PHADA’s Line-By-Line Comments and Recommendations on H.R. 2,
the Housing Opportunity and Responsibility Act of 1997

Below are the Public Housing Authorities Directors Association’s detailed comments on H.R. 2. The bill was introduced into the House of Representatives by Rep. Rick Lazio (R-NY) on January 7, 1997. Comments and recommendations are listed in order of title and section. For a summary of PHADA’s most pressing concerns, refer to the Advocate article titled PHADA recommends changes to House bill.

This link to H.R. 2 from the Library of Congress may be useful for reference. It provides the full text of the bill and has separate links for each section.

View the cover letter for the document, which was delivered to Joseph Ventrone, Staff Director of the House Subcommittee on Housing and Community Opportunity.

Title I

Section 2, Page 5, line 8 and other parts of the bill. We believe the phrase "decent, safe and affordable" is more appropriate than "safe, clean and healthy." Therefore, we suggest that you delete the latter phrase on line 8, keep "affordable" on line 7 and add "decent and safe" there.

Section 101, Page 7, lines 18-20. We strongly support the concept of deregulating and decontrolling housing authorities as described in this part of the bill's text. We will offer several suggestions on how this could be more readily accomplished by changing some sections of the legislation.

Section 101, Page 8, line 21. We question the term "prudently" because we are concerned that it could lead to second-guessing and micromanagement on HUD's part. We suggest it be deleted.

Section 102, Page 11, Paragraph (13). PHADA strongly supports this section, which defines "low income" families as those with incomes at or below 80 percent of the area's local median income. We also appreciate the flexibility in the bill, letting HUD approve adjustments to the income ceilings when the local housing authority (hereinafter "HA") finds that such variations are necessary because of unusually high or low family incomes.

Section 102, Page 11, line 5. Regarding the requirement to determine income, strike the word "Secretary." We think it would be confusing to have both the Secretary and the HA determining the definition of income. Our suggestion is consistent with the goal of devolving authority from Washington to localities and giving maximum authority to the local entity. Obviously, HAs will be guided and bound by the statutory provisions.

Section 102, Page 13, lines 10-11. We like the language inserted in this definition ensuring that individuals cannot claim a disability solely on the basis of drug or alcohol dependence.

Section 102, after (27) on Page 16. We suggest a new definition for "extremely low-income families." The term would mean "a low-income family whose income does not exceed the greater of 30 percent of the local area median income or the minimum wage for a full-time employee, whichever is higher." This kind of definition would ensure that HAs could house families at the minimum wage and still meet the income mix requirements under Section 222 ( c) on Page 82. We elaborate further on the need for this change in that section.

Section 103, Page 18, lines 18-19. PHADA objects to federal requirements that would supersede state or local law and mandate that HAs have at least one elected resident on their board of directors/commissioners. We want to make it clear that we do not object to the principle of resident participation on Boards. Indeed, for several years now, PHADA has been a leading advocate for greater resident participation in all aspects of public housing affairs. Rather, our opposition stems from the belief that such matters should be decided at the most local level possible. We believe this is consistent with the legislation's objective. This provision contradicts the bill's stated intent by actually taking authority away from localities, preempting laws that allow the chief government official to appoint commissioners.

In addition to the issues cited above, we are concerned with the mechanics associated with the provision. Under the terms of the law, HAs could be placed in the unenviable position of conducting elections between rival resident groups, possibly compromising the agency's position with at least some residents. For this and many other reasons, we think it would be better to retain the current appointment procedures, which give the local government the authority to decide who serves on boards.

In sum, Washington should not dictate to HAs who should be on their boards and how those boards should be composed. Accordingly, we request that you delete this language from the bill. Let HAs work with their states and local governments in seeking ways to promote greater resident involvement.

If the House is intent on including this component in the bill, then we want to state our support for the exemptions beginning on line 21 of page 18. We also prefer last year's Senate approach of not specifying an election. Under this methodology, the local mayor, county executive or other chief governing officer would continue to exercise the appointing authority. Again, we believe this process would ensure the best way to devolve authority to states and local governments.

Section 103, Page 20, lines 1-4. Using the same logic mentioned above, we believe that state and local law should govern conflicts of interest for Boards of Commissioners. While we support the most stringent conflict of interest statutes possible, we question the federal role.

Section 104, Page 22, lines 3-9. PHADA strongly supports giving HAs the discretion to determine income exclusions as set forth in the bill. We think this is a vast improvement over the current system, which creates disincentives for residents to seek work and move up the ladder of self sufficiency.

Section 104, Page 22, line 16 to line 4 on page 23. PHADA wholeheartedly endorses this subsection, which would require that HAs deduct portions of a family's unreimbursed medical expenses. This is a statutory change that we have fought for since the 103rd Congress, when it was contained in the Waters-Bishop rent reform package.

Section 104, Page 24, lines 8-11. Since excessive travel is a "permissive" deduction, we suggest that no amount be set forth in the statute. This should be left to the discretion of local HAs.

Section 105, Page 25, beginning at line 19. We have many concerns about the eight hour work requirement and the self sufficiency contract. First and foremost, we are highly skeptical whether HAs will have the time and administrative capacity to run these programs without the infusion of additional federal funds. This plan will be particularly difficult for small HAs to administer since they are already over-burdened and understaffed. Remember, more than 50 percent of the country's 3,400 HAs have 100 or fewer units.

PHADA wishes to make it clear that we generally support the concept of a work requirement for families that are receiving valuable housing assistance. We believe, however, that the legislation is no longer needed because of the enactment of comprehensive welfare reform during the 104th congressional session. Under that historic statute, virtually every resident who is not already employed will be required to perform some type of work in return for public assistance. Language in (3) on page 27 specifically states that persons are exempt from the work requirement when they are "otherwise complying with work requirements applicable under other public assistance programs." Thus, HAs will end up exempting everyone from the requirement, but will still be forced to keep records for the program. In short, we believe the provision in H.R. 2 is rendered moot because of welfare reform, and therefore request that the work requirement be removed from the bill.

