[Congressional Record Volume 140, Number 138 (Wednesday, September 28, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
 LEGISLATION TO RECTIFY PROBLEMS IN THE SECTION 8 PROJECT-BASED PROGRAM

                                 ______


                        HON. COLLIN C. PETERSON

                              of minnesota

                    in the house of representatives

                     Wednesday, September 28, 1994

  Mr. PETERSON of Minnesota. Mr. Speaker, today I am introducing 
legislation to rectify widespread problems in the Section 8 Project-
Based Assistance Program. This Section 8 Project-Based Program is 
separate from the more widely known Section 8 Voucher Program in that 
the subsidy attaches to the apartment rather than to the tenant. 
Tenants do not have the choice to move to another apartment building 
because their rental subsidy cannot be used elsewhere.
  The Employment, Housing and Aviation Subcommittee which I Chair has 
been investigating this program. We held a hearing on July 26, 1994 and 
will have a second hearing next week on October 6. The results from the 
first hearing were startling. The Department of Housing and Urban 
Development [HUD], the agency that administers this program, could not 
even identify for the subcommittee which projects were troubled either 
financially or physically.
  The HUD Inspector General reported that, to date, HUD has provided 
over $131 billion in assistance to over 20,000 projects. More than 30 
percent of these projects are troubled. Many are in deplorable shape: 
families are living with rat infestation; leaking toilets, sinks and 
roofs; no heat or smoke detectors; and holes in walls and ceilings.
  HUD has not done a complete assessment of its inventory of troubled 
projects, which this bill would require. This assessment would include 
a financial and cost-benefit analysis of each troubled property to 
determine appropriate remedial action. It would also examine the social 
impact these properties have on tenants, owners, and communities.
  In addition, this bill would require HUD to identify its troubled 
properties, collect and analyze the financial information for each 
project, and weigh its options for remedial action. HUD would then 
choose the most cost-effective action to take, while considering its 
affect on tenants, owners, and the community. Without a systematic 
method of determining what actions it should take on troubled projects, 
HUD could be wasting millions of dollars on projects that should not 
receive further assistance.
  One solution, included in the bill, would permit HUD to recapture 
section 8 project-based funds for reuse as vouchers or certificates. 
This would allow tenants who live in substandard apartments to move to 
another building.
  In addition to being in deplorable shape, many apartments have rents 
that are higher, in some cases double, the rent of comparable 
apartments in the same neighborhood that do not receive a subsidy. The 
General Accounting Office found a troubled section 8 property in 
Chicago where rent for a two-bedroom apartment was over $800 and a 
comparable apartment in a nearby building was just over $400. Some 
owners of section 8 assisted projects may be receiving undue profit at 
taxpayers' expense. The bill contains provisions that will control 
section 8 rent increases and make the rents comparable to unassisted 
rents in the area.

  I hope that with this bill, requiring more efficient and cost-
effective HUD oversight of section 8 properties, we can improve the 
management and financial and physical condition of these properties; 
properties that, by law, are intended to provide habitable rental units 
for thousands of low-income Americans.
  A summary of the legislation follows:

                         Congressional Findings

       The Subcommittee on Employment, Housing, and Aviation held 
     a hearing on July 26, 1994 to examine problems in the Section 
     8 Project-Based Assistance Program. The findings from the 
     hearing follow:
       Approximately 30% of the projects do not meet HUD's housing 
     quality standards and are classified as ``troubled''. Of the 
     total inventory of over 20,000 projects, about 10,000 are 
     insured by HUD;
       HUD cannot identify which projects in its inventory are 
     troubled;
       HUD is neither adequately inspecting projects nor ensuring 
     that repairs are made;
       HUD is not taking aggressive enforcement action against 
     owners of troubled projects. According to the HUD Inspector 
     General, aggressive enforcement action is the ``exception at 
     HUD, not the rule.'' Although some of the sanctions available 
     to HUD may hurt tenants, several of the administrative 
     sanctions would not.
       The inability of HUD to address the problems of troubled 
     projects is due to a variety of factors, including 
     ineffective management, inadequate data systems, staffing 
     shortages, and a lack of program accountability.
       HUD has not done a complete assessment of its inventory of 
     troubled projects. This would include a financial and cost-
     benefit analysis of each troubled property to determine 
     remedial action. It would also examine the social impact 
     these properties have on tenants, owners and communities.
       Many Section 8 apartments have rents that are excessive 
     compared to comparable unassisted apartments in the same 
     area. A 1993 HUD report analyzed 4,125 properties and 
     concluded that 42% of those properties had assisted rents at, 
     or exceeding, 140% of market rents in the area.
       In 1989, Congress directed HUD to issue regulations for 
     conducting rent comparability reviews, which examine the 
     difference between HUD-assisted and unassisted rents charged 
     for similar apartments in the same neighborhood. Although HUD 
     issued a proposed rule in 1992, it has yet to issue a final 
     rule--four and one-half years later. HUD placed a moratorium 
     on conducting comparability reviews until the final rule is 
     published. In the meantime, HUD is not doing comparability 
     reviews, and owners are receiving automatic rent adjustments.
       In order for HUD to take appropriate remedial actions, 
     statutory changes may be required. For example, under current 
     law, HUD cannot ``recapture'' Section 8 funds for reuse as 
     vouchers or certificates.


 bill summary--section 8 project-based program management improvement 
                         act of 1994, h.r. 5115

