and we still don't seem to have a system that meets its stated goals. Now, the Secretary is contemplating throwing out PHMAP and starting over.

Page 34, line 24. Obligation of funds. PHADA opposes the change in language that would substitute "provided" for "obligated" and "unobligated" for "unexpended." Circumstances outside the control of the housing authority are already provided for in regulation. Such liberalization of the language will lead to even increased unspent modernization pipelines at a time when it is critical that the opposite occur.

Page 35, line 4. Utilities. PHADA continues to advocate that this entire section be deleted. Changing "energy" to "utilities" does not sufficiently address the problem. There simply is little HAs can do to lower their utility payments. Nor is conservation directly tied to an agency's management performance. In the interest of streamlining PHMAP, this indicator should be dropped.

Page 35, line 12. Social services. PHADA recognizes the value of social services being available to residents desiring to become self-sufficient. However, we disagree that housing authorities should be measured on the degree that they provide such services. There are two problems with this: 1) how will rents pay for such direct services and, 2) HAs are not equipped to directly provide such services either in terms of human resources or professional expertise.

The Family Self-Sufficiency program has clearly demonstrated the need for staff dedicated to this particular function. With operating subsidies continually underfunded and amounts reserved for service coordinators restricted, it is unreasonable to expect HAs to directly provide social services.

We recommend that this additional indicator be dropped. Minimally, all housing authorities with less than 250 units of public housing or Section 8 should be exempted from this requirement. If it is retained, "links to or promotes" should be inserted in (H)(i) immediately in front of "effective programs...."

Page 35, lines 15-17. Resident involvement. HAs should not be assessed on the degree of involvement in the administration of public housing. They should be assessed on opportunities for input into the administration. To assume that all residents want and/or need to be involved in the actual administration is erroneous. Nor is it correct to assume that all residents are qualified to be directly involved in administration. Finally, resident rent payments entitle residents to have quality management and administrative services provided to them regardless of the amount of their rent.

Page 35, line 18. Safety and Security. We presume that this security indicator would replace a similar one now in place. We have no problem with the industry being assessed regarding the effectiveness of its screening and eviction policies. However, they should be assessed only on those aspects of their screening and eviction practices that are within their control. For example, while HAs have officially been authorized for about a year to retrieve NCIC data, various administrative roadblocks have effectively kept HAs in the dark about crimes that may have been committed out of their local jurisdiction. Similarly, a loophole in the appropriations measure for Legal Services still permits legal aide lawyers to defend against evictions of drug users and dealers as long as they are not heads of households. We need statutory help on both of these issues. Until there is a fix, however, HAs should not have their management assessed on this items.

Page 36, line 5, (J). Measuring HAs on their degree of success in reaching goals they set has no place as a performance indicator. It will simply guarantee a "race to the bottom." High-performing agencies which purposely stretch their staff to reach the highest possible goals will be penalized while low performers will be rewarded by defining low goals. This will guarantee that HAs set goals and objectives way below what is reasonably attainable. It should be dropped.

Page 36, line 11. Simplified indicators. PHADA strongly advocates that the "may" be replaced with "shall." The PHMAP certification is an arduous process even for high-performing agencies that have significantly more staff and program resources to devote than small agencies. We believe that the bill should mandate that HUD use a simplified set of indicators for HAs with less than 250 public housing units.

Page 36, line 19. Drug-related and criminal activity. We applaud the change of "drug-related" to "violent or drug-related." We are also pleased that the 1937 Act would be amended to add beyond these two crimes "any (other) activity resulting in a felony conviction." This is, in effect, how the language would read. In order to clarify this further, we recommend you consider adding the word "other" between "any" and "activity" to remove any doubt that this is Congress' intent.

Page 38, line 15. Transition rule. PHADA is strongly in favor of the repeal of federal preferences and giving authority to housing authorities to implement local preferences at their discretion. For the past two years, federal preferences have been suspended via temporary appropriations measures. Previous legislation permitted various percentages of new admissions to be exempt from federal preferences. All these moves have been very welcome. However, without a permanent repeal of federal preferences and authorization for local preferences, many housing authorities are hesitant to take advantage of this flexibility. "It could change again next year," is often heard.

PHADA recently completed a survey which garnered a high degree of participation to measure the level of participation among HAs regarding preferences and rent reform measures. More than 43 percent of the over 800 respondents had not as yet changed their preference system. By a three-to-one margin they indicated that the reason they have not yet changed is that, thus far, the authority to do so is only temporary. We need an authorizing bill that permanently repeals federal preferences -- as in both the Senate and House bills -- in order to increase the participation in this important flexibility.

Section 108. Expansion of Powers.

Page 39, line 20. Expansion of powers. PHADA supports the expansion of HUD powers when addressing the problems of troubled housing authorities. We suggest, however, that the words "in writing within 30 days" be inserted after "notify" and before "the agency." to avoid any claims of miscommunication. Thirty days is the blink of an eye in federal government time. However, written notification can be accomplished within that time because HUD knows now which agencies are troubled. The short time period also helps underscore the urgency of the issue. We applaud page 40, beginning with line 3, which clearly states that "nothing in this clause shall preclude the Secretary form taking any action ... before the commencement or the expiration of the 1-year period...."

Page 40, line 8. 1-year period. In order to be consistent with the previous section (ii), add after "1-year period" "or shorter as determined by the Secretary as...."

Page 40, line 9. Substantial default. We support the concept of this clause but are concerned about the degree of latitude given to HUD. Specifically, "improvement satisfactory to the Secretary" troubles us. One of the most challenging issues for any Secretary to deal with regarding troubled housing authorities is local politics. We don't believe that reserving this level of discretion to the Department will ultimately help it address this issue. Minimally, clear, measurable, and objective improvement benchmarks and timetables should be specified at the time an agency is officially notified of its troubled status. In some cases, HUD may wish to give a year to get off the troubled list. This is the weakest part of this section. We strongly urge the committee to give more structure to the Secretary on this point. Failing to do so may significantly gut the way this bill tries to address this important problem.