If the House is intent on including the work requirement in a public housing reform bill, then we request that you make certain modifications. First, add the word "volunteer" before "work" in all appropriate places in the bill. Second, specify that residents are permitted to self-certify compliance in order to relieve HAs of excessive record-keeping burdens. Third, families that are exempted from state workfare requirements should be exempt from the requirement in H.R. 2. This would provide for more consistency between state and federal work rules, and devolves more authority to the states consistent with the legislation's intent. Finally, report language should be added, pointing out that the work does not necessarily have to be performed on the HA's property, but could occur in libraries, schools, etc.

For many of the same reasons noted above, we oppose the inclusion in the bill of a self-sufficiency contract for virtually all residents. While the intent behind the measure is laudable, we view this as a major new unfunded mandate that will create significant administrative burdens for HAs, which are already being funded at amounts far below their total operating needs. Moreover, there is no realistic way this plan can be operated without a massive infusion of funds from Washington. We are therefore perplexed to see this type of legislation at a time when it appeared that Congress had finally gotten serious about deregulating state and local government entities, including housing authorities.

A cursory review of this program's potential costs reveals that it might exceed $9 per unit month. Extrapolated to a national level, this new mandate would cost HAs about $129 million. Clearly, this requirement simply is not feasible given current budgetary projections for public and assisted housing programs. Again, this is particularly true for very small housing authorities, which typically have less than 3 employees to administer all of the programs under their purview.

More important than anything else, however, the need for this particular legislation has also been negated in the wake of last year's welfare reform law. As mentioned above, that brand new statute will require all families to engage in some form of work in return for public assistance. The law also sets up a maximum five-year term of benefits for recipients and gives states, counties, and cities the flexibility to create their own local work requirements and time limits. We therefore strongly recommend that this section be eliminated from the bill.

Section 105, Page 27, lines 1-17. While we support the exemptions stated in the bill, we believe the language in S.1260 (104th Congress) was clearer and should be inserted if Congress opts to impose the work requirement.

Section 106, Page 27 beginning at line 18. PHADA has several concerns related to the local housing management plan (LHMP) and we believe this part of the legislation is in need of a major overhaul. First, we note the laudable deregulation and decontrol objectives stated in the bill's "Statement of Purpose." Notwithstanding this language, Section 106 may have the unfortunate effect of totally abrogating the bill's intent. Indeed, H.R. 2 could create many more administrative burdens for housing authorities rather than streamlining the program. We assert this because so many additional requirements are placed on HAs with regard to compiling new types of data that will be subject to HUD review and approval. We point out some specifics below.

Section 106, Page 34, lines 3-10. There are several planning requirements in the legislation that will not necessarily relate to all 3,400 housing authorities in the United States. Accordingly, the words "if applicable" need to be added to certain requirements in order to ensure that HAs are not expected to comply with provisions that are not germane to their situation. For example, there only needs to be a demolition/disposition section of the plan in certain cases. This should not be a generic requirement in the bill.

Section 106, Page 35, lines 18-21. PHADA is concerned with this language, which requires that HAs describe how they are going to coordinate with other entities to assist residents obtain employment and achieve self sufficiency. Cooperation is a two-way street and all too often the problem is on the other end. If this requirement remains, we strongly urge you to find ways to require that federally-funded entities cooperate with HAs in designing effective systems to achieve this laudable goal.

Section 106, Page 36, lines 5-11. Contrary to popular belief, not all HAs have a safety and crime problem. This requirement, too, should only be mandated when applicable.

Section 106, Page 36, beginning at line 22. Although we appreciate the improvements that have been made since the last version of the bill, the timing surrounding the submission and approval of the plan is still a problem that needs to be addressed.

As we envision the plans, they are to be submitted in conjunction with the start of the HA's fiscal year. Going in reverse order from the time the agency submits the final plan to HUD to when it must commence planning, let's look at the timing for an agency with a fiscal year that starts on January 1.

October 1 -- Submit plan to HUD in time to give the Department 75 days to review and get approval before the start of the HA's fiscal year.

September 25 -- The HA's Board of Commissioners approves the final LHMP.

September 20 -- Plan is revised to take into account citizen and local government input.

August 1 -- LHMP subjected to local review, resident input, and public hearing.

July 30 -- Agency Board of Commissioners approves publication of LHMP.

May 15 -- Work begins on the LHMP and the accompanying budget.

Under this scenario, the HA will have to begin work on its plan at least by mid-May, almost six months before the coming fiscal year's appropriations are known. This will make it very difficult for the HA to accurately plan for the coming year when it has no idea of how much funding it will receive. This is all the more reason for letting HAs self-certify the existence of their plans. This will give them more time to prepare their LHMPS and have it verified by the Independent Public Auditor, and will eliminate the 75-day requirement for HUD to review. As noted previously, due to diminished resources and capacity, HUD will not be able to adequately review all 3,400 LHMPs in any event.

Section 106, Page 39, beginning at line 1. PHADA strongly supports modifying the planning requirements for small HAs. We urge you to include additional language that would give high-performing HAs the same kind of needed regulatory relief.

Section 107, Page 39, lines 19-21. We are troubled by this language, which states that "The Secretary shall have the discretion to review a plan only to the extent that the Secretary considers review is necessary." We think this is opening the door to federal micro-management and is inconsistent with the bill's intent. We therefore request that the language be deleted.

Instead of requiring HUD review of the LHMP, we suggest letting HAs self-certify the existence of their plans. We recommend this whole section be re-drafted with this thought in mind. Self-certification can be policed by requiring its review through the independent public audit (IPA) and allowing HUD to investigate in limited, but appropriate, circumstances. Such a process would avoid giving the Department meaningless approval authority since it will not have adequate resources to fully review 3,400 LHMPs. This action will further remove the Department's liability for rubber-stamping something it has not had the time to truly review. Finally, this type of process makes the most sense given that the IPA is already in place. If necessary, an even stronger IPA could be designed to ensure accountability on the part of the HA while also checking to make sure that the agency is complying with existing statutes and HUD regulations.

