[Senate Report 104-195]
[From the U.S. Government Publishing Office]



   104th Congress 1st            SENATE                 Report
         Session
                                                       104-195
_______________________________________________________________________


                                                       Calendar No. 295



 
           THE PUBLIC HOUSING REFORM AND EMPOWERMENT ACT OF 1995

                               __________

                              R E P O R T

                                 of the

                     COMMITTEE ON BANKING, HOUSING,
                           AND URBAN AFFAIRS
                          UNITED STATES SENATE

                              to accompany

                                S. 1260

                             together with


                            ADDITIONAL VIEWS




               December 20, 1995.--Ordered to be printed
            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

  ALFONSE M. D'AMATO, New York, 
             Chairman
PAUL S. SARBANES, Maryland           PHIL GRAMM, Texas
CHRISTOPHER J. DODD, Connecticut     RICHARD C. SHELBY, Alabama
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
RICHARD H. BRYAN, Nevada             CONNIE MACK, Florida
BARBARA BOXER, California            LAUCH FAIRCLOTH, North Carolina
CAROL MOSELEY-BRAUN, Illinois        ROBERT F. BENNETT, Utah
PATTY MURRAY, Washington             ROD GRAMS, Minnesota
                                     PETE V. DOMENICI, New Mexico
 Howard A. Menell, Staff Director
  Robert J. Giuffra, Jr., Chief 
              Counsel
 Philip E. Bechtel, Deputy Staff 
             Director
 Jonathan Kamarck, Housing Counsel
  Melody H. Fennel, Professional 
           Staff Member
  Al Wooten, Professional Staff 
              Member
  David L. Hardiman, Legislative 
             Assistant
Steven B. Harris, Democratic Staff 
    Director and Chief Counsel
      Edward M. Malan, Editor
                                 ------                                

     Subcommittee on Housing Opportunity and Community Development

  CONNIE MACK, Florida, Chairman
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
CHRISTOPHER J. DODD, Connecticut     PETE V. DOMENICI, New Mexico
RICHARD H. BRYAN, Nevada             RICHARD C. SHELBY, Alabama
    Christopher D. Lord, Staff 
             Director
   Kari Davidson, Deputy Staff 
             Director
   Cheh Kim, Professional Staff 
              Member
    Paul N. Weech, Democratic 
     Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Introduction.....................................................     1
Purpose and Summary..............................................     2
Legislative History of the Committee Bill........................     2
Need for Legislation.............................................     3
Explanation of the Legislation...................................     4
    Title I--Public and Indian Housing...........................     6
    Title II--Section 8 Rental Assistance........................    28
Section-by-Section...............................................    37
    Section 1. Short Title; Table of Contents....................    37
    Section 2. Findings and Purpose..............................    37
    Section 3. Definitions.......................................    37
    Section 4. Effective Date....................................    37
    Section 5. Proposed Regulations; Technical Recommendations...    37
    Section 6. Elimination of Obsolete Documents.................    38
    Section 7. Annual Reports....................................    38
Title I--Public and Indian Housing...............................    38
    Section 101. Declaration of Policy...........................    38
    Section 102. Membership on Board of Directors................    38
    Section 103. Authority of Public Housing Agencies............    38
    Section 104. Definitions.....................................    39
    Section 105. Contributions for Lower Income Housing Projects.    39
    Section 106. Public Housing Agency Plan......................    39
    Section 107. Contract Provisions and Requirements............    41
    Section 108. Expansion of Powers.............................    42
    Section 109. Public Housing Designated for the Elderly and 
      Disabled...................................................    42
    Section 110. Public Housing Capital and Operating Funds......    43
    Section 111. Labor Standards.................................    44
    Section 112. Repeal of Energy Conservation; Consortia and 
      Joint Ventures.............................................    44
    Section 113. Repeal of Modernization Fund....................    44
    Section 114. Income Eligibility for Assisted Housing.........    44
    Section 115. Demolition and Disposition......................    45
    Section 116. Repeal of Family Investment Centers; Voucher 
      System for Public Housing..................................    45
    Section 117. Repeal of Family Self-Sufficiency; Homeownership 
      Opportunities..............................................    45
    Section 118. Revitalizing Severely Distressed Public Housing.    46
    Section 119. Mixed-Income and Mixed-Ownership Projects.......    46
    Section 120. Conversion of Distressed Public Housing to 
      Tenant-Based Assistance....................................    46
    Section 121. Public Housing Mortgages and Security Interests.    47
    Section 122. Linking Services to Public Housing Residents....    47
    Section 123. Applicability to Indian Housing.................    47
Title II--Section 8 Rental Assistance............................    47
    Section 201. Merger of the Certificate and Voucher Programs..    47
    Section 202. Repeal of Federal Preferences...................    48
    Section 203. Portability.....................................    48
    Section 204. Leasing to Voucher Holders......................    49
    Section 205. Homeownership Option............................    49
    Section 206. Technical and Conforming Amendments.............    49
    Section 207. Implementation..................................    49
    Section 208. Effective Date..................................    49
Title III--Miscellaneous Provisions..............................    49
    Section 301. Public Housing Flexibility in the CHAS..........    49
    Section 302. Repeal of Certain Provisions....................    50
    Section 303. Determination of Income Limits..................    50
    Section 304. Demolition of Public Housing....................    50
Changes in Existing Law..........................................    50
Regulatory Impact Statement......................................    50
Cost Estimate....................................................    51
Additional Views of Senator Faircloth............................    53
                                                       Calendar No. 295
104th Congress                                                   Report
                                 SENATE

 1st Session                                                    104-195
_______________________________________________________________________


         THE PUBLIC HOUSING REFORM AND EMPOWERMENT ACT OF 1995
                                _______


               December 20, 1995.--Ordered to be printed

_______________________________________________________________________


Mr. D'Amato, from the Committee on Banking, Housing, and Urban Affairs, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1260]

                              introduction

    The Committee on Banking, Housing and Urban Affairs, having 
considered the same, reports favorably a Committee bill to 
reform and consolidate the public and assisted housing programs 
of the United States, and to redirect primary responsibility 
for those programs from the Federal Government to the States 
and localities, and for other purposes.
    The Senate Committee on Banking, Housing, and Urban Affairs 
marked up S. 1260, the ``Public Housing Reform and Empowerment 
Act of 1995'' on October 26, 1995. The Committee considered, as 
original text for the purposes of amendment, the Committee 
Print which incorporated the principles of S. 1260 as 
originally introduced by Senator Mack, and cosponsored by 
Senators Bond and D'Amato.
    During the markup, the Committee approved two amendments by 
voice vote. One amendment was a managers' amendment making 
technical revisions to the Committee Print as well as 
incorporating 14 amendments previously filed by members of the 
Committee. The other was an amendment by Senator Faircloth to 
limit construction of new public housing. The Committee also 
defeated one amendment by voice vote. S. 1260 as amended was 
ordered reported by voice vote.

                          purpose and summary

    S. 1260, the Public Housing Reform and Empowerment Act, 
represents a major revision of the United States Housing Act of 
1937 to make the nation's public and assisted housing programs 
operate more effectively and efficiently. This bill represents 
an important first step toward a complete overhaul of Federal 
housing programs and a greater sharing of responsibilities 
among all of the participants in the Federal system.
    S. 1260 consolidates public housing funding and transfers 
greater responsibility over the operation and management of 
public housing from the Department of Housing and Urban 
Development (HUD) to housing authorities. In addition, it 
merges two similar programs that provide tenant-based rental 
assistance to low-income families and repeals program 
requirements in the current tenant-based assistance programs 
that discourage participation by private landlords.

               legislative history of the committee bill

    In developing its public housing reform proposal, the 
Committee has made a tremendous effort to obtain and 
incorporate the views of those who are directly involved in 
public and assisted housing programs, including the 
Administration and those agencies that directly administer 
public housing programs, private-sector apartment owners who 
participate in the assisted housing program, and interested 
groups representing public and assisted housing tenants.
    From March until October 1995, the Subcommittee on Housing 
Opportunity and Community Development held a series of six 
hearings on the mission, management and programs of the 
Department of Housing and Urban Development and proposals by 
HUD and others to reorganize the Department and redirect the 
Nation's housing and community development policies. One of the 
subcommittee's hearings, on April 27, 1995, was devoted to 
public housing reform. The subcommittee staff also held a 
symposium on public housing reform on May 12, 1995 and invited 
all interested parties to attend.
    On September 19, 1995, Senator Mack, Chairman of the 
Subcommittee on Housing Opportunity and Community Development, 
introduced S. 1260 with Senators Bond and D'Amato.
    On September 28, 1995, the Committee held a full day of 
hearings on S. 1260. Testifying before the Committee were: The 
Honorable Henry Cisneros, Secretary of HUD; Mr. Joseph Schiff, 
a former HUD Assistant Secretary for Public and Indian Housing; 
Mr. Gregory A. Byrne representing the Council of Large Public 
Housing Authorities; Mr. Richard Gentry representing the 
National Association of Housing and Redevelopment Officials; 
Mr. John Hiscox representing the Public Housing Authority 
Directors Association; Mr. Paul Graziano representing the 
National Leased Housing Association; Mr. Thomas Shuler 
representing the National Multi Housing Council; Ms. Karen Hill 
representing the National Low-income Housing Coalition; Ms. 
Nancy Bernstine representing the National Housing Law Project; 
Mr. Othello Poulard representing the Center for Community 
Change; Ms. Rosemary Rittenberg representing the Massachusetts 
Union of Public Housing Tenants; Ms. Sharron Lipscomb 
representing The Empowerment Network; Ms. Ann O'Hara 
representing the Consortium of Citizens with Disabilities; and 
Ms. Helen Boosalis representing the American Association of 
Retired Persons. In addition, written testimony was received 
from the General Accounting Office, the National Council of 
State Housing Agencies, the New York City Housing Authority, 
and the California Housing Authorities Association.

                          need for legislation

    S. 1260 addresses a growing crisis in the nation's public 
housing system. Over the years, public housing agencies (PHAs) 
have been saddled with statutory requirements as well as 
bureaucratic regulations that make it difficult for even the 
best of them to operate effectively and efficiently. Public 
housing developments too often have become warehouses for the 
poorest of the poor, and the residents of public housing face 
powerful disincentives to achieving economic independence and 
self-sufficiency.
    The Committee realizes that much of public housing is well-
run. Nevertheless, many public housing developments have become 
havens for crime and drug abuse and islands of welfare 
dependency. The well-publicized problems in public housing that 
are so visible in some of the nation's largest cities threaten 
to discredit an entire public housing system that is home to 
1.3 million American families.
    Compounding the structural problems of public housing are 
the dual concerns of budget and HUD capacity. Public housing 
agencies are facing significant and growing subsidy 
requirements in an era of diminishing Federal government 
resources. Given these limited resources, PHAs need the 
increased flexibility to use their funds in a manner that helps 
to maintain decent, safe and affordable housing for their 
residents. In addition, HUD itself faces a potential reduction 
in overall staffing of 40 percent over the next five years. The 
prospect of diminishing staff resources means that the 
Department will lack the capacity to maintain the same degree 
of oversight and control that it has exercised over the public 
housing system in recent decades.
    These circumstances have required the Committee to make 
public housing reform a high priority and to develop a 
comprehensive reform proposal that fundamentally alters the 
historical relationship between HUD and housing authorities. 
Increasing flexibility in the use of Federal resources is 
critical both to increasing the economic viability of public 
housing developments and providing a platform from which lower 
income households can achieve economic self-sufficiency. 
Subject to strict performance standards and comprehensive 
planning requirements, the bill allows housing authorities to 
use their funds in a more cost-effective and creative manner, 
and return greater responsibility over the operation and 
management of public housing to local housing authorities. The 
Committee recognizes that the Administration also proposed 
legislation to reform the public housing system, and S. 1260 
incorporates several concepts contained in the Administration-
proposed housing reform package.