Page 40, line 13. We strongly support the use of the word "shall" in this section. We also support the choices given to the Secretary in lines 18 and 21. We are concerned, however, that page 41, line 1, i.e., "(cc)" again makes the Secretary vulnerable to local political pressure by letting the Department take "such actions ... as necessary" as an alternative to taking possession or petitioning for receivership. "(cc)" should be dropped. Alternatively, the "or" on page 40, line 24 should be changed to "and" and on the top of page 41 change "(cc)" to read, "take such additional actions ...."

Page 41, line 6 ff. We believe that the changes from S. 1260 strike the correct balance between making the receiver accountable to contractors with valid contracts and permitting the receiver to act expeditiously. Also, HUD review and approval of a receiver's decision to establish one or more housing authorities is an appropriate safeguard on abuses of power on the part of the receiver. We are pleased that the language beginning with page 41, line 24 which exempts the receiver from various civil service, procurement, and related requirements, has been maintained. It seems appropriate to us, as well, that the Secretary delegate his powers to the receiver with the exception of requiring prior approval for the establishment of new housing authorities. Delegation of authority to an "administrative receiver," is also supported by PHADA.

Section 109. Capital and Operating Funds. PHADA generally supports the concept of two block grants to fund the capital and operating needs of public housing programs. All boutique programs must be consolidated into these funds. Our single exception, expanded on other places in these remarks, is the Public Housing Drug Elimination Program. Part of why this is such a successful program is that it is a separate program and it should remain so.

Page 48, line 7 ff. In developing the formula, we question how the percentage of units occupied by very low-income families, and the degree of household poverty (line 20) relate to the need for capital. The same issue appears in the formula criteria for the operating fund (cf page 51, line 8). Neither the degree of poverty nor the percentage of very low-income families served is directly related to the capital or operating needs of the local housing authority. We recommend that such references be deleted. Also, including these categories in the formulae works as a powerful disincentive to HAs to take actions to decrease the number of poor and unemployed. As written, if they do so, they will be penalized with less money.

In addition, basing the formula on low income assumes using a percentage of household median income. The problem with this is, that although that amount may be standard over large areas, other factors are not. Minimum wage may qualify one family as low or very low income in a certain area while it may not in another. Using these factors in the formulae would yield a deficient product.

Page 49, line 1 ff. We applaud the additional criteria of agency ability to effectively administer the fund as a significant issue for developing the formula.

We believe also that the bill should specify that the capital formula should take the modernization needs and backlog of ALL HAs, including small agencies with fewer than 250 units) into account since those agencies do not currently receive comprehensive grant formula funding. Like their larger counterparts, small agencies need a steady supply of modernization dollars to upgrade their properties. While the unification of programs will provide for that, it will not of itself, take into account years of unfunded modernization needs in agencies formerly served by the competitive CIAP process. Small agencies need to have formula grants of sufficient amounts in order to borrow against them.

Page 49, line 24 ff. Operating and management of mixed finance properties. PHADA applauds this provision, especially the inclusion of operating reserves. It will help HAs engaged in mixed finance efforts to leverage non-federal funds.

Page 50, line 12. Insurance costs. While we support the categories outlined in the bill regarding the operating grant, we urge that the words "including the costs of any related insurance needs" be deleted in favor dropping the work requirement as detailed later in our analysis. If the Congress determines that it will not drop the work requirement, then we still favor the deletion of this language and the provision of an exemption from liability prosecution in connection with the administration of the work requirement. Liability insurance premiums would likely be excessive and, with additional funding not being likely, drain other operating accounts to an unacceptable degree.

Page 51, line 8. Household poverty. We reiterate our objection to including "the degree of household poverty served by a public housing agency" into the formula because of its irrelevance to the actual operating costs of an authority.

Page 51, line 11. Provision of programs. Consistent with our concerns regarding performance measurements, we strongly advocate that the word, "provide" be deleted and "attempts to link and refer residents to" be inserted between "agency" and "programs." Unlike the degree of household poverty, these efforts are directly linked to operating costs but HAs should not be held accountable for directly providing social services when they neither have the resources nor the professional expertise to do so.

Page 51, line 15 ff. Vacant units. Although it may go without saying, it would be better to say it. The language should ensure that having numbers of chronically vacant units results in a lower formula grant, not a high one.

Page 51, line 23. Capacity. We reiterate our support for including "the ability of the public housing agency to effectively administer the operating fund distribution of the public housing agency."

Page 52, line 2. 20 percent fungibility. PHADA supports the flexibility authorized by this bill which would permit HAs to use up to 20 percent of their capital fund distribution to pay for operating fund shortfalls.

Page 54, line 8. Responsibility of the PHA. PHADA appreciates the direct grant funding of resident management corporations, specifically this provision which states that "the public housing agency shall not be responsible for the actions of the resident management corporation" in these cases. Language should be inserted, however, that indicates that the amounts of the grants should be proportional to the role they are taking, including overhead costs. To grant a resident organization the equivalent of what the HA was receiving for operating "x" number of units with the resident organization is engaged in only some of the HA administrative activities would be inequitable.

Page 55, line 11. Set aside. PHADA strongly opposes a 2 percent set aside and especially opposes its use for Operation Safe Home. This amounts to taking founds already allocated to all housing authorities to establish yet another boutique program of unproven value. We recommend decreasing that set aside to no more than 1 percent which still yields very substantial funding for these purposes. Permitting the Secretary to carry over fully $25 million approximately doubles what would be available in any one year.