To summarize on the plan, PHADA is concerned that the House is unintentionally burdening HAs in a time of diminishing federal appropriations. By establishing the plan in law, there has been a history of HUD carrying it to a higher level and drowning HAs in a sea of red tape. This must be changed. We believe the best way of accomplishing this is re-writing the statute so that Congress suggests the types of items that might be included. Then, let HUD, HAs, residents, and other interested parties adopt the specific requirements through a negotiated rulemaking process.

Section 107, Page 41, lines 15-21. This is an appreciated attempt to ease HAs into the new system by accepting comprehensive grant program (CGP) plans as their initial LHMP. Unfortunately, the language does not help those in the most need of assistance, namely HAs with fewer than 250 units (they do not participate in the CGP). We suggest that this be addressed by giving small HAs an extra year to comply with the requirement. It could then be phased-in like the CGP was during its initial implementation.

Section 107, Page 42, lines 9 and 13. We are concerned that the terms "costly" and "nonroutine" and "inexpensive" and "routine" may be too subjective. If not dropped altogether, these terms will need a more thorough explanation in the bill report. If left to HUD to define, we fear excessive micromanagement could result.

Section 108, Page 44, line 21 and thereafter. We are concerned about the potential workload for HAs under the reporting requirements. If this a relatively simple fill-in-the-blank report it is not too bad. On the other hand, if it is a narrative report, it could very well be another unfunded federal mandate that adds another straw to an already-overburdened camel. Accordingly, we request that you insert report language that clarifies this report is to be made as simple as possible. Much of the information HUD needs to obtain here could be gleaned from the IPA report. Finally, it should be clarified that this new reporting requirement should be submitted in lieu of the PHMAP report, not in addition to it.

Section 108, Page 45, line 4. Strike "as well as the use of other funds." As long as non-federal funds are being used for legitimate housing purposes, HAs should not have to document how they intend to use them.

Section 108, Page 45, (b). This "review of PHAs" component is in conflict with PHMAP which, until another type of accountability check is implemented, should be the sole mechanism that is used to assess HA performance. Because this could lead to excessive HUD oversight and counteracts the bill's intent, it must be deleted.

Section 108, Page 45, line 21. We believe the word "Board" is a typographical error and the intent was to insert the word "Secretary." In any event, this language would allow HUD to require any additional reporting requirements and data that HUD believed was necessary. This kind of discretion opens the door to an incredible amount of micromanagement. It must be removed from the bill.

Section 109, Page 46, lines 1-6. At first glance, the wording seems to maintain the status quo with respect to the issue of pets in public and assisted housing. PHADA strongly supports such language. Still, it appears that Section 109 is later amended by Section 622 and that HAs and private housing providers would be required to allow pets with certain restrictions. We strongly oppose such a mandate and have added comments under Section 622.

Section 110, Page 46, beginning at line 7. We applaud the House's administrative grievance procedure and hope it will be enacted into law. We think it strikes a reasonable balance between the rights of residents and the administrative burdens associated with the process.

Section 111, Page 47 (a). We suggest you strike the whole Headquarters Reserve section. Taking two percent of the entire appropriation leaves too much discretion to HUD. In addition, it is not readily apparent that the Department needs so much funding for disaster and emergency purposes. In fact, HUD recently took from the $75 million emergency fund to offset some of the modernization losses necessitated by the rescissions statute during the last Congress. This was accomplished with relative ease since no other funds had been taken from the allocation. If this section is not stricken altogether, then the allocation should be reduced to one percent or less.

Section 112, Page 48. We generally support exempting HAs from certain labor standards as contained in this section. We recommend that the bill go even further, however, and totally repeal Davis Bacon's application to public housing. If this is not possible, then perhaps Congress would consider making the law applicable to all contracts exceeding $250,000.

Section 113, Page 50. We support all of the nondiscrimination provisions in this section. PHADA wants to point out, though, our belief that all existing Fair Housing and Equal Opportunity functions should be transferred to the Department of Justice. In the long run, this will save money and streamline the federal bureaucracy.

Title II

Section 202, Page 55, line 2. PHADA recommends that the House allow HAs to use, if necessary, 20 percent (instead of 10 percent) of their capital funds for operating purposes. This is particularly needed in light of diminishing federal appropriations.

Section 203, Page 59, line 6. The word "only" should be deleted because it is way too restrictive and could stifle any chance for future innovation and creativity.

Section 203, Page 61 (b). We simply want to point out our strong support for requiring the mandatory conversion of certain severely distressed public housing.

Section 203, Page 64, lines 7-18. We support this section, which strengthens HUD's role in ensuring that HAs use grants for their intended purposes. Strict accountability is required to ensure that taxpayer dollars are used wisely.

Section 204, Page 70, lines 8-11. We suggest these lines be deleted. PHADA favors the continuation of the public housing drug elimination program (PHDEP) under the current application-grant process. Hence, we do not see the need to factor crime and security into the formula. Moreover, to do so might skew the formula too much in favor of high-crime area HAs that may not possess the administrative capacity to successfully run the program, thereby rewarding failure rather than success.

Section 204, Page 70, lines 12-14 and (ii) on Page 71. We appreciate the fact that you have counted an agency's good performance in the formula equation. This will help reward well-run HAs, something PHADA has long recommended. Similarly, we support (ii), which will allow HAs to keep nonrental income without any fear of a reduction in formula allocations. This is the kind of incentive we need to ensure that all housing authorities try to do an even better job with limited resources.

Section 204, Page 70 (i). PHADA applauds the insertion of language making it clear that HAs should be given incentives under the new operating formula to increase their income by attracting families "with a broad range of incomes." Similarly (ii) on page 71, and lines 12-17 on page 74, are also appreciated. These clauses clarify that any economic benefits created by mixed income communities shall flow directly back to the HAs.

Section 204, Page 72, lines 6-11. We support negotiated rulemaking as the tool for creating the operating and capital grant formulas. However, it appears there may be a conflict since that methodology is called for on line 6 and then "the formula shall not be contained in a regulation" appears on line 11. This phrase should be deleted.

PHADA also supports (C )on page 73, which provides that "chronically vacant units" are not subsidized under the new block grants. Such a process will help ensure equity in formulas that will be critical to the operations of all housing authorities in the United States.