                     EXPLANATION OF THE LEGISLATION

Overview

    S. 1260 consolidates public housing programs into two 
flexible block grants--one for operating expenses and one for 
capital needs--and requires HUD to establish new funding 
formulae for these activities through negotiated rulemaking. In 
addition to providing a more flexible source of funding, the 
bill also eliminates a series of statutory requirements that 
have prevented the effective and efficient use of funds. For 
example, the bill repeals the one-for-one replacement 
requirement. It also streamlines and makes flexible the 
demolition and disposition process to permit PHAs to demolish 
or dispose of obsolete or vacant housing. It also allows 
housing authorities to participate via joint ventures or 
partnerships in the development of mixed-income communities.
    The bill changes targeting requirements that will allow 
PHAs to serve residents with a greater range of income, while 
retaining targeting requirements that assure that very low-
income families in public and assisted housing will receive a 
significant portion of available housing assistance. The bill 
also repeals Federal preferences and allows PHAs to operate 
according to locally established preferences consistent with 
local housing needs.
    The underlying principles of the bill are local 
responsibility and resident empowerment. S. 1260 will provide 
housing authorities with greater flexibility to set their own 
rents with protections for very low-income families. The bill 
permits housing authorities to develop rental policies, such as 
ceiling rents and exemptions from adjustments to income, that 
will encourage and reward the employment and self-sufficiency 
of residents. The bill also provides a limited 18-month 
disallowance of earned income from public housing and section 8 
rent determinations for newly employed tenants as a means of 
encouraging employment. In addition, the bill creates a new, 
more flexible program that links supportive services to 
residents of public housing. This program includes a set-aside 
of funds for resident organizations that provide empowerment-
related activities for public housing residents.
    While allowing well-run housing authorities much more 
discretion, the bill also requires strong action against those 
housing authorities that are troubled. Although small in 
number, these PHAs with severe management problems control up 
to 15 percent of the nation's public housing stock. It is 
critical that the management and physical problems of these 
PHAs be addressed with HUD and localities becoming more 
responsible and proactive. The bill requires HUD to take over 
or appoint a receiver for PHAs that are unable to make 
significant improvements in their operations. It also gives HUD 
expanded powers to break up or reconfigure troubled 
authorities, bring in private management including nonprofit 
organizations, dispose of their assets, abrogate contracts, or 
not be bound by State or local law that significantly impede 
the correction of the housing authority's problems.
    The Committee believes that low-income families who are 
eligible for Federal housing assistance should have the widest 
possible choice of available affordable housing units. Thus, 
while a primary focus of the bill is preserving the nation's 
significant investment in the public housing stock, it also 
improves the ability of tenant-based section 8 assistance 
programs to work successfully. The bill combines the current 
section 8 certificate and voucher programs into a single, 
tenant-based assistance program. The new program will emphasize 
lease requirements similar to those in the private rental 
marketplace, and it repeals current program requirements such 
as ``take-one, take-all'' and Federal preferences, that now 
discourage landlord participation in the section 8 program.
    Finally, the Committee considered the Administration's 
proposal to convert the public housing system to a market-based 
system of tenant-based assistance. While the Committee strongly 
supports providing assisted households with the maximum 
residential choice, it is concerned that an entirely 
``voucherized'' system is not completely practical, given both 
the wide local variances in the costs of tenant-based versus 
project-based assistance and the limited availability of 
affordable housing in many housing markets which limits 
resident choice. However, the bill seeks to protect the most 
vulnerable public housing tenants by requiring that alternative 
housing including vouchers be provided to residents of 
distressed and nonviable public housing. It also requires PHAs 
to conduct development-by-development assessments of the cost 
of operating their public housing, and gives them the option of 
``vouchering'' out their public housing stock if doing so is 
more cost-effective than operating developments as public 
housing and they have demonstrated support from the community.

Findings and purposes

    The Committee believes the public and assisted housing 
programs are in disrepair. They are inefficient, frequently 
ineffective, and often fail to meet the needs of the households 
they were created to serve. The Committee also believes that 
public and assisted housing should be not only sources of 
affordable, decent, and safe housing, but also the platform 
from which participating households can achieve economic 
independence and self-sufficiency and realize the dream of 
homeownership.
    The findings and purposes contained in S. 1260 reflect the 
problems inherent in the current system of public and assisted 
housing and the solutions that will make the programs work more 
effectively and efficiently.
    The Committee recognizes, for example, that the current 
inventory of public housing units owned and operated by public 
housing authorities represents a substantial Federal investment 
in affordable low-income housing. However, the Committee 
observes that the current public housing system is plagued by a 
series of problems, including the concentration of very poor 
people in very poor neighborhoods and disincentives to self-
sufficiency. Further, the bill cites complex, top-down 
bureaucratic rules and regulations as aggravating these 
problems.
    The Committee finds that the interests of low-income 
persons, and the public interest, will be served by a system 
that: consolidates public housing programs; streamlines program 
requirements; vests increased authority, discretion and control 
with appropriate accountability in the hands of public housing 
agencies that are run well; and rewards employment and economic 
self-sufficiency. Further, the Committee believes that the 
tenant-based section 8 voucher and certificate programs can be 
made more effective and successful in assisting low-income 
families to obtain affordable housing by consolidating the two 
existing programs into a single, market-driven program.
    Therefore, it is the intent of this legislation: (1) to 
consolidate the programs and activities under the public 
housing programs administered by HUD in a manner designed to 
eliminate Federal overregulation; (2) to redirect the 
responsibility for a consolidated program to States, 
localities, Indian tribes, and public housing agencies and 
their tenants; and (3) to focus Federal action on the problems 
of public housing agencies with severe management problems.

Elimination of regulations

    Under the Committee bill, all rules and regulations 
relating to public housing and tenant-based section 8 are 
sunsetted after one year from enactment. This provision is 
intended to force HUD to review all of the current regulations 
to determine those that are obsolete. While the Committee 
recognizes that many regulations may still be appropriate for 
reissuance, it also fully expects the Department to conduct a 
careful review of every regulation and eliminate those that are 
obsolete, inconsistent with the goals and provisions of this 
Act, and unnecessarily micromanage the operations of public 
housing.
    The Committee recognizes that HUD contends that the 
Department is in the continuing process of reviewing, 
consolidating, and eliminating burdensome and excessive 
regulations. However, the Federal regulations involving housing 
programs continue to grow and become even more complex. The 
Committee believes that HUD needs affirmative direction to 
remove conflicting and sometimes incomprehensible rules which 
govern the public and assisted housing programs. The Committee 
also recognizes that this is a significant task and expects HUD 
to implement an expedited review and publication process for 
those regulations which are critical and necessary to the well-
being and proper management of the public housing and section 8 
tenant-based programs.

                   Title I--Public and Indian Housing

Composition of boards of directors of PHA

    The Committee bill requires PHAs to have at least one 
resident on their board of directors. The bill creates an 
exception for PHAs in which the State requires the board of 
directors to be salaried and to serve on a full-time basis. The 
Committee believes that placing a resident on the board is 
important to promote a greater understanding of tenant concerns 
and foster a working relationship between PHAs and residents. 
It is important to ensure meaningful participation by residents 
in the important decisions that affect their lives.

Ceiling rents

    The Committee bill provides PHAs with the flexibility to 
establish ceiling rents. The Committee bill amends section 
3(a)(2) of the 1937 Housing Act to authorize PHAs to establish 
ceiling rents that reflect the reasonable market value of 
comparable housing, but are not less than the cost to operate 
the housing.
    Under the Committee bill, the Secretary is required to 
carry out the ceiling rent provision through regulation after a 
notice and public comment period. Prior to the issuance of 
regulations, PHAs are permitted to adopt ceiling rents: (1) in 
accordance with current law; (2) at a level equal to the 95th 
percentile of the rent paid for a unit of comparable size by 
tenants in the same project or a group of comparable projects 
totaling 50 units or more; or (3) equal to the fair market rent 
for the area in which the unit is located. The Committee 
strongly urges the Department to include these options among 
the ceiling rent options in the final rule.
    During the course of hearings on this bill, numerous 
concerns were expressed about how the current rent policies 
detrimentally affect the upward mobility of tenants and 
discourage tenants from seeking jobs or trying to achieve 
greater financial independence. Because the current law 
generally requires tenants to pay 30 percent of their adjusted 
income for rent, whenever a tenant's income increases, his or 
her rent also goes up. As a result, it is often the case that 
residents make rational decisions either to remain in the 
housing and not work, or to leave public housing because their 
rent after returning to work exceeds the market value of the 
unit. This, in turn, affects the rent rolls of PHAs and the 
composition of public housing by removing the working families 
who are positive role models. Concentration of very poor 
families in public housing has directly contributed to the 
sharp rise in public housing operating subsidies. In addition 
to discouraging efforts to work, current rent policies also 
contribute to the break-up of families since the wages of all 
family members older than 18 years are used to calculate a 
family's rental payment.
    The Committee bill includes changes that begin to address 
the built-in disincentives in current law by giving PHAs the 
tools to implement a workable system of ceiling rents. Section 
3(a)(2)(A) of the 1937 Act now allows PHAs to establish maximum 
or ceiling rents. However, the current law is flawed and has 
had limited use because the formula for establishing ceiling 
rents includes a calculation of imputed debt service which 
produces a number that is generally higher than the actual 
market value of most units.
    The Committee believes that the reforms in rental policy 
made by this legislation will have a positive effect of 
providing greater incentives for public housing residents to 
work and economically improve their lives. This, in turn, will 
create better role models, more stable families, and a 
healthier social climate in public housing communities, as well 
as reducing cost burdens on PHAs themselves.

Minimum rents

    The Committee bill allows PHAs to establish a minimum rent 
not to exceed $25 for each family living in public housing or 
receiving section 8 tenant-based or project-based assistance. 
Under the Committee bill, minimum rents are voluntary for the 
PHA and can be anywhere from $0 to $25. The minimum rent 
provision is intended to promote personal responsibility and 
resident investment in their living space. It is also intended 
to ensure that families benefiting from housing assistance are 
paying something in recognition that there are far more 
families eligible for housing assistance for whom no assistance 
is available who are paying excessive rents in the private 
marketplace.
    The Committee does not intend for this provision to create 
excessive hardship for those simply unable to pay a minimum 
rent, such as those on fixed-incomes like the elderly and 
disabled. For this reason, the minimum rent provision is 
voluntary and up to the PHA to apply fairly and appropriately 
according to the financial circumstances of the PHA and its 
residents. For example, a PHA could exempt certain classes of 
people, such as those on fixed-incomes, from the minimum rent 
requirement.
    The Committee intends that PHAs be allowed to require every 
family to pay up to $25 for their rent and utilities. The 
Committee realizes that in some instances residents are 
reimbursed for the amounts that they pay directly to the 
utility company. The minimum rent provision is not intended to 
alter the current treatment of utilities in the calculation of 
tenant rent contributions.

Rent flexibility and income adjustments

    Under the Committee bill, all non-troubled PHAs are 
permitted to establish rent policies for families whose income 
exceeds 50 percent of the median income for the area. Families 
with incomes equal to or less than 50 percent of the area 
median will continue to pay 30 percent of their monthly 
adjusted income for rent except where they are paying a ceiling 
or minimum rent. In addition, the Committee bill allows all 
PHAs to disregard any income it deems appropriate when 
calculating a family's rent contribution.
    The Committee received extensive comments on the rent 
provisions. Housing authorities expressed grave concerns that 
the legislation did not afford PHAs sufficient flexibility in 
the area of rent setting. They argued that the only way to 
generate additional revenues and improve social conditions in 
public housing is to have flexible rent structures developed 
according to their respective financial conditions and local 
situations. Further, they warned that many PHAs will face 
fiscal hardship in these times of decreasing Federal resources 
for the operation and maintenance of public housing without the 
ability to set flat rents. Finally, PHAs argued that rent 
flexibility is essential to develop policies that encourage and 
reward employment.
    On the other hand, advocates for low-income families 
expressed concerns about the impact that a repeal of the Brooke 
amendment (or 30 percent requirement) would have on the poorest 
of the poor. They argued that a flat rent that requires a 
family to pay more than 30 percent of their income for rent 
would impose a harsh and undue burden on poor families, and in 
some cases, could result in the constructive eviction of 
existing tenants without the resources to pay higher rents.
    The Committee recognizes the validity of both of these 
arguments and, therefore, tried to strike a balanced policy. 
The Committee bill retains the 30 percent rent requirement for 
very low-income families to ensure that they are not required 
to pay more than they can afford for housing and allows non-
troubled PHAs the ability to set rents for families with 
incomes above 50 percent of the area median.
    The Committee also shares the concerns about the 
disincentives to work built into the current rent provisions. 
Therefore, the Committee bill provides PHAs with the tools to 
address this problem by allowing ceiling rents and income 
adjustments. The Committee bill intentionally designed the 
provision on income disregards to be simple and flexible to 
allow PHAs to design innovative rental policies that reward 
work and encourage economic self-sufficiency.