Page 57, line 3. Implementation. We strongly support that the regulations and formulae for the grants be established in negotiated rulemaking. This serves to level the playing field somewhat withing the industry itself and among the industry, Congress, and HUD. We commend the Senate for not mandating any specific percentages be allocated to one fund or the other, unlike H.R. 2 which, we believe, arbitrarily sets the distribution as a 50-50 split between the two funds.

Section 107. Labor Standards

Page 58, line 1 ff. Work Requirement. PHADA supports the philosophy underlying the eight hour work requirement but believes that, as written, is unworkable. More importantly, with the passage of welfare reform which has its own work-related requirements, we believe it is unnecessary. Under the welfare reform statute, virtually every resident who is not already employed will be required to perform some type of work in return for public assistance. This bill defines "covered family (page 59, line 7)" as one receiving public assistance.

If this requirement is retained, we ask for several changes. First, replace the requirement of a detailed description of how the HA intends to comply with this section with a resident self-certification process. Most housing authorities do not have the necessary resources to closely administer this program.

Second, protect housing authorities from liability suits. Rather than have the cost figured into an already underfunded PFS as this bill proposes, exempt HAs from lawsuits associated with this requirement.

Third, require, rather than permit, HUD to exempt adults who are already receiving vocational training or otherwise meeting work, training, or education requirements of public assistance. Persons over 62 and those with disabilities should be automatically excluded from the work requirement.

Fourth, on page 58, line 5 delete "not less than 8 hours of," and on line 7 add a sentence at the end stating "The 'community' in the preceding sentence refers to the general neighborhood, as well as the specific housing development, in which the adult lives."

Fifth, it is critical that any person exempted by a welfare department from the requirements of welfare reform also be exempted from this work requirement.

Page 60, line 4. Compliance. PHADA supports this provision which will conform assistance with public housing with other public assistance programs. While it is much too early to recognize the effect of welfare reform, it is apparent to us that the various assistance programs need to work as seamlessly as possible in order to achieve any real success. We particularly appreciate the clause regarding notice (page 61, line 5) which places the responsibility for notifying the HA upon the local welfare agency.

To ensure that the intent of this provision is carried out, welfare agencies must be mandated to promptly notified housing authorities, indicating that the reason for a reduced grant is non-compliance with the welfare department. Welfare agencies are accustomed to notifying HAs regarding reductions but are not used to giving a reason for such reductions. Failure to do so would result, it appears, in reductions of rent charged until such a reason. HAs are then faced with an onerous retroactive process or Congress' intent has been blunted.

Page 60, line 23 ff. Review. This provision grants the grievance procedure to those whose rent is not reduced because of noncompliance with a welfare department program. We wonder what there is to grieve with the housing authority. If the HA receives proper written notification from the welfare agency, it is acting as the statute mandates. The resident's argument is with the welfare agency, not the housing authority. An HA hearing will simply add to the administrative workload. We ask that this provision be deleted.

Page 61, line 20 ff. Cooperation Agreements for Self-Sufficiency Activities.

We do believe HAs should be working in cooperation with other agencies and organizations to achieve maximum opportunities for self-sufficiency. Experience has shown, however, that a mandate of this sort will only work if the partner agencies also are mandated to form such agreements. HAs speak to this issue with a significant body of experiences. Housing authorities have met with mixed results in years of trying to form networks with other agencies via the Project Self-Sufficiency, Operation Bootstrap, and Family Self-Sufficiency programs.

We also argue that the bill should exempt very small agencies, those with less than 100 units, from this requirement completely.

Inclusive language like, "to the maximum extent practicable (page 61, line 22)" and "as may be necessary (page 62, line 6)," strike us as too strong without parallel language in HHS authorizations. We strongly encourage you to work with your colleagues to craft such language. If this is not possible we recommend deleting this clause entirely.

Page 63, line 5. Confidentiality. We recommend dropping this clause. Most law and practice on this issue requires at least the consent of the client before information is shared. Many in the field have found that, even with the client's consent, social workers are sometimes reluctant to share relevant information. If housing authorities are to be even partially assessed as to their performance on cooperating with welfare reform, they MUST have access to the information. This clause, as written, guarantees inconsistent experiences of a HA in its own jurisdiction and vastly arbitrary levels of information sharing throughout the country.

Page 63, line 17 ff. Energy conservation and consortia. PHADA applauds the repeal of old Section 13 to eliminate the requirements regarding energy conservation. Well-run agencies already use sound procurement practices which dictate, among other things, that the life-cycle cost of heating and cooling systems be taken into consideration for both new development and major rehabilitation. Closer oversight of less well-run agencies should ensure that this is taken into consideration.

The authorizing language regarding the formation of consortia is not needed. HAs are currently permitted to form these relationships and are in the very best position to determine their nature The consolidation of planning and reporting requirements on page 64, beginning with line 5, seem appropriate to us, as does a joint PHAP of the next paragraph. It should be clear, however, that applications for funding should be treated as one, also. There are currently groups of small HAs working together that are not allowed to apply jointly for program funds, including the PHDEP. This works to everyone's detriment.

Page 64, line 18. Minimum requirements. We strongly oppose the inclusion of this paragraph which mandates that the Secretary form minimum requirements for consortia. Since legislation authorizing consortia is not needed, there is no reason for its inclusion. Ironically, this bill which is designed to increase local flexibility, this provision would actually require regulatory compliance where there is none now.

If you determine that you will retain this provision, then we recommend that the minimum requirements be part of the negotiated rulemaking process already occupying an important place in this bill. We fear, and our experience has often shown that we have a basis to fear, that giving the Department total discretion in determining the minimum requirements of a consortia agreement could thwart the intent of this part of the bill. Small housing authorities are in the best position to determine how a partnership relationship with one or more neighboring agencies will best work. Often, their problems and shared resources are unique, not only across the country but in different parts of the same state. Negotiated rulemaking will better ensure that the necessary creativity and flexibility that is necessary for success will be countered with the appropriate level of accountability.