Section 204, Page 72, beginning at line 19. We are concerned about splitting the interim formula 50%-50% between operating and capital funds. Right now, operating funds are at $2.9 billion, while capital funding is $2.5 billion, making the total for the two programs $5.4 billion. Under H.R. 2 then, only $2.7 billion would be available for operating purposes, far below what HAs need to efficiently operate. This seems arbitrary and unrealistic. Accordingly, we suggest that you strike the 50-50 split and instead insert a change that would ensure that HAs receive the same ratio of operating and modernization formula funds that were available to them immediately prior to H.R. 2's enactment. In addition, as indicated on page 75, lines 13-15, the interim calculation should take all small HAs' (those with fewer than 250 units) modernization needs into account since those agencies do not receive comprehensive grant formula funds.

Section 204, Page 74, line 4. Strike the word "may" and insert "shall." Whenever possible, the Secretary should be compelled to revise the formula to create incentives for HAs to increase their nonrental income. This would help HAs become less reliant on federal subsides, one of the bill's prime objectives.

Section 204, Page 75, lines 12-15. We want to point out our position that small HAs should be included under a capital grants formula program. Like their larger counterparts, small agencies need a steady supply of modernization dollars to upgrade their properties. The new block grant formula must take this factor into consideration.

Section 205, Page 76, lines 8-16. PHADA supports these new powers, which would allow HUD to reduce or withhold block grants from HAs that are not expending funds in accordance with the statute.

Section 205, Page 79, line 20. Add "the partnership and/or" to "the public housing agency." Consistent with the objectives of the section, this gives the partnership or the HA the ability to exercise the various options that follow.

Section 222, Page 82 (c). PHADA generally supports the House's version of income targeting for the public housing program. We appreciate that the House has now clarified that the targeting requirements apply to the HA's entire population, and not just to new admissions.

PHADA suggests two changes in the language. First, we think the targeting requirements should be fungible throughout the entire inventory of the agency's programs. In other words, an HA should be allowed to vary its targeting among its programs so that, in totality, it meets the overall goals called for in the legislation. Of course, the HA would still be required to house low-income families.

We further suggest that the language specifically state that resident families earning a minimum wage salary be counted as having "extremely low-incomes" as far as the targeting protections are concerned. While the bill allows HUD to establish income ceilings higher or lower than 30 percent of median based on unusually high or low family incomes, we believe that minimum wage families should automatically be included under the lowest income targeting category.

It must be remembered that a minimum wage family will be earning only about $10,000 per year which, in some American communities, could be as high as 50 percent of the area's local median income. Clearly, a family earning $10,000 a year that is striving towards self sufficiency should be considered either very low or extremely low income for the purposes of this provision. This is particularly important in the wake of welfare reform when, theoretically at least, more residents will seek to enter the workforce on the path to self-sufficiency.

PHADA's proposal is consistent with Congress's intent of giving working families more incentive to seek employment and move upward on the ladder to self sufficiency. In addition, it will help HAs create better income mixes within their developments, something which all experts agree results in more stable and secure environments for the community at large. Moreover, this important change would help improve the fiscal health of housing authorities and enable them to become less reliant on federal subsidies. Accordingly, we suggest changing the language on line 11 to read, "30 percent of median income or the minimum wage, whichever is higher."

Section 222, Page 83, lines 19-23. While we are sympathetic with the House's desire to avoid the concentration of very low-income families, we are leery about the discretion afforded to HUD under this paragraph. Put simply, FHEO might be inclined to set quotas, which could create serious problems for housing authorities around the country. Given some of the well-known past problems with FHEO, we strongly recommend that this language be deleted.

Section 223, Page 85. We strongly support the permanent repeal of federal preferences and giving HAs the right to adopt flexible local preferences. We are not sure, though, what may be considered "generally accepted" data sources (line 21) and are concerned that the term might be misinterpreted by some to mean that the data dictates the HA's plan. We therefore suggest that you delete this wording.

Section 224, Page 86 (c). We strongly support H.R. 2's language governing site-based waiting lists. If adopted, this provision will help low-income families select units that are most appropriate to their individual circumstances.

Section 225, Page 87. While PHADA still maintains its support for the total repeal of the Brooke Amendment, we recognize the political reality of the situation. We would therefore support legislation somewhat similar to the plan embodied in H.R. 2, which lets HAs set flat rents under certain conditions. Despite our support for the concept in the bill, we have some concerns about the particulars.

First, on page 88, lines 23-25, the bill states that HAs can establish rents as long as those rents "do not exceed the actual monthly costs to the public housing agency attributable to providing and operating the dwelling unit." We are worried that a narrow definition of "operating costs" could severely disadvantage HAs. We point out that residents would always opt for the lower of the two rents. In a scenario where the resident is currently paying more than the per unit month (PUM) operating costs, HAs could actually lose badly-needed revenues and services would decline. It must be remembered that, in many cases, residents whose rents now exceed PUM costs are effectively carrying those renters who make little or no contribution to the HA. If you now allow higher-income families to pay rents based on a very narrow interpretation of operating costs, you may further hamper the HA's ability to fulfill its mandate in these times of limited federal assistance.

At a minimum, then, we suggest that report language be added clarifying that this clause applies to all operating costs, including modernization, administration, resident services, security, insurance, utilities, and other expenses. We want to point out as well that, when HAs have to start calculating all these various costs, the actual formula could become quite cumbersome.

In addition to this point, we question the provision (page 88, line 3) that allows residents to annually elect the type of rent they wish to pay. One of the main thrusts of the bill is to permit HAs to operate more like private housing providers. Needless to say, such a system would never even be contemplated in the private housing market.

Again, we support permitting HAs to set flat rents and want to work with the House to develop an equitable system. The key point to remember in the rent-setting equation is that if the rent is not set at or below the market, it will not be used. This is particularly true in soft rental markets, where low-income families have more housing choices available to them. In the case where such a family opts for other housing because public housing is effectively too expensive, the government will never recover any reasonable fraction of the costs, much less 100 percent of the PUM operating costs. This is so because units will most likely continue to be occupied by welfare recipients on Brooke rents. Consider an example where the PUM cost is $300 and the rent is $225. The U.S. Treasury would still be much better off with a renter paying a market rent of $225 compared to a Brooke family who may be paying $60 a month.