Disallowance of earned income

    The Committee bill replaces the current income disallowance 
in section 3(c) of the 1937 Housing Act and replaces it with a 
bar against any rent increase for public housing or section 8 
households for 18 months as the result of the employment of a 
family member who was previously unemployed for 1 or more 
years. Any household with an income disallowance under present 
law is grandfathered.
    The purpose of this provision is to provide work incentives 
and to facilitate the transition from welfare to work. The 
Committee bill applies this provision to all members of the 
household to remove the disincentives in the present rent rules 
for dependent children or other adult members in the household 
to work.
    Under the Committee bill, any rent increase due to the 
continued employment of the family member must be phased in 
over a 3-year period after the 18 month moratorium. Phasing in 
any rent increase will prevent the newly employed person from 
experiencing a large increase in rent that could otherwise 
discourage them from working or staying in public housing. 
While the Committee hopes that all families will have the 
opportunity to make the transition to private housing and 
economic independence, it is also concerned that public housing 
communities are losing positive role models and stable living 
environments when working families move out because of adverse 
rental policies.
    The Committee bill also repeals section 957 of the National 
Affordable Housing Act of 1990, and section 923 of the Housing 
and Community Development Act of 1992. Section 957 applies to 
all assisted housing programs and provides, subject to 
appropriations, that the rent charged to a family may not rise 
more than 10 percent per year as a result of a previously 
unemployed family member becoming employed. This provision was 
never implemented by HUD because no appropriation was made 
available. However, the Housing and Community Development Act 
of 1992 contained language strongly urging the Department to 
implement this section, and HUD is now being sued by litigants 
who allege that this latter language takes precedence and 
requires implementation. The Committee contends that this 
provision has always been subject to appropriations 
irrespective of the language in the 1992 Act. The Committee 
bill, therefore, repeals both section 957 and section 923 to 
clarify Congressional intent on this matter and to avoid 
redundancy with provisions on income exclusions contained in 
this Act.

Public housing agency plan

    A major feature of the Committee bill is the creation of 
the public housing agency plan that is designed to serve as an 
operations, planning, and management tool for PHAs. The plan is 
to be developed in consultation with a local advisory board. 
The plan must also be consistent with the Comprehensive Housing 
Affordability Strategy (CHAS) for the PHA's jurisdiction and 
include a certification by an appropriate State, tribal, or 
local public official that the plan meets the requirements of 
the CHAS.
    The plan must include: an annual statement of policy; an 
annual statement of low-income housing needs in the community; 
the PHA's general policies, rules and regulations concerning 
tenant selection and admission, assignment, occupancy, rents, 
and project designations; the PHA's policies and rules for the 
management and operations of the agency; the PHA's policies, 
rules, and regulations regarding its management and 
administration of the capital fund, including its capital 
needs; economic and social self-sufficiency programs; and, an 
annual audit.
    The plan must be submitted to HUD for approval 60 days 
before the start of the PHA's fiscal year. HUD must review the 
plan to determine whether it: (1) is complete; (2) is 
consistent with the information and data available to HUD; and 
(3) does not include material prohibited by, or inconsistent 
with, applicable law. Insufficient time to review a plan is not 
a valid reason for HUD to reject a plan. If HUD fails to 
approve the plan within 60 days, it is deemed approved.
    The intent of this new provision is to provide a framework 
for local accountability in a new era of deregulation, 
flexibility, and local discretion. In developing this 
legislation, the authors believed that in removing many of the 
Federal statutory and regulatory requirements for PHAs and 
diminishing HUD's oversight function that it was essential to 
have a mechanism to ensure that decisions are made with 
accountability to residents, the community, and local 
government. The intent is for the PHA to consolidate all of its 
policies, rules, and regulations into a single planning 
document that is responsive to local needs and allows residents 
and community representatives to be instrumental in its 
development and have open access to its contents.
    During the bill development period and hearing process, 
concerns were raised that this new planning requirement was too 
bureaucratic and its required contents were more excessive than 
what is currently required of PHAs to submit to HUD. Concerns 
were also expressed that this requirement might create an 
excessive burden on small PHAs, particularly those with limited 
or part-time staff. Finally, PHAs and HUD commented that the 
Department does not have the capacity to review thoroughly 
every aspect of the plan in a timely manner.
    The Committee does not intend for the plan to create an 
excessive bureaucratic burden on PHAs. The intent is that if 
PHAs are relieved from many of the statutory and regulatory 
requirements that have tied their hands in the past, then they 
must develop their own new and clear policies to replace the 
existing Federal requirements that have been repealed by this 
legislation. The Committee recognizes that some PHAs may decide 
to continue operating as they have in the past while others may 
welcome the opportunity to develop new policies appropriate to 
local needs and conditions. Therefore, the process for 
developing a plan will reflect the extent to which a PHA wishes 
to adopt new policies. If a PHA wants to rewrite all of its 
current policies it may do so or it may simply wish to adopt 
existing policies as part of its plan.
    Under the Committee bill, HUD is given the authority to 
develop a streamlined plan for high-performing PHAs or those 
with fewer than 250 public housing units. This provision 
recognizes the difficulties for small PHAs with limited staff 
to develop comprehensive plans and attempts to reward high-
performing PHAs by providing incentives for continued high 
performance. Final regulations regarding the plan, including 
what will be required in a streamlined plan, will be developed 
through negotiated rulemaking. The Committee strongly urges the 
Department in developing streamlined planning requirements to 
retain those features of the planning process that maximize 
tenant involvement in the development of the plan.
    The Committee bill also provides the Department with 
discretion on what aspects of the plan it deems appropriate to 
review to ensure that it is complete, truthful, and in legal 
compliance. This provision recognizes the limited capacity and 
declining resources at HUD to review every aspect of the plan. 
The Committee believes that the main value of the plan is the 
local process of consultation and review that it engenders. The 
Committee believes that the upfront review of the plan by HUD 
is necessary but, more important, that the post-audit review 
ensures that the PHA is performing well and operating according 
to what is outlined in its plan. Therefore, the Committee 
encourages HUD to focus its attention on audits, including 
audits of PHA performance vis a vis their plans, and the Public 
Housing Management Assessment Program (PHMAP). This bill 
includes a new indicator of PHA compliance with its plan. It is 
more important for HUD to monitor troubled or near-troubled 
agencies rather than dedicating its limited resources to an 
extensive upfront review of PHA plans.
    Finally, the Committee bill includes a provision for a 
General Accounting Office (GAO) audit of the degree of 
compliance of PHAs with their public housing agency plans. The 
Committee expects the GAO to review a representative, but 
limited, sample of PHA plans and to report back to Congress in 
the time frame specified by the statute with its pending 
recommendations.

Local advisory board

    One of the primary objectives of this legislation is to 
return power and decision making authority from the Federal 
government to local housing agencies. With the devolvement of 
authority, however, comes the need for local participation and 
accountability. The Committee strongly believes that local 
agencies are better equipped to make decisions and develop 
policies to address local needs and conditions. It also 
recognizes, however, the importance of oversight at the local 
level and involvement by residents and local citizens in the 
decisions that impact their lives and communities. Therefore, 
the Committee bill encourages PHAs to facilitate resident input 
and requires the establishment of a local advisory board to 
participate in the public housing agency planning process.
    The local advisory board must be composed of public housing 
residents and participants in tenant-based programs, 
representatives of the community and local government 
officials. Sixty percent of the board must be composed of 
residents, including representatives of any existing resident 
organization, and the balance must be representatives of the 
community and local government officials.
    The role of the local advisory board is to make 
recommendations regarding the development of the plan which the 
PHA must consider and include in the submission of its plan to 
HUD. In addition, the local advisory board must review any 
significant amendments or modifications to the plan that the 
PHA submits to HUD. The Committee does not intend for the local 
advisory board to have veto power over the public housing 
agency plan; however, it does expect the PHA to consider fully 
the comments and issues raised by the local advisory board when 
developing its plan.
    The Committee received several comments from housing 
agencies and resident groups that the local advisory board may 
be redundant in situations where there already exists resident 
organizations actively involved in the housing authority 
decision making functions. Another concern was raised about the 
potential cost and difficulty of conducting a PHA-wide election 
to select residents to participate on the local advisory board. 
The Committee does not intend for this provision to create an 
undue hardship on PHAs nor does it intend to recreate an 
already successful tenant participation process. Therefore, the 
Committee bill allows HUD to waive, in whole or in part, the 
requirements with respect to tenant representation on the local 
advisory board if the PHA demonstrates that a resident council 
or other tenant organization of the PHA adequately represents 
the tenants of the PHA. The resident council or other tenant 
organization would take on the full responsibilities of the 
tenant representatives, who would otherwise serve on the local 
advisory board, in regards to the public housing agency 
planning process.

Performance measures and accountability

    The Committee believes that the Public Housing Management 
Assessment Program (PHMAP) will provide the critical yardstick 
for a post-audit review to ensure that PHAs are performing 
their duties as managers of public and assisted housing.
    The Committee bill contains two new additions to PHMAP. The 
new performance indicators include: the extent to which the PHA 
provides effective programs to promote the economic self-
sufficiency of residents and provides opportunities for 
residents to be involved in the administration of public 
housing; and the extent to which the PHA successfully meets the 
goals and carries out the activities of the public housing 
agency plan.
    These two new indicators of PHA performance reinforce, and 
are consistent with, two of the primary objectives of this 
legislation: to empower residents to become more active 
participants in the decisions that affect their lives and 
provide them opportunities to break out of the cycle of poverty 
and achieve economic independence and to place greater emphasis 
on local decision making.
    Rather than attempt to prescribe every aspect of program 
administration, which has proven to be a failure in the past, 
the Committee favors the approach of providing greater 
flexibility to PHAs to design programs that make sense for 
their residents and local communities. During the development 
of this legislation, however, concerns were raised about 
accountability and potential abuses which may occur as a result 
of the repeal of many Federal requirements governing the public 
housing program. The Committee carefully considered the 
comments it received concerning the balance between flexibility 
and accountability. The Committee bill attempts to achieve that 
delicate balance by providing PHAs with greater authority to 
develop policies appropriate to local needs through the public 
housing agency planning process but adding a new performance 
indicator making sure that the PHA actually performed according 
to the objectives set forth in the plan.
    As discussed in the section on the public housing agency 
plan, given the limited resources and oversight capacity at 
HUD, the Committee intends for the Department to concentrate 
its efforts on monitoring performance and program 
implementation rather than spending an inordinate amount of 
time on the upfront review and approval of public housing 
agency plans. The Committee believes that the Department's 
resources will be better utilized by examining results and 
measuring PHA performance against what they said they were 
going to do in their plans. The Committee points out that the 
Secretary of HUD in his testimony before the Committee also 
stressed the need to emphasize performance monitoring.
    During Committee hearings on public housing reform, 
concerns were also raised about the effectiveness of the PHMAP 
process. Reports by the HUD Inspector General indicate that in 
some circumstances information reported by PHAs can be 
fabricated, and may have been fabricated in the past. Since 
this legislation places great emphasis on performance reviews 
and post-audit functions, the Committee expects that HUD will 
dedicate the appropriate resources to ensuring the integrity of 
the PHMAP and audit process.