Page 65. Joint ventures. PHADA supports the level of discretion given to housing agencies to both form and operate wholly owned subsidiaries and to enter into joint ventures. We believe, however, that the dictate to ensure any profits should be used for low income housing or to benefit the tenants of public housing should apply only to the degree that federal money has been involved in the venture. The clearly stated relationship to housing subsidies (page 66, line 1)is helpful. Recent experience has shown that the Department has been less than willing to permit HAs to keep 100 percent of their profit from taking the risk of entrepreneurial activities. Authorizing subsidiaries and joint ventures without guaranteeing that agencies would not be penalized by a reduction of any degree in operating subsidies would effectively mute this whole subsection.

Section 113. Eligibility for Public and Assisted Housing.

Page 70, line 13 ff. Income eligibility. PHADA is convinced that members of the committee understand that, for housing authorities to survive and serve the needs of any of the poorest of the poor, they must be free to more significantly mix the incomes of those residing in public housing. The alternative is for the federal government to fully fund the shortfall. As long as rents are based at all on income, this is a fact of life that housing authorities, low-income advocates, and Congress cannot ignore. Those that claim that HAs want to increase the income mix and raise rents as a means to get out of the business of serving the poor have it exactly wrong. A housing authority no longer in business serves no-one. A housing authority without sufficient income to maintain and manage the property in a satisfactory manner serves no-one well.

Finding the right balance between serving the poorest of the poor and raising sufficient rental income in a period of decreasing subsidies is obviously key. Unfortunately, we are not aware of any conclusive study that defines that balance. In view of this, we have several recommendations.

First, any income targets should be applied to the entire resident profile, not simply new admissions. We believe page 70, line 14 does this for public housing. However, it should be modified as in the next paragraph.

Second, the income targeting standards should be entirely fungible across any and all assisted housing programs administered by the housing agency, not just public housing. For most this would mean including Section 8, although a few HAs may have locally assisted housing for the very poor which should also be included. This calls for a modification on page 70, line 15, to add after "public housing agency" the words "and any units of publicly assisted housing administered by the public housing agency." This change would allow a healthier demographic mix in public housing and ameliorate somewhat the economic and social ghettoization of the poor. At the same time, it would be balanced by more aggressive targeting of Section 8 to the poorest families who could then choose more affluent neighborhoods, better schools for their children, better medical care, and so on. As we said in our testimony, the important thing about this fungibility is this: the cause of better neighborhoods and more choice would be well served.

Third, on page 70, line 22, add "for purposes of this Act, this includes any family that is working full-time at or near the minimum wage." This distinction is critical to mitigate the unintended consequences of basing a system solely on median income. In all states, both the minimum wage and welfare benefits are uniform through the state, but they vary widely as a percentage of median income. In general, the minimum wage is a higher percentage of local area median in less populated areas, but can be significantly lower in metropolitan areas. The effect is that minimum wage working families in the relatively poorer areas of the country are denied housing -- depriving them of working role-models -- while families earning significantly more "downstate" in an urban area qualify for housing.

For example, in Atlanta full-time employment at $5.15 per hour is less than 25 percent of median, while it equals a little less than a third of median in Macon. In the poverty stricken rural areas of the state, however, full-time minimum wage employment brings a family to about half of median income. This is far from an isolated circumstance, being common to rural areas all over the deep south, Appalachia, and parts of the midwest and southwest. We don't believe it is Congress' intent to deny housing to the minimum wage worker in a poor county while only fifty miles away a worker earning more than twice as much is still receiving the benefit of targeting.

Our recommendation is also consistent with Congress' intent of giving working families more incentives to seek employment and move upward on the ladder to self-sufficiency.

Page 71, line 7 ff. Different standards. PHADA appreciates the intent of granting some flexibility on the issue of income targeting, but believes that the statutory language is so broad as to render this clause nearly useless. At the same time, the following paragraph requires HAs to submit a plan for achieving a diverse income mix in each public housing property. We strenuously object to this provision (lines 14-20). This becomes an unwarranted addition to the PHAP and, in many cases, is unreasonable and unworkable given the present constraints.

Page 71, lines 8-9. "If approved by the Secretary...." The Department is given no standards under which to review and approve any deviation from the previously stated income targets. Nor is any timetable for review and approval given. Both parameters to assist the Department in making a decision regarding the alternative and a time frame should be established.

The second specific problem is related. Page 71, lines 10-11 states that an HA may implement an alternative standard "for good cause." "Good cause" is not defined. "Agency solvency and viability" may be one of several that could qualify as "good cause."

We are extremely concerned with the language beginning with line 14 on page 71. First, this appears to be a backdoor way to introduce another PHAP item. While we applaud the reworked PHAP language, we regret that something of this detail is "thrown in" at a later point in the bill.

Secondly, including such detail not only goes against the underlying concept of negotiated rulemaking, it gives HUD much more licence that it currently enjoys to exercise micro-management to an even higher degree than it does now. This runs contrary to the intent of the bill. HUD has repeatedly demonstrated that its culture is such that it is often a reluctant partner at best in mixing the income of public housing developments. We strongly urge the committee to delete this provision.

Page 71, line 21 ff. Section 8 income targeting. Our comments above regarding income targeting and alternative standards apply, as well, to Section 8.

Page 72, line 18 ff. Ineligibility of illegal drug users and alcohol abusers. PHADA strongly supports the rights of families to peaceful enjoyment of their healthy and safe homes, as well as the rights of its staff members to work in such an environment. Hence, it commends the committee for including language of this sort. However, we recommend that page 73, lines 5 and 21 be changed by including after "illegally using," the words "or possessing, manufacturing, or distributing" to close a potentially serious loophole. This is certainly consistent with Congressional intent.