Our point in using this illustration is to demonstrate that rents should not necessarily be derived from "operating costs," but should be based on other factors such as the surrounding housing market. Accordingly, we recommend that the House explore rent-setting legislation similar to a plan that was discussed last year during the debate on H.R. 2406. Under this plan, HAs would have the authority to set any type of rent they wanted, provided that the rent did do not exceed 30 percent of the family's adjusted income. Under such a system, HAs would be permitted to design more marked-based rents based on their operating costs and other relevant factors that are unique to the HA's situation. Moreover, using a variety of ceiling rents and earned income deductions, HAs would also have the flexibility to create incentives for families to seek employment and move up the ladder of self sufficiency. PHADA pledges its support to work with Congress in further developing this idea as work on H.R. 2 progresses.

Section 225, Page 89 (c). We strongly support the House's minimum rent provision as well as the hardship protections. H.R. 2 gives HAs the kind of flexibility they need to ensure rent equity. Equally as important, it also allows them to exempt those families who truly cannot afford even a modest minimum rent.

Section 225, Page 92, lines 3-20. As indicated earlier, PHADA strongly supports providing incentives for residents to seek employment, but we believe the 18-month earned income exclusion is the wrong approach. Our basic point is that a temporary income disallowance is not a substitute for true and meaningful rent reform. There are much better ways to remove work disincentives and help residents move toward self sufficiency.

First, we question whether Congress truly wants to give people this kind of a break on their rent. Yes, we want to create employment incentives for welfare recipients, students, longtime unemployed persons and others who are first entering the job market, but do we really want to exempt 100 percent of their income for more than one year, and then give them a reduced rent for three additional years? Before doing so, Congress should consider how this might affect the morale of residents who have been working all along and who would not be entitled to, what is in our view, an overly-generous benefit.

Congress should also recognize that this plan could wreak havoc with public housing operating budgets. For a variety of different reasons, many residents enter and leave the workforce on a fairly regular basis. Under the terms of H.R. 2, an HA would most likely have to reduce a resident's rent when they become unemployed or lose welfare benefits. At the same time, HAs will not be able to take in additional funds that they otherwise would have collected had the eighteen month exclusion not been in place. Given that so many families regularly leave and then re-join the workforce, the income disallowance will ratchet-down an HA's income in a relatively short period of time, thereby making the agency even more reliant on federal appropriations. Needless to say, this is exactly the kind of problem the legislation is trying to correct.

We again want to make it clear we fully support the creation of work incentives for all assisted housing residents. We just believe there are better ways to accomplish this objective. To that end, we suggest that you allow HAs to design workable ceiling rents and significant earned income exclusions as part of their local plan. It should be remembered that residents will have a considerable amount of input in the creation of those plans, and that it is in the HA's best interest to create the best economic incentives possible for all working families, not just those who are now entering the ranks of the employed.

If, in the final analysis, Congress rejects this idea and is intent on enacting some type of temporary disallowance for new workers, then we suggest that you reduce the exemption to 50 percent of all new earned income for a period of one year. We believe this would be a more workable and equitable approach compared to the current language.

Section 227, Page 95, beginning at line 10. We repeat our recommendation from last year that the House incorporate S.1260's (104th Congress) language governing designated housing for the elderly and disabled. In our view, the Senate language is much clearer and will lead to the desired results with the fewest bureaucratic impediments. Even with the passage of the 1996 Housing Opportunity Program Extension Act, HUD still continues to micromanage the designated housing process. Passage of legislation like that in the Senate bill would go a long way towards resolving this continuing problem.

Section 227, Page 97, line 8. We appreciate that you have defined choice-based housing as a "comparable" form of replacement housing. We point out, though, that under current HUD rules, the Department does not consider Section 8 vouchers as eligible replacement housing under designated housing plans. We believe this violates the spirit of the existing law. H.R. 2 would remedy this problem by recognizing all choice-based housing as comparable.

Section 232, Page 102, beginning at line 9. PHADA greatly appreciates the House's recognition of local housing codes, allowing HAs to inspect their units under those codes. This section is major improvement compared to existing law.

Section 232, Page 103, lines 18-22. We question the benefit of submitting the results of all HQS inspections to HUD. Will the Department utilize this data? Will it lead to better housing? Instead, we urge that the statute provide that it be made available if requested. This is a much more reasonable approach in our view. It is also consistent with the House's language governing HQS in the choice-based housing program.

Sections 233 and 234, beginning on Page 103. We support the retention of the Section 3 program and the continued designation of Resident Councils and Resident Management Corporations on page 105.

Section 235, Page 109, line 19. We do not believe that HAs should automatically be compelled to share any non-formula generated increases in income with resident management groups. At the same time, in fairness to resident groups, we do not believe they should be required to share any new income with housing authorities. We want to make it clear that while we support resident management, we believe this provision violates the bill's intent. That is, to provide as much flexibility to HAs as possible by removing many of the current rules that stifle innovation and creativity.

Section 236, Page 111, line 13. We suggest that "majority" vote of the residents to transfer management be changed to "two-thirds majority." Transferring the management is a very serious action and should not be taken lightly. We believe this change would ensure that resident support for such action truly is desired.

Section 237, Page 117, lines 22-23. We are not sure who might constitute "a qualified public housing management specialist" under the terms of the bill. At a minimum, this should be defined more specifically in the bill's report language.

Section 237, Page 119, lines 6-17. This language would allow HUD to waive certain rules and regulations for both resident managers and housing authorities. The waiver could be enacted after notice and opportunity for comment. We strongly support this provision and appreciate its inclusion in the bill.