Preferences

    The Committee bill repeals Federal preferences for public 
housing and tenant-based assistance programs and allows each 
PHA to establish its own system of preferences with input of 
local residents, community members, and government officials 
through the adoption of a PHA plan.
    Under current law, PHAs are required to target 50 percent 
of their vacancies or new admissions to people with worst case 
housing needs. By repealing Federal preferences, PHAs will be 
provided much broader discretion to admit relatively higher 
income families to the public housing program or to admit 
eligible families based on their assessment of local housing 
needs.
    The Committee believes that Federal preferences have been 
one of the primary causes of concentrating the poorest of the 
poor and creating unstable public housing communities. This 
well intentioned provision was originally designed to guarantee 
that finite housing resources serve families most in need. 
However, it has resulted in unintended consequences warehousing 
very low-income families in areas of high concentrations of 
poverty and despair; for example, PHAs, on average, house 
families at 17 percent of area median income down from 32 
percent in 1980, before preferences. Eliminating Federal 
preferences should result in greater local autonomy, better 
income mixes, and improved social environments in public 
housing communities. The Committee hopes that the change in 
this policy will revitalize those communities and lead to even 
more opportunities for the creation of affordable housing, 
particularly in mixed-income developments.

Criminal records

    The Committee is sympathetic to concerns expressed by both 
PHAs and residents that public housing should provide stable 
and secure living environments. Thus, the Committee bill 
provides PHAs with greater access to criminal conviction 
records of adult applicants for, and residents of, public 
housing, for the purposes of applicant screening, lease 
enforcement, and eviction. PHAs are granted the authority to 
obtain records from the National Crime Information Center and 
local law enforcement agencies on convictions occurring up to 5 
years before the request for such information was made.
    The Committee bill avoids the imposition of an unfunded 
mandate on local law enforcement agencies by authorizing them 
to charge a reasonable fee for the service. The Committee 
expects that this fee will be no greater than the cost of 
providing the information.
    The Committee is also mindful of the need to protect 
residents and applicants from unfair actions by PHAs. The 
Committee bill protects the rights of public housing residents 
and applicants in two ways. First, residents and applicants are 
provided with an opportunity to dispute the accuracy and 
relevance of records before adverse decisions are made based on 
the information contained in the records. Second, PHAs will be 
required to establish a records management system which will 
protect the privacy of residents and applicants by maintaining 
confidentiality, preventing dissemination to unauthorized 
persons, and ensuring the destruction of records when they are 
no longer needed. Moreover, by providing this essential 
information to PHAs, the rights of law-abiding residents of 
public housing will be safeguarded.
    The Committee wishes to emphasize that the criminal records 
provision contained in the bill is in no way intended to 
preempt State or local laws to the extent that they allow local 
law enforcement agencies to provide records of juvenile 
convictions or criminal convictions which occurred more than 
five years prior to the date of request.

Eviction for drug-related activity

    The Committee bill closes a loophole in current law which 
establishes as cause for termination of tenancy a drug crime 
committed ``on or near'' the premises of the PHA. The Committee 
believes that any drug-related criminal activity by public 
housing residents potentially poses a threat to law-abiding 
residents of public housing developments. Therefore, the 
Committee bill strikes the ``on or near'' the premises language 
and establishes as cause for termination any commission of a 
drug crime, regardless of the geographic location of the act.
    The Committee bill provides that any tenant or recipient of 
section 8 assistance who is evicted or whose assistance is 
terminated by reason of drug-related criminal activity shall be 
ineligible for public housing or section 8 assistance for three 
years. An exception is provided for persons who successfully 
complete a PHA-approved rehabilitation program.

Leases

    The Committee bill replaces the current statutory provision 
requiring specific minimum and maximum time frames which PHAs 
must comply with when providing written notice of lease 
termination with a provision requiring that notice requirements 
be consistent with State or local law.

Troubled public housing authorities

    Although the Committee bill generally devolves greater 
authority to well-performing PHAs, the Committee believes that 
one clearly appropriate role for HUD is dealing with the 
problems of so-called ``troubled'' housing authorities that 
suffer from chronic and severe management problems. Thus, the 
Committee bill provides HUD with expanded powers to deal with 
the problems of troubled PHAs.
    The Committee believes that a more aggressive approach to 
troubled authorities is essential. The bill will preserve the 
maximum amount of flexibility for the Department, ensure the 
timely resolution of the problems of troubled agencies, and 
protect the interests of the residents in projects operated by 
those authorities. HUD already possesses numerous tools and 
administrative authorities to help address the problems of 
troubled PHAs. These include technical assistance, entering 
into memoranda of agreement to force corrective action, and the 
ability to seek a court-ordered receivership. However, these 
authorities are frequently not exercised or are insufficient to 
ensure that the problems of troubled authorities can or will be 
corrected in a timely fashion.
    Taking necessary measures to address the problems of 
chronically troubled agencies should not depend on whether or 
not HUD has the political will to act. The Committee believes 
that HUD must be prepared to impose what is, in effect, a 
``death penalty'' on the most poorly run authorities and to 
assume control of the assets of those authorities.
    The Committee bill provides that HUD may give a PHA 
designated as troubled a one-year period, beginning on the 
later of the date on which the agency receives notification of 
its troubled status or the date of enactment of this Act within 
which to demonstrate satisfactory improvement. If satisfactory 
improvement is not made, then HUD shall declare the PHA in 
substantial default of its annual contributions contract and 
take over the PHA or place it in receivership. The Committee 
stresses that the one-year ``probationary'' period is at HUD's 
discretion. The Committee assumes that in cases where a housing 
authority has already been designated as troubled for a number 
of years, HUD will seriously consider exercising its authority 
to declare the PHA in substantial default immediately. In 
addition, the Committee urges the Department, in determining 
what constitutes ``satisfactory'' improvement, to require 
measurable and meaningful progress toward non-troubled status.
    The Committee requests that HUD provide the Committee with 
a current evaluation of all troubled PHAs, including the period 
of time in which each PHA has been designated as troubled, the 
specific problems which have resulted in the troubled 
designation of the PHA, the steps each troubled PHA has taken 
to remove the troubled designation to date, and the actions 
taken by HUD to assist each PHA in removing the troubled 
designation. The Committee would like the evaluation before 
January 31, 1996.
    The Committee is concerned that current law impedes the 
timely and effective correction of the problems of the troubled 
authority once a default is declared. Thus, S. 1260 seeks to 
assure that timely and appropriate action can be taken to 
protect the government's substantial investment in the housing. 
It gives HUD choices including seeking a court-ordered receiver 
for the housing authority or taking possession of the PHA or 
any of its functions. If a receiver is appointed, the receiver 
shall have powers accorded by the appointing court and in 
addition may abrogate contracts that substantially impede 
correction of the default; demolish or dispose of the assets of 
the agency; require the establishment of one or more new public 
housing agencies; and be exempt from certain State or local 
laws that substantially impede the correction of the 
substantial default. If HUD takes possession of the PHA, HUD 
will have the same powers that have been conferred on a court-
appointed receiver.
    The Committee's decision to establish an administrative 
procedure for HUD's takeover of a PHA that is parallel to that 
of a court-appointed receiver is based on the concern that a 
city or PHA, by contesting the appointment of a court-appointed 
receiver, can delay by a matter of years the corrective actions 
that are required to protect the public housing and its 
residents. However, the Committee also realizes that HUD's 
capacity to assume direct control over a substantial number of 
troubled agencies may be limited. Therefore, the Committee 
expects HUD to continue to rely on the court-ordered 
receivership process to the greatest extent feasible, or in the 
alternative, to use its authority to appoint an administrative 
receiver to assume the responsibilities of HUD, as S. 1260 
permits.
    Finally, the Committee stresses that it expects HUD to use 
judiciously its authority to abrogate contracts and preempt 
State or local laws concerning civil service requirements, 
employee rights, procurement, or financial or administrative 
controls. Such expanded authorities should be used only where 
such laws or contracts have substantially contributed to the 
default and impede its correction.

Public housing designated for the elderly or disabled

    Over one-third of the public housing units are in buildings 
originally designed for the elderly. In recent years, however, 
non-elderly disabled persons have come to occupy many of the 
units in these elderly buildings and constitute the major share 
of the waiting lists for them. Some of these persons have moved 
into elderly public housing upon discharge from mental health 
institutions and programs and from drug and alcohol abuse 
rehabilitation programs. Many elderly in public housing across 
the country--74.3 percent of whom are women and 44 percent over 
75 years old--have complained of assaults, deep fear, and 
incompatible lifestyles.
    This problem originated because the 1937 Housing Act 
included non-elderly disabled under its definition of 
``elderly''--a requirement that the non-elderly disabled be 
housed in buildings for the elderly. In 1992, Congress 
attempted to address this problem through a provision in the 
Housing and Community Development Act that enabled PHAs to 
designate buildings for occupancy only by the elderly, or only 
by the disabled, or jointly by both. However, the provision has 
not been effective for many PHAs that are unable to ensure, as 
required by the Act, that adequate resources would be available 
to non-elderly disabled to make up for units designated for 
elderly only. This guarantee is particularly difficult in 
housing authorities with few vacancies and at a time of 
declining resources for new units.
    The Committee bill dispenses with the cumbersome process 
under current law and places the decision about designation in 
local hands. Under the Committee bill, PHAs are permitted to 
designate public housing projects or mixed-income projects for 
occupancy as elderly housing, disabled housing, or elderly and 
disabled housing. If there are insufficient elderly families to 
fill the elderly project, then near elderly families may occupy 
it. However, any unit that is ready for occupancy that has been 
vacant for more than 60 consecutive days must be made available 
for occupancy by any eligible family.
    The Committee bill also safeguards current non-elderly 
residents from unwarranted eviction as a result of the 
designation of a building and enables such a person on the 
waiting list to maintain his or her place thereon until 
appropriate housing is offered. Finally, the bill considers the 
housing needs of the non-elderly disabled by requiring that 
PHAs develop a statement of needs including the housing needs 
of disabled families as part of their public housing agency 
plan.
    The Committee has heard concerns raised by senior citizens 
that the current statutory provisions on mixed populations has 
resulted in nonelderly disabled with drug and alcohol problems 
living in the same buildings as senior citizens. The Committee 
believes that the right to health, safety, and peaceful 
enjoyment of one's living environment is fundamental. To this 
end, the Committee bill provides PHAs with greater authority to 
screen applicants for tenancy in elderly-only, disabled only, 
or elderly and disabled housing and to deny occupancy to 
persons with existing drug or alcohol problems or with a 
pattern of illegal drug or alcohol abuse that could pose a risk 
to other tenants.
    The Committee believes that these new provisions on 
designated housing will address a longstanding and often highly 
emotional problem of mixing elderly and disabled populations in 
the same developments. Finally, it is expected that PHAs may 
begin the designation of housing under this provision upon the 
earlier of the promulgation of the interim rules for the public 
housing agency plan or 120 days from enactment of this Act.

Repeal of energy conservation

    The Committee bill repeals the current section 13 of the 
1937 Housing Act. Section 13 currently directs the Secretary to 
require that newly constructed or substantially rehabilitated 
projects be equipped with heating and cooling systems selected 
on the basis of criteria which include a life-cycle cost 
analysis of such systems.
    Repeal of this free-standing requirement is consistent with 
the Committee's goals of reducing Federal micromanagement of 
PHAs and delegating, to the maximum extent feasible, decision-
making authority to the PHAs. Given the severe budgetary 
constraints under which PHAs are likely to be operating in the 
future, the Committee expects that housing authorities will be 
conscious of the need for energy conservation measures. 
Nonetheless, the bill requires the new Operating Fund formula 
to emphasize energy conservation.

Drug elimination grants program

    The Committee has also decided to retain for three final 
years a separate drug elimination grant program. This program 
provides grants to public housing authorities and to some 
assisted housing managers to support innovative programs to rid 
developments of drug-related problems. Public housing agencies 
have made effective use of the grants for increasing security 
for residents against drug-related crimes, and providing 
services to people with substance-abuse problems, as well as 
for preventive programs like those for at-risk kids.
    The Committee is retaining this program separately for an 
additional year beyond the date prior to consolidating it into 
the Operating Fund and Capital Fund grant programs in order to 
provide a smooth transition for successful drug elimination 
grant programs.