Page 74, after line 23. Consideration of rehabilitation. PHADA appreciates the level of discretion given to housing authorities that would permit them to admit and/or retain currently assisted families where substance abuse has been an issue within the past three years. This flexibility would not punish those with a bona fide disease who are dealing responsibly with it, while still keeping active illegal drug users and alcohol abusers out of assisted housing. There are, however, a couple of serious problems with the specific language.

First, housing authority staff do not generally possess the professional expertise to evaluate the meaning of "successfully completed" supervised drug or alcohol rehabilitation programs. Such expertise is most often reserved for professionals in a very complex field.

Secondly, most social workers trying to "place" someone from a treatment program may or may not possess a sufficient level of chemical dependency expertise but do have a vested interest in getting the individual or family into housing. Therefore, the local social service agency may not be the place to get an objective assessment.

In view of this, we recommend adding after page 74, line 23 the following: "(D) A public housing agency may, at its discretion, have access to medical and other treatment records of an applicant or member of an applicant's family or a currently assisted family or member of a currently assisted family at any treatment center or other supervised drug or alcohol rehabilitation program. The available information shall include and be limited to the dates of such treatment, an assessment of the degree of cooperation with any treatment plan, whether the individual completed treatment or left against advice, and a prognosis for the future. Lack of cooperation on the part of any family or member of any family shall result in no consideration of rehabilitation on the part of the housing agency."

Section 114. Demolition and disposition of public housing.

Page 75, line 8 ff. Applications for demolition and disposition. In general, PHADA supports the conditions outlined in this section. Giving HUD 60 days to review the plan and mandating approval if the housing agency certifies to the delineated items is helpful to expediting the process for well-run agencies. However, we do have some concerns.

PHADA remains very concerned about agencies with a demonstrated record of serious management deficiencies continuing to receive HUD approval for additional demo/dispo activities accompanied with the large sums of money necessary to carry out those activities. Some agencies, including some of the largest, use their resources responsibly and well. Yet, others which have not managed their demolition and disposition projects well continue to get large sums of money. Under the language of this section, that practice could continue.

Page 78, line 18. Proceeds. Language should be added that would ensure consideration of disposing the property to the housing authority for other housing and community development uses. If a property was vouchered out, the HA could be a valid receptor of the physical asset as any other entity.

We are also concerned regarding the cost of replacement housing sometimes associated with some agencies. Therefore we recommend that, at least where troubled agencies are concerned, language be inserted that would add the "capacity of the agency" to undertake its demo/dispo plan and, on page 80, after line 19, the following language be added: "An additional criteria for approval of the plan for troubled housing agencies is that the cost of the replacement units is reasonable." With this change we don't object to page 81, line 10 which makes these changes retroactive to September 30, 1995.

Page 82, lines 1-19. Authorization and requirements. PHADA appreciates the flexibility given to housing agencies in this section that would permit, but not require, any HA to convert any public housing development or portion thereof to voucher assistance. However, we are concerned with line 11 with the use of the word, "significant." We believe HUD may attempt to fill in the vacuum created by a lack of definition with classically arduous requirements and procedures. As well, HAs cannot guarantee significant participation; they can only assure that they will make opportunities available for such participation. We urge the committee to modify the language to reflect our concerns.

Page 82, lines 20 ff. Conversion assessment and plan. PHADA continues to object to the mandatory nature of the assessment for conversion to vouchers of each public housing development throughout the country. We understand and support the need to determine under what conditions vouchering out public housing is the best choice. This industry-wide mandatory assessment, however, is overkill.

The same purpose can be served with a conversion demonstration conducted in the most severely distressed public housing properties, specifically, in cases where the property is either 50 percent vacant or where modernization needs exceed the cost of new development. If voucheriation is a cost effective and viable alternative, it will be most clear with these developments.

In addition, the revision of Section 31 of the Housing Act on page 97, beginning with line 1, ensures that housing which has already been demonstrated as distressed per the industry definition and which is financially unviable as public housing will be vouchered out. The mandatory assessment is not necessary.

It simply doesn't make sense to us to mandate that every agency in the land conduct an administratively burdensome and expensive study that, in the vast majority of cases, may show that project-based assistance is the best way to operate public housing developments.

Page 84, line 15 ff. Streamlined assessment. If the Senate wishes to have a larger demonstration than we have suggested, the Secretary should be required to waive the requirements of the assessment for agencies that perform well and small agencies with less than 250 units of public housing. At a minimum, the Secretary should be required, not permitted, to streamline the study for these classes of HAs.

Page 84, line 22 ff. Implementation. PHADA agrees that conversion to vouchers should be hinged on its cost and that it would principally benefit residents of that portion of public housing being converted. We also agree with page 85, line 11 which limits the reasons the Secretary could disapprove a conversion plan. Consistent with other sections of the bill, however, we recommend that the Secretary be given no more than sixty days to disapprove the plan, except in the case of troubled agencies, and that insufficient time to review the plan is not an acceptable reason for disapproval.

Section 116. Repeal of Family Self-Sufficiency, Homeownership Opportunities. We agree with the repeal of FSS as a mandatory program. We suggest, however, that rather than abolishing the program entirely, it be made optional on the part of HAs. The biggest problem with this program, in addition to staff resources, has been its mandatory nature. Any growth in either Section 8 assistance or public housing development increased the size of the FSS program by a like number of units. Some agencies remain highly committed to this program, or some variation thereof. Some of these have been fortunate enough to have received staff resource assistance from local social service agencies and/or non-profits and churches. Rather than prohibit this program, we urge you to make it optional. This will give those agencies with the resources to be of significant help to individual families. While these cases will be few in number, they will obviously be very important to the individual families involved.

Page 86, line 11 ff. Public Housing Homeownership Activities. PHADA generally supports the language that authorizes, but does not require, the sale of public housing to residents to either the residents or an organization acting as a conduit from the housing authority to residents. We believe the right of first refusal and replacement assistance combined with relocation protects current residents in units for sale more than those residents in the private market. The recapture provision (page 87, line 22 ff.) seems reasonable. We also support giving HAs the option of assisting residents in the purchase of a home.

Page 87, line 11 ff. Purchase Requirements. We believe that, in order to be successful, more flexibility must be granted to housing authorities on this issue. On line 20, rather than "12 months" put "for a term determined by the housing agency," or if that is not acceptable, "for a term determined by the housing agency but in no case less than 12 months." Conform line 24 with this change, and change page 88, line 3 to "shall recapture a percent of the amount of any proceeds..." The flexibility is needed because of differing requirements in the private market that may impact on the HA's ability to leverage non-federal financing.

Page 88, line 17. Protection of non-purchasing tenants. We applaud this provision that permits HAs to use both public housing hard units and Section 8 tenant-based assistance for non-purchasing tenants.

Section 117. Revitalizing Severely Distressed Public Housing. S. 462 would sunset this program by October 1, 1999. PHADA's position on this program is that it should be ended now, by this Act, and the money folded into the Capital Fund and used more widely for modernization needs.

As we stated in our testimony, PHADA's membership has carefully watched the development and implementation of URD/HOPE VI. We have no argument with the purpose and goal of this program. It was developed to address the very real and urgent need to demolish the worst public housing and create new housing choices for low-income families. PHADA participated in the task force on distressed housing and supported the objectives of URD/HOPE VI. Even last year, PHADA recommended the continued funding of this program.

What has changed our mind? Bluntly stated, some of the grants have not been used wisely and some may have been awarded primarily because of politics. We are aware that some HAs are spending well over $150,000 per unit to rehabilitate distressed housing -- in some cases several times the cost of either complete rehabilitation or private market replacement. While some agencies, including some large ones, have used the grants well, some of the largest grants have been made to housing authorities that are historically mismanaged, politically influenced, and PHMAP-troubled. In our view, continuing to pour large sums of scarce modernization money into agencies that don't have the capacity to use it well doesn't make sense. In sum, this simply is not the most prudent use of scant resources and has all the potential to hurt the industry in the public's eyes as much as run down housing stock does. The language of the bill should be altered to state that expenses must bear a "reasonable relationship" to the total development costs of building a new unit.

Page 91, line 12 ff. Competition. If the Senate wishes to continue this program even another year, it should improve accountability. Many of the funding recipients continue to have large numbers of chronically vacant units and are modernization troubled. After factor "(4)" add "(5) the demonstrated capacity of the agency to use the funds effectively and efficiently as demonstrated by the history of recent similar projects including the extent of obligations and expenditures and the cost of units recently rehabilitated."

Page 91, line 13 ff. Terms and Conditions. We disagree with the discretion given the Secretary to impose additional terms and conditions on recipients. Rather, for troubled agencies, the "may impose such terms and conditions ...." of line 13 should be changed to "shall impose such terms and conditions on recipients of grants under this section that directly address the management deficiencies that have contributed to a troubled rating and/or other related inadequacy." For maximum flexibility and accountability, we recommend dropping page 91, line 16 beginning with the last word, "except" through page 92, line 2.

Page 92, line 3. Alternative management. If the program continues into next year, PHADA supports maintaining this as an option for the Secretary.

Section 118. Mixed-finance and mixed-ownership projects. We are puzzled by the definition of "mixed-finance project" beginning on page 92, line 24 through page 93, line 4. The definition appears to focus on what has been traditionally defined as "mixed income" property rather than financing. The remainder of the section seems to indicate that the authors had the actual financing that enabled the development project in mind. We suggest revisiting this definition.

Page 93, line 10. Structure of Projects. We appreciate that the eligibility of the families who would reside in the mixed-financed project would be determined by the housing authority. We recommend, however, that the "20 years" in line 12 be conformed to that which is used in low income tax credit financing, i.e., 10 years plus 5 years. This makes sense to us since LITC will be a major source of mixed-financing.

Page 94, line 1-3. PHADA objects to the "blank check" this clause gives HUD which, if not limited, could open up a pandora's box of micro-managed regulation that could effectively gut the entire program. Mixed-financing and mixed-income population is critically important at this time -- too important to subject it to HUD's regulators. This is precisely the type of HUD discretion that has led to a mountain of regulations, handbooks, and manuals that has stifled creativity and led to the enthroning the process and the dethroning of the results. Ideally, drop this entire subparagraph Minimally, exempt agencies that perform well from this requirement.

Page 94, lines after line 21. In order to support efforts to make as much mixed-financed housing as possible available to those needing affordable housing, we recommend you add another paragraph which would give housing authorities a preference in being given funds under the relevant section of the IRS code.

Page 95, line 1-6. Taxation. PHADA supports this clause which gives the housing authority the option of subjecting the public housing units in a mixed-financed development to local real estate taxes or the "payment in lieu of taxes" authorized by Section 6(d) of the Housing Act.

Page 95, line 18 - page 96, line 15. Contract terms. PHADA appreciates this section. The lack of future funding for public housing has been well publicized. If private entities were bound to maintain the terms of public housing even if the HA could not live up to its contractual obligations, it would be very difficult indeed to leverage any private funding at all.

Page 97, line 1 ff. Conversion of Distressed Public Housing. PHADA generally supports this provision. The goal and purpose of the Commission on Distressed Housing in which PHADA participated was to identify the housing which was in the most immediate need of improvement. In some cases the chronic condition of the housing stock contributes to the distress of the families having to live in that environment. If the assessment of the housing is that it is more expensive and difficult to maintain as public housing than to voucher out the assistance, the latter option is the correct one.