Section 237, Page 120 (e)(1). This paragraph mandates that resident-managed developments be guaranteed not less than the same per unit month amount in funding each year. However, this seems to conflict with (2) on page 109. The latter paragraph makes more sense to us, stating that HAs can reduce assistance to resident groups if the HA's assistance is lowered. PHADA supports (2) on page 109 because it is the most equitable way to address funding shortfalls. Therefore, (e)(1) on page 120 should be deleted.

Section 251, Page 124. We generally support the House's homeownership provision, which makes it clear that the decision to create a program rests entirely with the housing authority. To further improve the program, we suggest you make a few changes. First, on lines 18-21, the House gives HUD the potential to delay homeownership efforts for an indefinite period of time. To correct this potential problem, we suggest that approval of such programs be done as part of the LHMP approval. HAs deserve the opportunity to have their plans approved in totality, not in a piecemeal fashion. We also suggest that you allow HAs to relocate non-eligible families (who may be living in units that other assisted residents may want to purchase) to other housing that is comparable in size and price.

Section 261, beginning on Page 129. PHADA supports the House's plan to simplify the demolition and disposition process. We suggest a few modifications to the existing language. On page 129, lines 16-19, the bill gives HUD the potential to delay demolition and or disposition for an indefinite period. Again, similar to the idea referenced above, we suggest that the approval of such plans be finalized with the approval of the whole LHMP.

On page 136, line 13, the bill allows HAs to be exempt from site and neighborhood standards only if "significantly fewer dwelling units" are constructed. While we clearly recognize the need to tear down the worst projects (particularly the older, larger developments) and provide replacement housing as soon as possible, PHADA finds this provision somewhat troublesome because it could again lead to micromanagement. Perhaps a distinction could be drawn between large troubled complexes and smaller developments where the problems are not as serious. In our view, this would be preferable to unilaterally mandating the same requirements for all 3,400 HAs. We therefore suggest "significantly" be deleted.

Finally, on page 137 beginning at line 23, we suggest that the De Minimis exception be expanded from 5 dwelling units to 50 units. We are aware of too many instances where HAs have had to undertake extensive efforts to tear-down relatively few units. Also, we suggest that the De Minimis exception should be allowed for any cited reason in this section of the bill, not just the two that are listed in this provision.

Section 262, Page 138. We support the stated intent of this section, which would allow HAs to demolish obsolete public housing, and then revitalize properties by constructing new units or offering residents tenant-based assistance. To achieve these objectives, this section basically extends the HOPE VI program for severely distressed public housing. The provision sunsets on September 30, 2000.

Our quarrel is not with the intent here. PHADA is a strong proponent of demolishing the worst public housing and creating new housing choices for low-income families. In many cases, the HOPE VI program has been a success in this regard. With that said, however, we do not support the program as it is presently being administered.

In our view, some of the grants have not been used wisely and have been awarded simply because of politics. Specifically, we are aware that some HAs are spending well over $150,000 per unit to replace distressed housing. This simply is not a prudent use of scant resources. We have also heard stories that some HAs are not using grants to replace housing, but rather to develop exotic mixed use real estate projects of questionable value. Finally, we believe that because of limited administrative capacity, some HAs simply do not know how spend all of the HOPE VI money they have been awarded.

Our key point is that limited housing dollars need to be better channeled to address their intended purpose. To realize this objective, we strongly recommend that the HOPE VI funding be folded into the modernization account instead of awarding funds through the current application-grant process. Housing authorities should then be permitted to use modernization funds for purposes currently allowable under HOPE VI. HAs could then best decide how to best use their funds as part of the comprehensive planning process. We believe this methodology would instill better long-range planning, and also remove some of the politics from the awards process.

Whether Congress accepts this strategy or not, we urge you to vigorously oversee paragraph (h) on page 143. This subsection mandates that HUD require a grantee to contract with other entities to run revitalization programs when the Department determines this would facilitate more efficient use of the grant. If HUD was overseeing the program properly now, we would not be experiencing some of the problems outlined above.

Section 263, Page 148, beginning at line 9. PHADA supports HAs having the right to voluntarily convert their public housing to choice-based assistance as long as the provision is entirely voluntary. With this in mind, we question subparagraph (c ) on page 149, which gives HUD the discretion to streamline the process. Why not streamline the process in the statute and make it simpler for all HAs? If this is not feasible, then we suggest a statutory deadline on HUD's review of the plans. In addition, we believe that if an HA voluntarily vouchers-out a development, it should retain the title to the development and be able to use it for any purpose that fits within its legal powers.

Section 272, Pages 151-152. The amounts authorized under the terms of the bill are woefully inadequate. H.R. 2 freezes the modernization allocation at $2.5 billion through the year 2002, and holds operating funding at $2.9 billion through the same term. There are a number of legitimate complaints about the program that can be directly traced to the severe under-funding in recent years. PHADA therefore urges an authorization of $3.2 billion for the operating fund and $2.9 billion for capital purposes in FY 1998. These authorizations should, at a minimum, increase at the same rate of inflation through 2002.

Title III

Section 301, Page 154, line 10. We strongly recommend that "1" fiscal year be changed to "2" fiscal years. While we understand the need to decrease the overall budget authority in these times of fiscal constraints, a sustained federal commitment is needed to ensure that landlords participate in the tenant-based program. In addition, we must point out that one-year terms would make it virtually impossible for HAs to establish project-based programs.

Section 304, Page 155, lines 24-25. We think the citation to (b)(3) and (c ) is inappropriate and will not be necessary if you heed PHADA's advice and abolish the Secretary's slush fund.

Section 304, Page 156, lines 12-16, and Page 158 (c). This language needs to be deleted. HUD is given way too much authority to determine whether a tenant-based program is viable or not. Factors such as performance, need, and other relevant criteria should dictate whether HAs continue receiving choice-based formula funds. In addition, under (c ) on page 158, 50 percent of an agency's turnover assistance would flow to communities where the Secretary would decide these issues based upon the "relative needs of all areas." Under such language, it is conceivable that a majority of the assistance will shift to larger urban areas because the need is so great in those communities. While this may be true, the needs of suburban and rural areas would not be diminished.