Consortia and joint ventures

    The Committee bill expands the authority of PHAs to 
establish consortia with other PHAs to administer all or some 
of their housing programs. Under this section, PHAs will have 
great flexibility in determining the scope of responsibility of 
any consortia they may form. For example, two PHAs may form a 
consortia for the purpose of sharing managerial 
responsibilities, administering a joint section 8 program, or 
effecting a complete merger.
     The Committee bill expands the authority of PHAs to form 
wholly-owned or -operated subsidiaries and other affiliates. 
Members of the PHA governing board or other PHA employees would 
be allowed to direct, manage, or otherwise control these 
subsidiaries. In addition, the Committee bill allows PHAs to 
enter into joint ventures, partnerships, or other business 
arrangements or otherwise contract with persons, organizations, 
entities, or units of government for the purpose of 
administering the programs of the PHA.
    The purpose of this section is to provide PHAs with the 
greatest amount of flexibility feasible to engage in 
entrepreneurial endeavors in order to reduce costs and generate 
income which must be used for the provision of low-income 
housing or to otherwise benefit the tenants of the PHA. This 
section allows PHAs to undertake business arrangements for the 
purposes of facilitating access to alternative sources of 
financing (including use of the low-income housing tax credit), 
developing mixed-income projects, instituting innovative 
managerial improvements, and contracting with other entities in 
order to reduce administrative costs, generate revenues, and 
empower tenants. Tenant empowerment could take the form of the 
creation of employment opportunities, expansion of services, or 
development of mixed-income projects.
    The Committee believes that in an era of shrinking 
resources, PHAs should have the authority to undertake business 
ventures for the purposes of providing financial stability. To 
this end, the Committee wishes to emphasize that it does not 
intend for PHAs which are successful in generating revenue 
through business ventures authorized by this section to be 
penalized by an operating fund formula which acts as a 
disincentive to entrepreneurship such as is embodied in the 
current Performance Funding System (PFS) formula. Nor is it the 
intention of the Committee to see the intended grant of 
authority to PHAs contained in this section stifled by a 
requirement that PHAs receive the prior approval of HUD, beyond 
that provided for in the public housing agency plan 
requirements, before embarking on prudent business ventures--a 
situation that would amount to micromanagement. At the same 
time, with new authority must also come a corresponding 
responsibility; a redesigned operating fund formula should not 
act as an insurance policy for PHAs which engage in risky 
business ventures and thus jeopardize their primary function--
the provision of affordable housing.

Work requirement

    The Committee strongly believes in the principles of 
empowerment and self-help. Public housing residents should 
assume a degree of responsibility for their living conditions 
and the upkeep of their physical surroundings. This will help 
give residents of public housing a greater stake in their 
communities.
    The legislation requires able adult residents of public 
housing communities to contribute to the communities in which 
they reside through a volunteer work contribution of 8 hours 
per month. As a private homeowner contributes to his or her 
neighborhood through property maintenance, a resident of public 
housing can contribute to his or her neighborhood through 
grounds keeping or through a myriad of other activities within 
the public housing community.
    The Committee asserts that political activities of any 
nature, including but not limited to petition drives, letter-
writing campaigns, phone banks, or rallying, shall not 
constitute an eligible work activity under any circumstance. In 
fact, political activities are not permissible using the 
resources of a public housing agency under any circumstances.
    The Committee does not intend for such work requirements to 
impose an undue hardship on any public housing resident. A 
hardship would include the creation of a disincentive to the 
pursuit of work or education. HUD may provide an exemption from 
the work requirement for any adult who is: not less than 62 
years of age; a person with disabilities who is unable to 
comply with the requirement; working not less than 20 hours per 
week; a student receiving vocational training, or otherwise 
meeting work, training or educational requirements of a public 
assistance program; or a single parent or the spouse of an 
otherwise exempt individual who is the primary caretaker of one 
or more children who are 6 years of age or younger.
    The Committee has received comments from several PHAs that 
are concerned about the potential administrative burden this 
work requirement will create. The Committee addresses that 
concern by allowing maximum flexibility on how the work 
requirement can be administered and recommends that its 
administration could be delegated to tenants themselves or the 
work could be performed in conjunction with the local advisory 
board.

Eligibility for public and assisted housing

    The Committee bill changes the current income eligibility 
standards for public housing and section 8 tenant-based 
assistance by providing that for any public housing units or 
vouchers made available for occupancy each fiscal year that: 
(1) not less than 40 percent shall be occupied by families 
whose incomes do not exceed 30 percent of the area median; (2) 
not less than 75 percent shall be occupied by those whose 
incomes do not exceed 60 percent of the area median; and (3) 
any remaining units may be made available for families whose 
incomes do not exceed 80 percent of the area median. This 
provision applies to new admissions on turnover and to 
incremental units.
    The issue of income targeting raised great concerns by the 
public housing industry, low-income housing advocates, and HUD. 
Currently, the income of the average public housing resident is 
17 percent of local area median, and the vast majority of all 
public housing residents have incomes below 50 percent. There 
is widespread agreement that the public housing program needs 
to serve families with a broader range of incomes both for 
social and fiscal reasons, but there are significant 
disagreements on how to achieve the proper mix.
    Those representing the public housing industry argued that 
PHAs should have greater flexibility to make income targeting 
determinations. The PHAs pointed out that given the imminent 
cuts in federal funds for public housing, PHAs will need less 
stringent income targeting rules to generate more revenues for 
operation and to achieve greater income diversity.
    Both HUD and low-income housing advocacy groups, on the 
other hand, argued that loosening income targeting rules too 
much, coupled with the repeal of Federal preferences, will 
alter the fundamental mission of public housing--to serve low-
income families unable to find decent and affordable shelter in 
the private housing market. While the Department also 
recognized the need to mix working families with those on 
welfare, it held the position that income targeting rules 
should allocate 40 percent of the units to families below 30 
percent of the area median income, with the remainder below 60 
percent of the area median income. The Department strongly 
advocated for a 60 percent upper income limit arguing that 
allowing PHAs to serve families up to 60 percent of the area 
median income will substantially change the face of public 
housing. Additionally, it claimed that the revenue earned from 
rents for families at 60 percent of the median will be 
substantially the same as revenue earned from households 
between 60 and 80 percent due to the likelihood of ceiling 
rents.
    The Department was also concerned that the upper limit of 
80 percent in the Committee bill was too high for the section 8 
tenant-based program and argued that 75 percent of the vouchers 
should be targeted to those below 30 percent of the area median 
income while the remainder should be made available only to 
households with incomes up to 50 percent of the area median.
    S. 1260, as introduced, provided that 40 percent of the 
public housing units and vouchers must be made available to 
families whose incomes do not exceed 30 percent of the area 
median. During mark-up of the legislation, the Committee agreed 
to strengthen the targeting provision by adopting an additional 
income band providing that 75 percent of the units and vouchers 
be made available to families whose incomes do not exceed 60 
percent of the area median. The Committee believes that these 
income targeting provisions combined with the repeal of Federal 
preferences will provide PHAs with adequate flexibility to 
attract higher income tenants and at the same time ensure that 
a fair portion of the units be made available to the very 
poorest families in our nation. The Committee did not agree to 
lower the overall eligibility limit to 60 percent because such 
a policy change would be a retreat from current law and would 
make it increasingly difficult for PHAs to achieve greater 
income mixes in public housing communities that everyone agrees 
is an important and desirable goal. The Committee bill also 
requires the PHA to achieve a diverse mix of incomes in each 
development including scattered-site public housing. The 
Committee included this provision to ensure that PHAs strive to 
create better income mixes in each development rather than 
continuing to concentrate the poorest of poor in particular 
public housing developments. At the same time, the Committee 
does not intend PHAs to use the more flexible targeting 
provisions to house only moderate income families in the 
scattered-site projects. The Committee bill does not, however, 
prescribe specific percentages or number of families at each 
income level that should occupy each project in order to allow 
PHAs flexibility in achieving income mixes according to local 
conditions. The Committee intends that the PHA shall have the 
sole discretion to establish its policies and requirements for 
a diverse income mix according to local needs under the public 
housing agency plan.

Demolition and disposition of public housing units

    The Committee bill modifies the standards in section 18 for 
demolition and sales of public housing units to enhance the 
ability of PHAs to remove obsolete, distressed and excessively 
costly units from their developments. Under the bill, HUD must 
approve an application for demolition or disposition within 60 
days of receipt if the PHA certifies: (1) in the case of a 
demolition, that the project is obsolete and unsuitable for 
housing purposes and cannot be made useful for housing by any 
reasonable, cost-effective program; and (2) in the case of 
disposition that the conditions in the area adversely affect 
the health or safety of the tenants or the feasible operation 
of the project; or the disposition allows the acquisition, 
development or rehabilitation of other properties that will 
work better as low-income housing; or that the non-dwelling 
property is in excess of the PHA's needs.
    In addition to streamlining the approval process, the 
Committee bill removes the requirement that any units 
demolished or sold be replaced on a one-for-one basis. The 
Committee has received numerous comments that the one-for-one 
replacement requirement has been one of the major impediments 
to eliminating the most distressed public housing and 
revitalizing public housing communities.
    The Committee bill also provides any eligible resident 
organization, or nonprofit organization supported by residents, 
a right of first refusal in appropriate circumstances if a PHA 
proposes to sell a public housing project or portion of a 
project. If a resident organization expresses written interest 
in purchasing a property, no sale of the property may occur for 
60 days in order to give the organization the opportunity to 
obtain a firm commitment for financing the purchase of the 
property. While the Committee believes it is important to give 
residents a fair opportunity to purchase properties for their 
future use, it is also not the intent of this provision to be 
used to slow down or obstruct the sale of properties where its 
retention is not in the best interests of the tenants or public 
housing agency.
    The Committee believes that these new provisions will go a 
long way toward improving public housing communities by giving 
PHAs greater flexibility in removing obsolete housing that has 
been a financial drain and threat to the health, safety, and 
welfare of public housing residents.
    The Committee also urges HUD to enter into partnerships 
with PHAs and nonprofit organizations in disposing of the HUD-
owned or held multifamily housing stock for use as affordable 
housing. The sale of this housing at a nominal cost or for free 
will help ensure the continuing availability of affordable, 
low-income housing at little cost to the Federal government.