However, line 5 indicates that the housing agency shall identify all relevant housing projects. This is an expansion of current requirements that establish a 300 unit threshold. We strongly encourage you to include this as one of the parameters of the conversion effort.

Page 99, line 8. Disposition plan. Insert language indicating that the HA is a valid receptor of any property disposition.

Page 100, line 18. Conversion to T-B Assistance. We recommend that "(B)" be revised to say "provide any necessary counseling or referrals for necessary counseling for families displaced by such action; and...." The issue here is that the affected families will be helped, not necessarily who helps them. Many housing authorities are located in jurisdictions with social service agencies funded by the government and, at least as common, private non-profit agencies that may be able to assist in the necessary counseling. Some housing agencies have cooperation or similar agreements already established with these entities for this purpose.

Section 120. Mortgages and Security Interests. PHADA largely endorses the provisions of this section. Given the fiscal realities of the times, being able to mortgage one's properties is a critical improvement. This is especially good news for very small housing authorities who will be forced to borrow against future allocations.

HUD should be given no more than 45 days for this process. In the case of non-troubled agencies, the plan should be deemed approved unless the Department notifies the agency in writing prior to the 45^th day. A lack of time should not be deemed sufficient for denial. In the case of troubled agencies, written approval or disapproval should be required

Section 121. Linking Services to Public Housing Residents.

Page 103, line 19 ff. PHADA appreciates that this section is limited to the extent that appropriation Acts provide funding. We are also supportive of HUD making grants available directly to resident organizations if HAs are not held responsible for the funded activities, as in other sections of the bill.

Page 105, line 11-15. Funding for Resident Councils. PHADA appreciates the need to fund resident organizations. We reiterate, however, our concern that the resident council or other organizations, not the housing authority, be held accountable for how the funding is used. In addition, the language requires a minimum of $25 million to be spent for resident organizations. We recommend that these funds be seen as set aside for such use but that HUD not be mandated to use it all without regard to qualification.

Page 105, line 22. Technical correction. We believe that the word, "section" is missing from the end of this line.

Section 122. Prohibition on Use of Amounts. PHADA has no objections or recommendations on this section.

Section 123. Page 106. Pet Ownership. While there are several important improvements over the version in H. R. 2, PHADA continues to have serious concerns about this section.

It seems inappropriate to us in the extreme that a bill that has as its goal to minimize federal micro-management would dictate a national pet policy. Indeed, the majority of those in the Congress correctly seem to defer to the States and localities about occupancy standards for human beings! How do pets warrant such federal attention?

Unfortunately, this issue garnered so much publicity about the amount and intensity of debate in last year's House bill that it has taken on an importance and life all its own. Both proponents and opponents of the pet provision clamor that there are more important issues. There are, but mandating pets in housing is also serious.

Permitting pets in public and other project-based housing can and will have serious negative consequences. While there are, no doubt, families (and certainly members of the pet food industry) that would appreciate this option, many other families would object. A survey on the west coast indicated that pets would have the serious consequence of significantly raising insurance rates at a time when there is little money available to improve housing for people. The average awards in liability suits in that survey approached $30,000 per incident.

Increased property maintenance costs will also be substantial. Much of public housing is occupied by families with small children who have little space to play. Sharing that space with pet feces is not only unpleasant for families, but unhealthy for the children.

Page 106, line 15. If the Senate insists on preserving this section the words "as determined by the owner of federally assisted rental housing" should be added after the word "housing." The owner is responsible for the management of the housing and for responding to complaints. It should be the entity that defines "reasonable." Not to do so will guarantee needless time-consuming arguments.

Page 106, line 16. Change "nominal fee" to "a reasonable fee based on common real estate management practice."

Language should also be added to indicate that no more than one pet would be permitted.

Page 107, line 7. PHADA appreciates the limitation of covered assisted housing to project-based housing. We assume this limitation is here because the authors understand that if it was applied also to tenant-based housing it would serve as a powerful disincentive to private owners to participate in Section 8. It is as bad a management practice for project-based providers as for tenant-based.

We strongly urge the committee to drop Section 123 in its entirety.

Finally, if the Senate is determined to keep this provision, we urge you in the strongest possible terms to subject the implementing regulations to the negotiated rulemaking process.

TITLE II -- SECTION 8 RENTAL ASSISTANCE

Section 201. Merger of the Certificate and Voucher Programs. PHADA remains very supportive of this endeavor. Years of attempts to accomplish this by regulation have been less than successful. We believe this statutory change will at last accomplish what we have all be looking for.

Page 108, line 17 ff. Establishment of Payment Standard. We support the flexibility of setting payment standards at 90 to 120 percent of the FMRs. Allowing housing authorities to set the standards with this flexibility will permit newly assisted participants to access the best possible assisted housing program based on their individual situation and financial condition.

Page 108, line 22. Set Aside. PHADA recommends that this section be deleted. A five percent set-aside for use at the Secretary's discretion contradicts the principles of local flexibility and accountability of this bill. If it is maintained we strongly recommend that the size of the set-aside be no higher than two percent.

Page 109, lines 12-22. Review and approval. This provision adds protection for tenants against rent gouging and gives the Department unlimited discretion in determining when excessive rent is being charged. Such discretion will guarantee inappropriate HUD interference and micro-management. Bureaucrats in the Department have repeatedly demonstrated that they are vigorously opposed to local discretion on the matter of payment standards. This provision will allow them to ensure that HAs will be hamstrung in this area. This whole paragraph should be deleted.

In addition to the discretion being excessive in the extreme, it is unneeded as page 112, line 11 provides that no family would be required to pay more than 40 percent of their adjusted monthly income for rent. We advocate raising that cap to 50 percent on the basis that 40 percent is arbitrary and limits family choice unnecessarily. Families are better judges than the federal government of what their budgets will allow. This is even more essential since the reduction of the FMRs to the 40^th percentile.