Section 306, Page 163, lines 6-7. The bill would freeze the tenant-based authorization at $1.8 billion through FY 2002. Without any increase permitted for inflation, this authorization is clearly insufficient to meet the needs of the program over the next five years.

Section 321, Page 165 (b). As indicated earlier, we generally support the House's income targeting thresholds with the proviso that there be fungibility between the project and tenant-based programs and with assurances that minimum wage families be classified as meeting the income targeting requirements under Section 222.

Section 321, Page 166, lines 15-21. PHADA appreciates the flexibility in H.R. 2, allowing HAs to create local preferences for admission to the choice-based housing program.

Section 321, Page 167 (e). PHADA supports national portability within the confines of the House bill. However, we are concerned that the main problem associated with such portability is still not addressed, i.e., the bureaucratic headaches that occur when the receiving agency cannot afford to absorb the incoming family.

We further want to point out our support for the provision requiring families to reside in the community for at least one year before taking assistance elsewhere. We similarly support (3) on page 168, which allows HAs to deny assistance to families who have violated previous leases.

Section 322, Page 170, lines 23-24. We strongly support the minimum rent for the choice-based program, as well as the optional hardship exceptions listed in (2) on page 171.

Section 325, Page 175. PHADA appreciates the ability of a choice-based landlord to terminate a tenancy in the same way as a non-assisted tenancy would be ended. We compliment its inclusion in the bill.

Section 326, Page 177, line 1. We believe the intent was to include both "Sale" and "Rental" here, so you may want to make this change.

Section 328, Page 179, lines 7-16. PHADA believes that you should treat choice-based housing HQS the same as in Title II for public housing. In other words, if the HA wants to use a local housing quality standard it should be allowed to do so. Indeed, we suggest that you permit HAs to design and propose their own local codes, which would, of course, have to be substantially equivalent to HQS and subject to HUD approval. On another note, thank you for letting HUD differentiate between major and minor code violations.

Section 329 Page 180 (a). We support the House's choice-based homeownership initiative.

Section 352, Page 186, line 14 and thereafter. While PHADA likes the idea of a shopping incentive, the plan put forth in H.R. 2 of escrowing the savings and splitting it annually between the family and the national deficit is an administrative nightmare. We urge that this be rethought. If this plan cannot be eliminated, then we suggest the abolition of the shopping incentive.

Section 353, Page 188, lines 12-13. We hope Congress ultimately enacts the payment standards now incorporated in H.R. 2. The flexibility (80%-120% of FMR) ) is very much appreciated. Still, we recommend that (c ) on page 188 be eliminated. This provision gives HUD unfettered power to review an HA's payment standards when a "significant percentage" of families are paying more than 30 percent of their income toward rent. Given that HUD has already expressed its opposition to this particular language, the potential for micromanagement is all too prevalent.

Title IV

Section 401, Page 196. PHADA is opposed to the "Home Rule Flexibility Grant Option" for several reasons. Most important, it must be noted that housing authorities were created in the first place to insulate low-income housing programs from local politics to the maximum extent possible. In too many American locales, housing for the poor does not enjoy much community support. Low-income families ultimately pay the price of this opposition and are denied the affordable housing they so desperately need. The Home Rule plan fails to recognize this unfortunate fact of life.

On the other hand, because housing authorities are at least quasi-independent of their localities, they are able to retain autonomy, which helps them fulfill the mission of delivering low-income housing assistance. We are concerned that Title IV would impede HAs in these efforts.

We also question why the House would want to set up an administrative "middleman" that will most likely only serve to siphon badly-needed resources from housing providers. In most cities, the local government does not possess the experience or expertise to run public and assisted housing programs. Conversely, of the 3,400 housing authorities in the United States, only 3 percent have been deemed to be unsuccessful in fulfilling their mandate. Why not give well-run agencies that have proven track records more tools to run their programs?

We also oppose Title IV on the grounds that there are other -- and better -- ways to deliver housing assistance to the poor. We note that, two years ago, Congress initially considered a HUD plan to block grant assistance to the states and cities. That plan was later modified with the grants continuing to flow directly to housing authorities. However, public housing units would have gradually been vouchered-out under the scheme. Congress wisely rejected HUD's ill-conceived reinvention plan for a myriad of reasons. Chief among them was the realization that the best way to deliver housing assistance to low-income families was to devolve as much authority and flexibility as possible to well-run housing authorities. For the most part, H.R. 2 reaffirms this proposition. Thus, we are puzzled as to why Title IV is included at all.

The Home Rule provision would provide local jurisdictions with a considerable amount of flexibility that HAs are not provided in the legislation. For example, localities would not necessarily be limited by rent restrictions that are applicable to housing authorities. While we support experimentation with different systems in order to develop new models for delivering housing assistance, we believe this can be more readily accomplished by giving more discretion directly to well-run housing authorities. This kind of flexibility was included in the so-called Moving to Work (MTW) demonstration in H.R. 2406. Rather than risking the loss of valuable housing assistance and some of the other problems associated with Title IV outlined above, we suggest that Congress instead enact the MTW demonstration that was in Representative Lazio's bill during the 104th Congress.

Section 406, Page 207. On the chance that the Home Rule provision remains in the bill, we urge that the locality be required to set the performance standards. HUD should then verify that the locality has, in fact, met those standards. Moreover, a time limit for HUD approval needs to be added to the application process.

Section 407, Page 208. Where would the funding come from to provide the training? It should be clear that it comes from the Secretary's reserve and not at the expense of all other housing authorities.

Finally, the Home Rule provision does not address how the complex issue of portability will be dealt with when the localities are administering housing assistance. In our view, this is yet another reason why the job should be left to housing authorities that already know how to run the programs.

Title V

Section 501, Page 211. This section arranges for a study of different oversight models that might be used to assess housing authority performance. We appreciate that the House has incorporated industry suggestions to perform a study that would examine accreditation as one potential form of oversight.

The main point we want to make is that HAs should not be subject to two or three different "masters." After the study is completed, Congress, in consultation with HUD, HAs, residents and other interested parties, should determine which single entity (HUD, the Board, the Independent Public Auditor, etc.) is best equipped to monitor housing authority performance. In the end, there must only be one regulatory institution to whom HAs report so as to ensure that they are deregulated to the maximum extent possible.