Voucher system for public housing

    The Committee considered seriously the Administration's 
proposal to convert the public housing system to a market-based 
system of tenant-based assistance. The Committee strongly 
supports the concept of residential choice embodied in the 
voucher program, and this legislation is committed to ensuring 
that tenant-based section 8 assistance is effective in meeting 
the housing needs of lower income households. In addition, the 
Committee is committed to safeguarding the Federal taxpayers' 
$90 billion investment in the nation's public housing inventory 
and assuring its continued availability for helping to meet the 
affordable housing needs of low-income households.
    The Committee believes that a total conversion to a voucher 
system is a ``one-size-fits-all'' approach that is not 
appropriate or will not work in all markets or in all 
circumstances. For example, a June 1995 study by the General 
Accounting Office determined that while nationwide the cost of 
vouchers versus the cost of operating public housing is 
similar, the averages conceal wide differences in these two 
options in different market areas. Further, while voucher 
success rates are generally high, the Committee is concerned 
that voucher utilization rates also vary widely around the 
country, which calls into question the viability of converting 
the entire stock of public housing to vouchers. The Committee 
has attempted to provide a framework for assessing the relative 
costs of tenant-based assistance and public housing so that 
PHAs can make informed judgments about their policies.
    The Committee bill generally requires all PHAs to conduct 
an assessment comparing the costs of continuing to operate each 
of the projects as public housing with the costs of converting 
to and operating a system of tenant-based assistance. The 
required assessments include: (1) a comparison of the costs of 
continuing operation of the units in question for their 
remaining useful life as public housing to the costs of 
providing tenant-based assistance in substantially similar 
units over the same period of time; (2) an analysis of the 
market value of the project both before and after 
rehabilitation and before and after conversion to a system of 
tenant-based assistance; (3) an analysis of local rental market 
conditions and the likely success and feasibility of providing 
tenant-based assistance for the specific residents of the 
project in question, including an assessment of the 
availability of decent and safe dwellings rented at or below 
the payment standard established by the entity administering 
tenant-based assistance in the local area; and (4) an 
assessment of the impact of a conversion on the neighborhood 
where the project is located (taking into account such 
circumstances where projects act as anchors of their 
communities).
    HUD may provide a waiver of the assessment requirement as a 
result of a request by a PHA or HUD's own authority. In 
addition to the waiver authority, HUD may allow PHAs, in 
certain circumstances, to perform a streamlined assessment, 
either as a result of a request by the PHA or HUD's own 
authority. HUD may provide a waiver or otherwise provide for a 
streamlined assessment for specific projects or classes of 
projects such as projects designated as elderly housing, 
disabled housing, or elderly and disabled housing, scattered-
site, or mixed-income projects. HUD may provide a waiver or 
provide a streamlined assessment to PHAs that are not planning 
to convert, are small PHAs, or are large PHAs where conducting 
an assessment for each of its projects would constitute an 
unnecessary burden. In these cases, HUD may provide for a 
streamlined assessment which may include less detail, or allow 
for a single PHA-wide assessment or allow for consolidated 
assessments for multiple substantially similar projects.
    The broad authority granted to HUD to waive or provide for 
a streamlined assessment is based on the Committee's intent to 
avoid placing a burdensome and unfunded mandate on PHAs. It is 
the Committee's intent that the assessments conducted under 
this section may be based on existing data and shall not 
require expensive new appraisals. Nevertheless, the Committee 
feels that the assessments conducted under this section will 
provide a useful and invaluable source of data on which the 
Congress, HUD, and the PHA will be able to draw upon in order 
to make informed decisions concerning the future of the public 
housing portfolio. HUD is urged to develop a mechanism for 
collecting, aggregating, and analyzing the data in the 
conversion assessments.
    The Committee bill provides an option to PHAs which conduct 
a conversion assessment to develop a plan to convert a public 
housing project or portion of a project to a system of tenant-
based assistance. In order to implement such a plan, the PHA 
must demonstrate that the conversion would principally benefit 
the residents, the PHA, and the community and that the costs of 
providing families occupying the units in question with 
vouchers would not be more expensive than continuing to operate 
the units as public housing. In addition, HUD shall disapprove 
a plan where it is plainly inconsistent with the findings of 
the assessment or with reliable data and information known to 
HUD.
    The Committee bill requires the assessments and plans 
conducted under this section to be made in consultation with 
public officials and with the significant participation of the 
affected residents. In addition, the assessments and plans must 
be submitted as part of the applicable public housing agency 
plan and must comply with the requirements of the plan 
including timing, notice, hearing, opportunity for public 
comment, review by the local advisory board, consistency with 
the local CHAS, and review and approval by HUD.
    The Committee feels that providing an option to convert to 
tenant-based assistance will provide an added incentive for 
PHAs to perform well and maintain safe and decent living 
conditions, particularly in light of the possibility that 
residents and local governments may bring added pressure on 
PHAs to improve their operations or exercise the option to 
voucher out.

Repeal of family investment centers

    The Committee bill repeals the current section 22 of the 
1937 Housing Act which provides for the creation of Family 
Investment Centers. Consistent with the Committee's goal of 
program consolidation, the establishment of similar programs 
for the benefit of residents becomes an eligible activity under 
a new section 31 social services program.

Repeal of family self-sufficiency program

    The Committee bill repeals the requirement for PHAs to 
develop a family self-sufficiency program. While the Committee 
strongly supports the goals and concept of the Family Self-
Sufficiency Program and encourages PHAs to adopt such programs, 
where feasible, the Committee was concerned that the program 
became an unfunded mandate on PHAs with no separate 
appropriation available for program administration. Therefore, 
the Committee bill repeals the program and makes it an eligible 
activity under the new block grants. In addition, self-
sufficiency activities may be funded under the new program for 
supportive services and resident empowerment activities in 
section 31. Existing family self-sufficiency programs are 
maintained to the extent that there are any existing contracts 
or agreements made under this program.

Homeownership opportunities

    The Committee bill repeals section 5(h) of the 1937 Housing 
Act but adds a new, more flexible provision in section 23. 
Section 23 authorizes a PHA to sell any of its units to its 
low-income tenants or to a conduit organization for sale to 
tenants. The sales price is determined by the PHA in accordance 
with its plan, and the proceeds must be used by the PHA for 
purposes related to low-income housing. The legislation also 
contains a resale restriction to prevent purchasing tenants 
from gaining a windfall if they resell the property within one 
year. The Committee patterned the new homeownership provision 
according to the section 5(h) program which has proven to be a 
highly successful program for assisting public housing tenants 
in becoming homeowners.
    In order to expand the opportunities for resident 
homeownership, the Committee incorporated a provision that 
allows a PHA to use its operating or capital funds as well as 
any other sources of income to provide assistance to residents 
to purchase a home. Such assistance is intended to help low-
income families who are financially capable of becoming 
homeowners, but lack adequate savings to purchase a home. 
Assistance is intended to include downpayment assistance, below 
market interest rate loans, closing cost assistance and other 
financial assistance to bridge the gap to homeownership. 
Residents may receive such assistance to help them purchase 
either a public housing unit or a single family house, 
condominium or cooperative unit owned by a public or private 
entity.
    The Committee strongly supports the expansion of 
homeownership opportunities for residents of public and 
assisted housing to provide incentives for upward mobility and 
economic self-sufficiency.

Severely distressed public housing

    The Committee recognizes the value of retaining a severely 
distressed public housing program, similar to HOPE VI, for 
three additional years. HOPE VI provides grants to public 
housing authorities for the demolition and replacement of 
severely distressed public housing. The National Commission on 
Severely Distressed Public Housing estimates that 86,000 out of 
a total inventory of 1.4 million units nationwide are severely 
distressed. This program provides local authorities with the 
flexibility they need when determining which developments need 
to come down and where they are located. HOPE VI represents 
efforts to remake public housing into the type of housing 
envisioned throughout this bill. The new developments will be 
less dense, include greater income mix and integrate services 
for low-income residents. Extending this program three more 
years will enable housing authorities with projects in progress 
to finish the work they have begun. This program provides 
necessary and large capital grants to tear down obsolete public 
housing which activity would be normally too costly under the 
Capital Fund.

Mixed-income projects

    The Committee bill addresses many of the issues faced by 
PHAs that are working with private partners to create mixed-
income developments, often in HOPE VI or in other endeavors to 
replace or reconfigure obsolete developments. The Committee has 
broadened significantly the ways in which a PHA can develop 
housing to replace its obsolete stock or to respond to needs 
identified in its public housing agency plan. The bill 
authorizes PHAs to form public-private partnerships with 
private for-profit or nonprofit entities to develop affordable 
housing that serves residents with a broad range of incomes and 
avoids concentrations of poverty. A PHA can invest its capital 
funds and deploy its operating subsidies in such mixed-income 
developments to provide opportunities to those it serves to 
live in more socially diverse, stable housing communities. For 
example, the Committee bill allows a PHA to form a public-
private partnership, to transfer some of its operating 
subsidies to fund public housing units in a building owned by 
that partnership, and to convert the previously subsidized 
units owned by the PHA to market rate units (so long as the 
number of subsidized public housing units remains the same). 
The Committee intends this provision to include partnerships 
that could also include State or local public partners.
    Under the Committee bill, a PHA can also elect to remove 
itself from day-to-day real estate management by turning that 
task over to its private partners or other contractors, thus 
enabling the PHA to be an asset manager for the community's 
low-income housing needs. These arrangements will bring into 
play resources beyond those of public housing, such as private 
investment, low-income housing tax credit proceeds, HOME funds, 
CDBG funds, and State and local programs. With the decline in 
Federal funds dedicated to the operation and maintenance of 
public housing, these added resources will assist in removing 
old, obsolete public housing and creating additional housing 
units for low-income families in more stable and healthy 
environments.
    The Committee bill also seeks to encourage public-private 
partnerships and simplify the creation of mixed-income 
developments by allowing a PHA to elect to exempt the units 
assisted by it from the often cumbersome requirements of 
section 6(d) of the 1937 Housing Act relating to cooperation 
agreements and payments in lieu of taxes. Instead, the units 
could be made subject to the same real estate taxes as apply to 
the rest of the development where such a choice facilitates the 
mixed-income development.

Conversion of distressed public housing to tenant-based assistance

    The Committee believes that a high priority of public 
housing reform should be to protect tenants who are currently 
trapped in non-viable or seriously substandard public housing 
developments.
    The Committee bill requires PHAs to identify developments 
in their inventory that are distressed and remove them from the 
public housing inventory. Distressed housing is defined 
according to criteria in the Final Report of the National 
Commission on Severely Distressed Public Housing. It includes 
developments where the PHA cannot assure the long-term 
viability as public housing and where the cost of continued 
operation and modernization of the property exceeds the cost of 
providing section 8 vouchers for all families in the 
development. PHAs are required to develop a five-year plan to 
remove all such distressed housing from their inventory. If a 
PHA fails to develop the required plans and implement them 
appropriately, HUD is given the authority to step in. The 
Committee stresses, however, that most decisions concerning 
public housing conversions are local decisions and that HUD 
should get involved only in circumstances where it is obvious 
that the PHA is acting in bad faith and making decisions that 
are detrimental to residents.
    S. 1260, as introduced, included the following factors in 
the definition of distressed: developments that total more than 
600 dwelling units or in the case of high-rise family buildings 
or substantially vacant buildings, 300 dwelling units and 
developments that have a vacancy rate of at least 10 percent 
for dwelling units not in funded, on-schedule modernization 
programs. The Committee was concerned that such a definition 
was too limiting and potentially excluded up to half of all 
distressed properties that should be eliminated. Therefore, the 
Committee adopted a new definition of severely distressed 
housing in the managers amendment to S. 1260 that requires PHAs 
to identify distressed developments based on criteria similar 
to those used in the Final Report of the National Commission on 
Severely Distressed Public Housing that was intended to broaden 
the definition of distressed public housing.
    While the Committee fully expects PHAs to eliminate the 
most distressed public housing stock that currently traps 
people in dangerous situations, it also recognizes the current 
budgetary, relocation, rental market, and redevelopment 
scheduling constraints that may make it difficult to dispose 
immediately of such housing and provide replacement housing for 
families in occupancy. Therefore, the Committee bill allows HUD 
to extend the 5-year deadline but only if the 5-year deadline 
is impracticable.

Linking services to public housing residents

    The Committee bill authorizes a new program in section 31 
to allow HUD to make grants to PHAs, resident management 
corporations, resident councils, or resident organizations for 
supportive services and resident empowerment activities to 
assist public housing residents in becoming economically self-
sufficient. Except for funds provided directly to resident 
councils, funds may be allocated on the basis of either a 
competition or a formula. The intent of this provision is to 
consolidate the numerous existing set-asides, demonstration 
programs, and categorical grants into a single program that 
emphasizes services and self-sufficiency on behalf of 
residents.
    Resident management corporations and resident councils have 
been funded in the past for the purpose of exploring the 
feasibility of resident management of public housing and for 
developing resident capacity so that such management might be 
possible. Resident management has been quite successful in many 
public housing developments throughout the country and should 
be encouraged to continue and expand wherever possible. 
Evaluations of resident management programs have shown, 
however, that the program has worked most effectively when 
focused on the broader goal of self-sufficiency and economic 
up-lift rather than just resident management of public housing.
    The expanded program gives PHAs, RMCs, RCs, and other 
resident organizations financial assistance for: physical 
improvements to a public housing project to provide space for 
supportive services; the provision of service coordinators; the 
provision of services related to work readiness including 
academic skills training, adult literacy, job search 
assistance, and vocational and entrepreneurship development; 
resident management activities; and such other activities 
designed to enhance the self-sufficiency of residents. The 
Committee intended to allow a broad range of eligible 
activities in order to give grant recipients the opportunity 
and flexibility to design innovative programs to enhance the 
economic self-sufficiency of residents.
    The Committee bill requires that for funds appropriated 
under this section, not less than $25,000,000 be provided 
directly to resident organizations to ensure that they are 
actively involved in the development and implementation of 
these programs.
    The Committee is concerned by recent reports of misuse of 
funds in the current Tenant Opportunity Program, and urges HUD 
to take prudent steps to ensure the accountability of funds 
provided under this program.

                 Title II--Section 8 Rental Assistance

    Tenant-based section 8 rental assistance has become a very 
effective and powerful means of meeting the housing needs of 
low-income families. To date, the programs have successfully 
assisted well over a million families in obtaining affordable, 
quality housing in the private market. Unlike public housing, 
the flexibility and portability of these programs have 
empowered families to choose where they live based on personal 
and economic needs. According to a recent congressionally 
mandated study (excluding New York) about 87 percent of tenant-
based section 8 subsidy holders successfully obtain housing, 
and success rates have steadily increased in recent studies. 
Studies have also found that recipients of tenant-based rental 
assistance were less likely than public housing residents to 
live in concentrated poor urban communities; however, the 
Committee is concerned that concentration of poor and minority 
households has also occurred in the tenant-based program.
    Despite the success of the section 8 certificate and 
voucher program, the process in obtaining housing has been 
often demanding and difficult, and landlord acceptance of 
section 8 has been limited. Also, tenant-based section 8 has 
been less well accepted in tight housing markets. The Committee 
recognizes that reforms are critical to address these 
deficiencies and intends that the bill's reforms will make the 
program operate so that low-income families can use section 8 
to rent affordable housing more widely in the private market. 
These reforms are especially important as Congress considers 
measures that expand the use of tenant-based assistance as an 
alternative means of providing affordable quality housing. For 
example, the public housing reforms of the Committee bill will 
provide some public housing residents with tenant-based 
assistance in cases where distressed public housing is sold or 
demolished. The Committee also believes the section 8 reforms 
are necessary to assist residents in multifamily properties 
insured by the Federal Housing Administration where owners 
prepay their mortgages. As the Committee considers broader 
reforms to HUD's assisted housing programs, this bill's reforms 
will allow vouchers to work better if Congress decides to 
convert project-based assistance to tenant-based assistance.
    The Committee bill recognizes that administrative reforms 
to tenant-based section 8 programs are critical to the 
effectiveness and efficiency of the program. By combining the 
best features of the section 8 voucher and certificate programs 
into a single voucher program, the reforms provide housing 
agencies the flexibility to design their programs and respond 
to local needs while ensuring an adequate level of 
accountability to residents, local governments, and the Federal 
government. A more streamlined program will encourage more 
private owners to participate, provide section 8 families with 
a greater selection of housing choices, and increase the 
success rate in obtaining quality affordable housing. The 
Committee urges HUD to collect the appropriate data to monitor 
the effects of the reforms in this bill on the success rate for 
section 8.
    The section 8 certificate and voucher programs were created 
separately in 1974 and 1983, respectively. The programs 
currently serve about 1.4 million low-income families. About 
2,500 State and local housing agencies administer the section 8 
programs. HUD has entered into about 30,000 multi-year 
contracts with these housing agencies to operate these 
programs. Housing agencies are responsible for determining 
household eligibility, selecting families and individuals to 
receive subsidies, contracting with landlords whose rental 
units have been selected by the subsidy holders, and 
determining that units meet rent and housing quality standards.
    Housing agencies and HUD have been administering two 
separate programs with similar statutory requirements, rules, 
regulations, and funding notices. While most requirements are 
the same for both programs, significant differences still 
exist. For example, except in limited circumstances, 
certificate holders cannot pay more than 30 percent of their 
income for rent. Under the voucher program, however, assisted 
households can pay more or less than 30 percent of their income 
for rent, and voucher holders have a ``shopping incentive'' to 
seek lower-cost apartments. The Committee bill merges the 
existing certificate and voucher programs into a single, 
market-driven, streamlined program that embraces the best 
features of both programs. Many reforms are modeled after S. 
2281, which the Committee approved in 1994. Other changes are 
based on studies by and discussions with HUD, PHAs, the General 
Accounting Office, and low-income housing providers and 
advocates.

Merger of certificates and vouchers

    Under the Committee bill, the existing certificate and 
voucher programs are merged into a single voucher program under 
a revised section 8(o) of the 1937 Housing Act. The new voucher 
program retains the current program administrative system used 
under the existing certificate and voucher programs since the 
current administrators (public housing agencies and state 
agencies) understand the intricacies of the programs, the local 
market they operate in, and the clientele they serve. Using the 
existing administrative structures will ease the transition to 
a merged program.
     The new voucher program also retains certain features of 
the current certificate and voucher programs while providing 
additional flexibility to housing agencies to respond to local 
market conditions with minimal Federal involvement. For 
example, the Committee bill allows housing agencies to set a 
payment standard between 90 percent and 120 percent of HUD's 
fair market rents (FMR). This flexibility will allow housing 
agencies to react more quickly to changing real estate markets 
than is possible under the current certificate program's FMR 
system.
    In general, the value of the subsidy is the difference 
between the payment standard and 30 percent of a tenant's 
adjusted income. An assisted family's monthly rent is the 
highest of 30 percent of adjusted income, 10 percent of gross 
income, or if a family is receiving welfare assistance 
designated for housing, the portion of those payments that is 
so designated. If the initial rent on a unit exceeds the 
payment standard, the assisted family is responsible for paying 
the difference up to 40 percent of income. However, this 
provision only applies to the initial rent, and an assisted 
family can pay more than 40 percent of income towards rent when 
rents are increased.

Eligibility

    Eligibility for tenant-based assistance remains the same as 
current law and includes very low-income families, previously 
assisted families, low-income families, families that qualify 
under a homeownership program, and eligible families under the 
Low-Income Housing Preservation and Resident Homeownership Act 
of 1990 (LIHPRHA). The new voucher program recognizes that 
certain low-income families, such as working families that need 
temporary housing assistance, deserve to participate in the 
section 8 program. The Committee, however, intends that housing 
agencies will continue to serve a significant number of very 
low-income families in response to local housing needs. 
Accordingly, the bill targets 40 percent of new vouchers, both 
incremental and turnover, to families with incomes at or below 
30 percent of area median income; 75 percent of new vouchers to 
families below 60 of area median; and the rest to families 
below 80 percent of area median. These targeting standards are 
the same as those established for public housing in Title I of 
this Act.

Rent burden

    The new voucher program retains the feature of the current 
voucher program that allows assisted families to pay rent 
levels of more than 30 percent of adjusted income while setting 
reasonable parameters on initial rent burdens. Assisted 
families are allowed to rent a unit above the payment standard. 
The tenant rent contribution, therefore, could be higher than 
30 percent of adjusted income. However, the Committee bill 
limits the rent burden upon move-in at 40 percent of adjusted 
income. This would prevent assisted families from paying 
excessive rent burdens.
    The Committee is concerned that some housing agencies may 
set artificially low payment standards, which do not reflect 
local rental rates and that assisted families may be required 
to pay excessive rent burdens. To address this concern, the 
Committee bill gives HUD the discretion to require housing 
agencies to submit their proposed payment standard for 
approval.
    The Committee bill also requires HUD to monitor rent 
burdens and to review any payment standard that results in a 
significant percentage of assisted families paying more than 30 
percent of adjusted income for rent. Housing agencies are 
required to modify the payment standard if the results of the 
review establishes that the payment standard is too low for a 
particular market and that too many voucher holders will have 
to pay an excessive percentage of their income for rent.

Preferences

    The Committee bill repeals preferences for all project-
based and tenant-based section 8 programs and allows housing 
agencies to establish local preferences consistent with their 
public housing agency plan. Local flexibility in establishing 
preferences for housing assistance has the benefit of allowing 
local housing agencies to respond to their community needs. The 
Committee believes that locally established preferences would 
be determined after a comprehensive and careful review of the 
locality's housing needs, which would include the needs of 
vulnerable populations such as the elderly, disabled, homeless, 
and very low-income families.

Ineligibility of tenants evicted for drug-related activities

    The Committee bill expects that assisted families will act 
responsibly as a condition of receiving Federal rental 
assistance. Accordingly, assisted families who have been 
evicted from housing by reason of drug-related criminal 
activity are ineligible from receiving assistance during a 3-
year period from the date of such eviction, unless the tenant 
successfully completes an approved rehabilitation program. 
Current law does not prohibit a household evicted from a 
section 8 unit from receiving assistance elsewhere.

Increasing owner participation

    One of the key factors to the success of the tenant-based 
rental assistance program is the ability to attract property 
owners to participate in the program. Owner participation plays 
a significant role in providing a broad range of housing 
choices for assisted families. The history of section 8 has 
shown, however, that private owners have been reluctant to 
participate in large part because of time-consuming and costly 
program requirements which conflict with normal market 
practices. Some program requirements have constrained the 
ability of owners to make rational business decisions. For 
example, the ``take one, take all'' rule requires landlords who 
rent to one section 8 recipient to rent to all otherwise 
qualified section 8 recipients and not refuse to lease to such 
recipients because they receive section 8 assistance. Further, 
section 8 leases have no set terms and section 8 landlords are 
required to renew leases for section 8 tenants (the ``endless 
lease'' rule).
    The Committee bill reforms section 8 to make the program 
operate like the unassisted market as much as possible while 
maintaining the program goals of providing low-income families 
with decent and affordable housing. The Committee bill expects 
that these changes, combined with landlord outreach efforts 
conducted by housing agencies as part of their program 
administration, will greatly expand the choice and availability 
of housing units.
    The key reforms that encourage greater owner participation 
include providing flexibility in resident screening and 
selection, minimizing housing agency involvement in tenant-
owner relations, eliminating the ``take one, take all'' and 
``endless lease'' rules, and conforming section 8 leases to 
generally accepted leasing practices. These reforms streamline 
and simplify the program by reducing the involvement of the 
Federal government. The Committee bill recognizes that rules 
such as ``take one, take all'' and the ``endless lease'' were 
created to protect assisted households from owner 
discrimination. The Committee bill, however, does not 
anticipate that the repeal of these rules will adversely affect 
assisted households because protections will be continued under 
State, tribal, and local tenant laws as well as Federal 
protections under the Fair Housing Act and the Americans with 
Disabilities Act. The intent of the repeals is not to excuse 
discrimination against section 8 holders but to remove 
disincentives for owner participation and to expand the number 
of housing choices available to section 8 families.

Lease conditions

    The Committee bill recognizes that the lease conditions 
under the current section 8 programs have deterred private 
owners from participating in the programs because they require 
owners to treat assisted residents differently from unassisted 
residents. The Committee bill reforms the lease conditions to 
make the new voucher program operate as much like the 
unassisted market as possible.
    The most significant change is the elimination of the 
``endless lease'' rule, which has prevented an owner from 
terminating a section 8 tenancy unless the owner instituted 
court action. The new voucher program permits the use of 
section 8 leases that are similar to a standard market lease. 
The Committee bill specifies that the use of standard market 
leases be the same as those used in the locality, contain terms 
and conditions that are consistent with State, tribal, and 
local law, and are also applicable to unassisted residents.
    Lease terms of one year are permitted under the Committee 
bill and shorter term leases in cases where housing choices 
would be expanded for section 8 holders. The Committee does not 
expect that the use of lease terms shorter than one year would 
be used frequently and safeguards against this by requiring the 
approval of the housing agency. The Committee recognizes that 
some small private owners use six month term leases as standard 
practice and that assisted families should be allowed to access 
such housing. However, the Committee intends that rental 
assistance under the new section 8 voucher program be used only 
as a permanent housing resource and not be diverted for 
temporary shelter purposes.
    The Committee bill also allows owners to terminate the 
tenancy on the same basis and in the same manner as they would 
for unassisted tenants in the property. Lease terminations 
would have to comply with applicable State, tribal, and local 
law. Further, owners are required to provide written notice to 
the tenant, which would specify the reasons for terminating the 
lease.