       The Section 8 Project-Based Management Improvement Act of 
     1994 would address many of the problems with Section 8 
     project-based properties. It would:
       Require HUD to identify troubled Section 8 project-based 
     projects within 30 days of the bill's enactment. HUD will 
     establish two categories for projects--severely troubled and 
     troubled.
       Require HUD to have completed a financial and social impact 
     analysis on all of its severely troubled and troubled 
     projects. HUD will have 18 months after the bill's enactment 
     to complete the analyses.
       HUD is required to complete the analysis for all severely 
     troubled projects in the first six months after the bill's 
     enactment. HUD is required to complete the analysis for all 
     troubled projects within eighteen months of the bill's 
     enactment.
       The financial and social impact analysis would assist HUD 
     in determining remedial actions to be taken on projects. 
     There are several actions that HUD can choose to take on each 
     troubled project; such as providing funds to renovate the 
     property; enforcing sanctions against the owner; providing 
     Section 8 vouchers and certificates to tenants; and, in cases 
     where a project is beyond repair, foreclosing on the 
     building. HUD is required to collect and analyze the 
     appropriate information on each project, and weigh the 
     possible options. It should then choose the most cost-
     effective action to take, while considering its effect on 
     tenants, owners, and the community.
       In performing the financial and social impact analysis, HUD 
     is required to include the following (1) background 
     information (2) financial information (such as the project's 
     estimated rehabilitation costs, alternative financing 
     mechanisms, and income and expenses) (3) comparison of 
     options for remedial action. (4) an assessment of the social 
     impact of each option, and (5) any other information as 
     determined by the Secretary of HUD.
       Require HUD to develop the guidelines it will use for 
     determining remedial actions to take on each project. HUD 
     must submit these guidelines to Congress within 30 days of 
     the bill's enactment.
       Permit HUD to ``recapture'' project-based Section 8 funds 
     for reuse as vouchers or certificates (under current law, 
     terminated Section 8 funds had to be returned to the Treasury 
     and could not be used for vouchers or certificates).
       Repeal a prohibition on lowering Section 8 rents that were 
     in effect on or after April 15, 1987 for certain projects.
       Require HUD to develop final regulations on conducting 
     comparability reviews within 30 days of the bill's enactment.
       Permit HUD to switch between applying the two methods of 
     determining rent increases for Section 8 projects when 
     refinancing (Annual Adjustment Factors and budget-based).
  


                       SENATE COMMITTEE MEETINGS

  Title IV of Senate Resolution 4, agreed to by the Senate on February 
4, 1977, calls for establishment of a system for a computerized 
schedule of all meetings and hearings of Senate committees, 
subcommittees, joint committees, and committees of conference. This 
title requires all such committees to notify the Office of the Senate 
Daily Digest--designated by the Rules Committee--of the time, place, 
and purpose of the meetings, when scheduled, and any cancellations or 
changes in the meetings as they occur.
  As an additional procedure along with the computerization of this 
information, the Office of the Senate Daily Digest will prepare this 
information for printing in the Extensions of Remarks section of the 
Congressional Record on Monday and Wednesday of each week.
  Meetings scheduled for Thursday, September 29, 1994, may be found in 
the Daily Digest of today's Record.

                           MEETINGS SCHEDULED

                              SEPTEMBER 30
     10:00 a.m.
       Banking, Housing, and Urban Affairs
         To hold hearings on the nominations of Bruce A. Morrison, 
           of Connecticut, and J. Timothy O'Neill, of Virginia, 
           each to be a Director of the Federal Housing Finance 
           Board, Department of Housing and Urban Development, and 
           James Clifford Hudson, of Oklahoma, to be a Director of 
           the Securities Investor Protection Corporation.
                                                            SD-538

                               OCTOBER 3
     2:00 p.m.
       Indian Affairs
         To hold hearings on the nomination of Peter J. Osetek, of 
           Arizona, to be Commissioner on Navajo and Hopi 
           Relocation, Office of Navajo and Hopi Indian 
           Relocation.
                                                            SR-485
     3:00 p.m.
       Governmental Affairs
         To hold hearings on the nomination of Martha F. Riche, of 
           Maryland, to be Director of the Census, Department of 
           Commerce.
                                                            SD-342

                               OCTOBER 4
     10:00 a.m.
       Foreign Relations
         To hold hearings to examine the status report on United 
           States assistance to the newly Independent States.
                                                            SD-419
       Governmental Affairs
         Business meeting, to consider pending calendar business.
                                                            SD-342
       Labor and Human Resources
         To hold hearings on the Department of Labor's Job Corp. 
           program for at-risk youth.
                                                            SD-430

                               OCTOBER 5
     10:00 a.m.
       Budget
         To hold hearings on proposals to provide legislative 
           line-item veto authority to the President, including 
           expedited and enhanced rescission proposals, including 
           S. 9, S. 224, S. 437, S. 690, S. 740, S. 2458, H.R. 
           1578, and H.R. 4600.
                                                            SD-608
     1:00 p.m.
       Finance
       Energy and Agricultural Taxation Subcommittee
         To hold hearings on miscellaneous farm tax issues.
                                                            SD-406
     2:00 p.m.
       Judiciary
       Constitution Subcommittee
         To hold hearings to examine the constitutional right to 
           international travel.
                                                            SD-628

                               OCTOBER 6
     9:30 a.m.
       Governmental Affairs
         To hold oversight hearings on the General Accounting 
           Office.
                                                            SD-342
     10:00 a.m.
       Judiciary
         To hold hearings to examine how the Violent Crime Control 
           and Law Enforcement Act will fight drugs.
                                                            SD-226

                               OCTOBER 13
     9:30 a.m.
       Governmental Affairs
       Oversight of Government Management Subcommittee
         To hold oversight hearings on the Navy's mismanagement of 
           the sealift tanker contract.
                                                            SD-342

                             CANCELLATIONS

                              SEPTEMBER 30
     9:30 a.m.
       Governmental Affairs
       Regulation and Government Information Subcommittee
         To hold hearings on S. 2136, to prohibit sponsorship of 
           television violence by agencies of the Federal 
           Government.
                                                            SD-342