In a related matter, we believe that Title V is too focused on public housing agencies. We firmly believe that all federally-assisted deep subsidy housing providers should be expected to deliver high quality service to their residents in an economical manner. In our view, Title V should be altered to reflect this point. With that said, we generally support the new subtitle with a few modifications that are delineated below.

Section 501, Page 213 (B) and (C). These sections state that the study will examine whether any accreditation models are applicable to the institution of public housing. Paragraph (C ) on lines 20-24 adds that the study should "evaluate the effectiveness of establishing an independent accreditation and evaluation entity to assist, supplement, or replace the role of the Department of Housing and Urban Development..." Despite this wording, a new federally-charted Accreditation Board is automatically established in Section 521 on page 217. The Board would not commence any functions until Congress gives it statutory authorization. We question why the Board is automatically established and members are appointed (see lines 9-10, page 218) when one of the study's main purposes is to explore whether an Accreditation Board would be advisable. We suggest that the Board's formation in Section 521 is premature.

Section 501, Page 214 (D). We appreciate that you have added Independent Public Auditors to this section. PHADA believes that the IPA is probably the best tool as far as monitoring HA performance. This is particularly true when you consider that HUD's resources will continue to diminish in the foreseeable future.

Section 506, Page 216 (a) and (b). We question whether "6 months" on line 15 is sufficient. The entity that is conducting the study may need more time. Also, "12 months" on lines 24-25 may not be adequate for the report's publication.

Section 506, Page 217, line 6. Thank you for giving the national industry organizations the opportunity to review and comment on the final report.

Section 521, Page 217. As mentioned previously, do you really want to establish and appoint members to the Board before the study is actually completed? Also, we question whether the Board should be a part of the executive branch, or for that matter, any part of the federal government. We suggest that the study at least look at the feasibility of making the accreditation board a non-federal independent entity.

Section 523, Page 223, lines 1-2. We very much appreciate that you have specifically stated that PHMAP would be replaced if the Board opts to establish an accreditation system. This goes directly back to our point that HAs cannot be subjected to a variety of different oversight tools if they are going to fulfil their mission.

Section 525, Page 227, line 3. We suggest that "reasonable" be inserted before "fees."

Sections 531 & 532 Page 228. We support the continued application of PHMAP until the study is done and a final report on other oversight models is completed.

Section 532, Page 230, lines 13-14. Perhaps report language should be added indicating that factors "beyond an HA's control" include insufficient operating subsidies. Housing authorities should not be penalized because they are not receiving adequate financial support. Given that HAs are already severely under-funded, this could become a real issue even if appropriations for operating subsidies remain stable.

Section 533, Page 231. We preferred the term "Dysfunctional" HAs that was contained in H.R. 2406. We believe this best described some of the most chronically troubled housing authorities.

Section 545, Page 242 & Section 546, Page 249. PHADA strongly supports the "removal of ineffective PHAs" and the "mandatory takeover of chronically troubled agencies" as incorporated into these two sections.

Section 545, Page 244 (c). PHADA is concerned that this provision will give HUD too much discretion to pump extra money into HAs that have been taken over. We have already witnessed this problem in some of the more high-profile HUD takeovers the last few years. If codified into law, this provision could potentially shortchange other HAs at a time when they are not receiving adequate operating assistance. If this provision is retained, it should be made clear that the funding can only come from the Secretary's emergency fund, and not at the expense of well-performing HAs.

Title VI

Page 252 (1) and (2). The delayed implementation is probably a wise choice to ensure that no necessary statutes are unintentionally rescinded. This should ease a lot of the concerns related to repealing the Housing Act of 1937. Similarly, the cross-reference language on page 254, lines 9-14, is also a good idea.

Section 622, Page 264. PHADA is unalterably opposed to this component of the bill. It would require that HAs and private landlords admit families that own "common household pets." We oppose this plan because: 1) Washington should not dictate to housing providers whether they should or should not allow pets. Such government interference would never be considered in the private rental market, where pets are often prohibited; 2) The provision will definitely dissuade private landlords from participating in subsidized housing programs, thereby reducing the available supply of affordable housing; 3) Contrary to last year's House debate on this matter, Americans do not possess an inalienable right to own pets; 4) What animals fall under the definition of "common household pets?" Would HA's have to admit families that own pit bull terriers? 5) The potential safety and sanitary problems that could result from this proposal are too innumerable to detail here, but they will be quite serious in any case. Indeed, numbers 4 and 5 beg the question what happens if the majority of residents do not want pets in their area? In project-based developments, we suggest that, at a minimum, you allow for a referendum among the residents.

It is sometimes easy to dismiss housing authority concerns with this measure simply because of its ostensibly benign nature. The fact remains, though, that this new federal requirement will create major problems that could have profoundly negative effects on the state of public and assisted housing. The biggest problem is that it will ultimately hurt low-income families because it will undoubtedly lead to a diminution in the number of available affordable housing units around the country. Simply put, private landlords will drop out of the Section 8 program because they do not want to deal with the headaches created by this federal mandate. In the final analysis, the very people Congress professes to help will instead be hurt because they will not be able to locate suitable housing.

For all reasons noted above, PHADA strongly believes that this issue should be decided at the local level and is not a matter with which the federal government should be concerned. Section 622 should be deleted from the bill.



Section 624, Page 269. We appreciate that Community Partnership Against Crime (COMPAC) funds may be used to reduce crime "in and around" public housing as indicated in (3). However, we support an anti-drug program that is more similar to the provision that was contained in S.1260 last year.

The reason we favor the Senate approach is that it does not attempt to create a formula-driven system for all HAs by size category. Contrary to popular belief, not all large agencies need anti-drug funds, while many small HAs are desperately in need of such funds. The Senate bill recognizes this, while H.R. 2 automatically decides the funding formula (85% for larger agencies and 10 percent for small HAs). Conversely, S.1260's system would be based on overall need and not the mere size of the HA. PHADA supports that measure with some modifications. Our proposal is as follows: