December 16, 1996

Honorable Franklin Raines
Director
U.S. Office of Management
and Budget
Washington, D.C. 20503

Dear Mr. Raines:

PHADA represents the professional administrators of 1,650 housing authorities located across the United States. I am writing in response to OMB's recent proposal to block grant public and assisted housing funds to the states and certain localities. The association strongly opposes this initiative.

While we have differed with HUD Secretary Henry Cisneros in the past on some issues, PHADA wishes to convey its agreement with the December 3 letter he forwarded to you concerning this matter. As indicated in that correspondence, public housing as an institution has made great strides in recent years, and the Secretary is correct that the OMB plan would be a "serious mistake" at this juncture.

In our opinion, the proposal is not at all warranted. There are approximately 3,400 housing authorities in the United States. More than half of these agencies have been designated as "high performers" under the assessment tool HUD uses to gauge each housing authority's performance. Most of the remaining agencies, meanwhile, are classified as "standard performers" that are satisfactorily providing housing assistance under very difficult circumstances. Only 3 percent of all housing authorities have been classified as "troubled." In short, 97 percent of all housing authorities have a proven track record of delivering quality services to their clientele.

On the other hand, serious questions exist about the capacity of states and local governments to oversee this complex program. In most states, no administrative infrastructure is in place to take on the burdens of administering project and tenant-based assistance on a wide scale basis. Consequently, states would in most cases have to contract with local housing authorities that possess the expertise needed to run the programs. Thus, the OMB plan would create an administrative middleman that would serve only to siphon sorely-needed funds from where they should be targeted -- towards the needs of low-income residents.

The plan also contradicts the Administration and Congress's stated objective of devolving authority directly to the most appropriate local source, in this case the community's PHA. In our view, this policy direction is not advisable. Indeed, from our perspective, the OMB plan is not only poor governmental policy, but bad politics as well. The unfortunate reality is that some communities oppose subsidized housing assistance for low-income families and go to great lengths to thwart the housing authority's mission. One of the very reasons housing authorities were created in the first place was to insulate them from local political pressures. In some cases then, OMB's proposal would exacerbate problems for housing providers because they would now be forced to rely on their local and state governments for funding. In the final analysis, poor families might be denied badly-needed housing assistance.

We sympathize with the Administration's desire to reduce the federal budget deficit. However, OMB's plan to block grant or freeze operating subsidies for five years would devastate public housing communities around the nation. This is particularly true in light of recently-enacted welfare reforms, which will have an enormous financial impact on housing authorities. In short, Washington must make a decision to either absorb these additional costs or free housing authorities from excessive regulation. One potential way this can be achieved is through an expansion of the recently-enacted Moving to Work Demonstration (MTW) that was referenced in OMB's passback. Under this program, funds are provided directly to housing authorities, who are given the flexibility to administer the monies using new innovative strategies. We support this experimental approach because it will give HUD, Congress, and housing authorities the test-case data they will need to provide housing assistance with fewer dollars.

For all of the foregoing reasons, we agree with HUD that the OMB plan is ill-advised, and respectfully request that it be withdrawn. Please do not hesitate to contact me should you require any further information concerning our position on this matter. Thank you for considering PHADA's views.

Sincerely,


Timothy G. Kaiser
Executive Director



cc: Hon. Henry Cisneros
Hon. Rick Lazio
Hon. Joe Kennedy
Hon. John Kerry
Hon. Connie Mack