Page 110, line 1 ff., and page 111 line 1 ff. Amount of assistance payment. PHADA supports the 30 percent tenant contribution. (iv) should be added after line 23 to indicate the minimum TTP provision as in Title I.

Page 113, line 16. Selection of families. We are very concerned over the reference to the PHAP in this paragraph. There are 577 housing agencies that do not have any public housing units. This provision assumes that they would complete a PHAP, most of which would be not applicable to them. The agency administrative plan has worked well and we strongly advocate that the system of Section 8 local preferences be described in the administrative plan and that it be deemed sufficient for all aspects of Section 8 assistance.

Pages 114 - 116. The Lease. We applaud the committee for this whole section. It will be of great assistance to housing authorities and is very well done.

Page 114, line 1 ff. Lease. Our earlier comments pertaining to drug-related and criminal evictions should be reflecting in the Section 8 part of the bill too.

Page 116, line 20. Local codes. PHADA prefers the HR 2 version which would permit HAs to choose with local or federal standards without restriction. The problem is with determining whether a local code exceeds HQS. In general? In the majority of cases? In the most important areas? It would be rare indeed to have a local code that could be easily and accurately compared in all areas to HQS. Far more likely will be a situation where local code exceeds HQS in some areas, meets it in others, and falls short in yet others. The Congressional majority party has a well-articulated philosophy of devolving authority to the locality. This in an additional opportunity to do so.

Page 116, line 24. Periodic inspections. We recommend "periodic" be changed to "annual" or "at least annually." As written it could be construed to mean that more than one inspection would be required per year as the length of the contract term is one year.

Page 117, line 7. Leasing units owned by PHA. Add "another housing agency" after "government." Many HAs now effectively use this option.

Page 117, line 11 ff. HQS demonstration project. PHADA does not object to a demonstration project of reasonable size to examine the possibility of a more expedited inspection process. Having said this, however, we are extremely concerned with the ultimate goal of such expedited inspections: having housing authorities become responsible for repairs. If the demonstration is ultimately for this purpose, then we are vigorously opposed to it. This, in turn, will open the do to litigation that views the HA as the owner. This is not acceptable to us.

Page 118, line 18. Rest reasonableness. PHADA has two major concerns with this provision.

The first is that it underscores the need to continue to fund administrative fees at a sufficient level. Previously, only certificates were subject to a rent reasonableness test. This will add considerably to the administrative workload of housing agencies.

Secondly, we are concerned with page 119, line 4 which would have the housing authority intervene on behalf of the family to help negotiate a reasonable rent. Not subsidizing a unit that fails the rent reasonable test is appropriate. Acting as the family's agent, however, in rent negotiations exceeds what should be expected of a housing authority. In a addition to being patronizing towards tenants, the provision is not needed; if the rent isn't reasonable, the unit is excluded from participation.

Page 120, line 1 ff. Timely payments. PHADA believes strongly that, to encourage participation, HAP payments to landlords must be made on time. This clause, however, does not address one cause of delayed payments, i.e., a delay by HUD in transferring funds to the housing authority. In these cases, the HA should be authorized to pass on any penalties for late payment to HUD. What would also assist HAs in making timely payments would be report language noting that the Department should attempt to transfer payments to housing authorities well before the first of the month. In addition, the Department should be required to execute Annual Contribution Contracts in a timely manner. In some cases, HAs have been forced to establish a line of credit to borrow against in order to make up for delayed ACCs. The committee should minimally authorize interest charged on borrowed money for this purpose as an eligible program expense that is not offset against "additional income."

Page 124, line 14. Witness relocation. PHADA is concerned that line 18, "shall make available such as may be necessary" to transfer residents gives HUD too much discretion. While we want to support this effort, we recommend that, at a minimum, the language be changed to "shall make available such sums that are reasonable."

Section 202. Repeal of the federal preferences. PHADA wholeheartedly supports the repeal of the federal preferences and the authorization of local preferences not inconsistent with the CHAS. However, in communities where no CHAS exists, general conformance with the state's consolidated plan should suffice.

We reiterate our concern that some community groups attempt to utilize the CHAS hearing process to "get another shot at" getting preferences for which they advocate. If the housing authority conducted a public hearing and followed all other public notice requirements, we urge that the subject of local preferences be exempted from the CHAS hearing process.

Section 203, page 128, line 23. Portability. We appreciate that the language requires the Secretary to establish procedures of portability compensation. We also support the reservation of funds for such compensation. This will greatly ease the administrative burden of back-billing housing authorities.

Page 129, line 21 ff. Lease violations. PHADA is fully supportive of denying assistance under portability to families who moved out of their housing in violation of their lease.

Page 130, line 13. Include work history. After this line include a category that would require an acceptable work history. Failure to do this invites a repeat of the failures of the Section 235 program.

Page 130, line 18. Include language ensuring that, in all cases, at least the minimum total tenant payment, as defined elsewhere in this bill, applies.

Section 206. page 132. Law enforcement. PHADA supports the value of having law enforcement and security personnel living in assisted housing as may be appropriate.

PHADA has no specific comments on Section 207, Conforming Amendments.

Page 139, Repeal of MTO. Consistent with the bill's purpose of achieving maximum flexibility for local agencies, we urge that the committee permit moving to opportunity programs on a voluntary basis. If this program works for some agencies, they should be permitted to continue it.

Section 208, page 139. Implementation. Consistent with other major changes made by this bill, the Section 8 changes should be subjected to negotiated rulemaking. These rules are just as important as those in Title I and, therefore, should be subject to the same process.

TITLE III -- MISCELLANEOUS PROVISIONS

Section 301, page 141. Public Housing Flexibility in the CHAS.

Page 142, lines 18-22. PHADA appreciates this provision which would require that the locality address how the CHAS will help address the needs of public housing and how it will coordinate with the local housing agency.

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