Repeal of the 90-day notice requirement

    The new voucher program will no longer require that a 
participating owner provide a 90-day notice to HUD when it 
intends to terminate a section 8 contract. This requirement has 
been a meaningless paperwork burden on HUD and owners by 
involving HUD in the owner's termination of section 8 
contracts. This has discouraged owner participation and hurt 
the program's effectiveness. Where an owner terminates a 
contract, section 8 assistance will ordinarily continue to be 
provided to families.

Housing inspection procedures

    The new voucher program retains current requirements for a 
housing agency to inspect units to assure that they meet 
housing quality standards (HQS). The Committee bill, however, 
makes inspection procedures more flexible by allowing 
inspectors to use local housing codes or housing codes adopted 
by public housing agencies instead of HUD's HQS. These two 
optional codes may only be used if they equal or exceed HUD's 
HQS and do not severely restrict housing choice. The Committee 
recognizes that in some cases the optional codes may have 
excessive housing requirements and therefore, may limit housing 
choices. In these cases, the optional codes should not be used.
    The Committee bill also requires that the Secretary 
designate another entity to make inspections and rent 
determinations for units that are owned by PHAs. The intent is 
to prevent a conflict of interest for PHAs. The Committee 
expects that HUD would consider a variety of entities in 
addition to local government agencies, such as nonprofit and 
private sector contractors to perform this function.
    Housing quality inspections would be required before lease-
up and periodically during the section 8 contract term. The 
intent is to provide some flexibility for housing agencies in 
performing inspections in response to different housing 
circumstances. The Committee recognizes the importance of 
ensuring that the government is subsidizing quality housing 
units, and this provision is not intended to compromise this 
goal. Further, this provision does not preclude housing 
agencies from performing inspections more frequently than 
annually for certain circumstances where the unit's physical 
condition has been damaged due to vandalism, disasters, or 
other special circumstances. The Committee expects that housing 
agencies will develop policies and procedures to ensure that 
timely inspections are performed to safeguard the physical 
condition of units occupied by section 8 residents without 
overburdening owners.
    A fourth measure that addresses housing inspections is the 
establishment of a housing inspection procedures demonstration 
program. Section 8 owners have expressed concern with delays in 
completing the inspections. As a result, the bill provides for 
the creation of a demonstration program where HUD would test 
various procedures that attempt to expedite the inspection 
process. The demonstration would also test procedures in 
expediting repairs of section 8 units.

Late payments

    Housing agencies are required to make timely payments of 
rent to owners or they will be subject to penalties in cases 
where they are responsible. To ensure that late payments are 
not funded out of subsidy allocations, the Committee bill 
requires that late payments be paid from the housing agency's 
administrative fees. The Committee recognizes, however, that in 
some instances, late payments are not due to the housing agency 
but to factors beyond their control. If HUD determines that 
late payments are due to factors beyond the control of the 
housing authority, no penalty would be assessed.
    The Committee believes that HUD should closely monitor the 
frequency of late payment penalties for housing agencies and 
consider strong sanctions for such housing agencies that 
repeatedly and consistently fail in making timely payments. One 
possible sanction is to contract the administration of the 
program to another entity.

Assistance for manufactured housing

    Tenant-based rental assistance will continue to be provided 
to families who own a manufactured home and rent the property 
on which it is located. Housing agencies would establish a 
payment standard which could not exceed an amount established 
or approved by HUD. The Committee encourages HUD to rely more 
on local rental cost data for manufactured home properties in 
lieu of establishing separate FMRs.
    The calculation for the subsidy payment to manufactured 
homeowners who rent their property is revised to provide a more 
generous subsidy amount based on a less complicated formula. 
This calculation uses the same subsidy determination like that 
used for housing assistance payment for other tenant-based 
units in the new voucher program by basing the subsidy on the 
real property rented, plus an allowance for any tenant-paid 
utilities. The mortgage payment would be excluded from the 
original formula calculation.

Shopping incentive

    The existing voucher program contains a ``shopping 
incentive,'' whereas the certificate program does not. The 
purpose of the shopping incentive was to provide assisted 
households the monetary incentive to seek the lowest possible 
rent by allowing the tenant to keep the difference between the 
rent and the payment standard. If tenants could lower their 
housing costs, they would then have additional money available 
for other uses, such as food, health care, or transportation. 
Also, the shopping incentive was expected to prevent inflation 
in rents.
    The Committee bill eliminates the shopping incentive. The 
Committee believes that this will reduce Federal costs for the 
tenant-based programs since about one-third of voucher holders 
in fact do not shop for the best buys but actually remain in 
the units that they already occupied prior to receiving 
assistance. If the shopping incentive were continued in 1996, 
the average shopping incentive for those that receive it would 
be about $1,100 per year. Some have argued that eliminating the 
incentive would persuade assisted families to move to more 
expensive units. However, a 1990 study by Abt Associates found 
that more than one-third of all certificate holders, who do not 
receive a shopping incentive, rented units below the FMR. 
Therefore, the comparison between the certificate and voucher 
programs have found that the shopping incentive did not appear 
to persuade families to select the best buys. Furthermore, HUD 
has not found any evidence that the shopping incentive helps to 
prevent inflation in rents. Excess subsidy saved from 
eliminating the shopping incentive could be used to assist more 
families.

Portability

    One of the most distinctive features of the tenant-based 
program is the ability to use the rental assistance in a 
variety of communities and neighborhoods. The Committee 
believes that assisted families should have the maximum 
flexibility in choosing where to live. The new voucher program 
promotes portability for assisted families to fully explore and 
select from a multitude of housing options.
    The portability feature under the new voucher program 
allows assisted families to move anywhere within and outside a 
PHA's jurisdiction. The Committee bill recognizes that the 
section 8 program is a national program and therefore reforms 
the program to allow portability anywhere in the country where 
the program is being administered. National portability will 
also permit voucher holders to respond to job and educational 
opportunities and other significant changes in their lives 
without loss of subsidy.
    In order to make the portability feature work effectively 
and efficiently, the Committee bill authorizes the Secretary to 
establish procedures and reserve funds for compensating PHAs 
that issue vouchers to families that move into or out of 
another PHA jurisdiction. The Committee recognizes that when 
assisted families leave their jurisdictions, an enormous 
administrative burden for PHAs is created. These provisions 
should resolve these administrative difficulties created by 
billing receiving jurisdictions.
    The Committee expects that these changes combined with 
intensive counseling for voucher holders will make mobility 
easier for families while addressing the PHA's concerns in 
administering the portability feature. The Committee is aware 
that some metropolitan-wide jurisdictions have dealt with the 
administrative problems effectively, but in other locations 
PHAs have discouraged families from exercising their 
portability rights. The Committee expects that PHAs will 
develop procedures to make the portability feature work 
effectively.

Homeownership option

    Section 8 currently requires PHAs to make the homeownership 
option available to tenant-based assisted families through 
cooperative housing. The present law allows assisted families 
to use this option if they meet certain employment and income 
criteria such as being a first-time homeowner and participant 
in the PHA's Family Self-Sufficiency (FSS) program. However, 
the current section 8 homeownership program has significant 
statutory limitations that make it an ineffective tool for 
achieving homeownership.
    The Committee believes that the homeownership option has 
the potential to serve as an effective tool for expanding 
housing choices and residential mobility for assisted families. 
The bill amends section 8 in several ways. First, it allows a 
family to receive section 8 assistance for homeownership 
through shares in a cooperative housing development, whether or 
not the family is a first-time homeowner. Second, the 
assistance formula for families receiving assistance for 
homeownership is modified to make it similar to the tenant-
based rental assistance formula. Third, the bill removes a 
complicated provision for recapturing the reduction in the 
household's share of housing cost resulting from excluding home 
equity from income. Finally, the requirement that at least 80 
percent of the downpayment amount must come from the 
homebuyer's own resources is eliminated.
    The reforms to the homeownership option will help in making 
the program easier to implement and administer. Since the 
program is optional for PHAs to administer, the Committee bill 
allows PHAs to contract with nonprofit organizations to 
administer the program. The Committee provides this option 
because some PHAs may not be interested in or capable of 
running a section 8 homeownership program. The Committee 
expects that PHAs will encourage assisted families to explore 
the homeownership option and foster the implementation of this 
program whether the PHA administers or contracts out the 
program.

Repeal of Moving to Opportunity Program

    The Committee bill repeals the Moving to Opportunity 
Demonstration program (MTO), which was created in the Housing 
and Community Development Act of 1992. The goal of the program, 
which was modeled after the Gautreaux experiment in Chicago, 
was to provide counseling and tenant-based section 8 assistance 
for low-income households to move from poverty-concentrated 
neighborhoods to areas with lower poverty rates. Section 8 
certificates and vouchers were provided to families in 
conjunction with funding for tenant counseling and landlord 
recruitment by fair housing and community-based organizations.
    The Committee is not convinced that MTO has achieved its 
original goal of assisting low-income families to move to 
housing that provided more economic and social opportunities. 
Instead, the program has been plagued by poor implementation 
that has created opposition to it in numerous communities. 
Further, the Committee believes that some of the opposition to 
the program has resulted from the perception that HUD is 
attempting to transform a program designed to complement the 
voucher program into a much broader, social experiment for 
dispersing low-income families to middle-income suburban 
neighborhoods. Moreover, the Committee believes it is wrong to 
require low-income families to move to certain neighborhoods. 
Families will be empowered when provided with information which 
provides real housing options through informed choice.
    The Committee recognizes that assisted housing programs 
have both real and perceived impacts on inner cities, abutting 
communities, and suburban neighborhoods. The Committee believes 
that the reforms it has proposed to the section 8 program--to 
eliminate some of the barriers to landlord participation, to 
encourage homeownership and work, and to screen applicants for 
criminal or drug histories--will help promote wider acceptance 
of section 8.
    Finally, the Committee also expects that some functions of 
the MTO program, such as tenant counseling and screening and 
landlord outreach can and will be performed regularly by PHAs 
as part of their administrative functions.

Implementation

    The transition period for merging the existing certificate 
and voucher programs will require thoughtful and careful 
planning and discussions with housing agencies, owners, section 
8 tenants, and other interested parties. A General Accounting 
Office study of merging the two programs pointed out that 
during a transition period, HUD and housing agencies would have 
to administer three programs--the certificate program, the 
voucher program, and the new merged program. Accordingly, 
negotiated rulemaking procedures will be used to develop 
regulations to implement the new voucher program. After the 
regulations for the new voucher program are implemented, HUD 
will be allowed to continue to apply former law where necessary 
to simplify the program administration or to avoid hardship to 
assisted families and owners. The Committee believes that the 
coordination and cooperation of all parties will be important 
in ensuring a smooth merger.

                           SECTION-BY-SECTION

Section 1. Short title; table of contents

    This section states that this Act may be cited as the 
Public Housing Reform and Empowerment Act of 1995.

Section 2. Findings and purpose

    This section describes Congress' intent to reform public 
housing and section 8 tenant-based programs by consolidating 
programs, streamlining program requirements, and providing 
well-performing public housing agencies (PHAs) with maximum 
discretion and control in conjunction with accountability to 
tenants and localities. It also stresses the need to reform 
public housing to remove disincentives for economic self-
sufficiency of residents by allowing PHAs the flexibility to 
design programs that reward employment.
    In addition, the section stresses the need to improve the 
section 8 tenant-based assistance programs using market-based 
principles.

Section 3. Definitions

    This section defines ``public housing agency'' and 
``Secretary''.

Section 4. Effective date

    This section states that unless otherwise specifically 
provided, the Act and amendments made by the Act shall be 
effective upon date of enactment.

Section 5. Proposed regulations; technical recommendations

    Subsection (a) requires all new proposed regulations 
necessary to implement the law to be submitted to Congress 
within 9 months of enactment.
    Subsection (b) requires HUD to submit to the appropriate 
committees of Congress within nine months of enactment any 
recommended technical and conforming legislative changes to 
carry out this Act.

Section 6. Elimination of obsolete documents

    This section prohibits the enforcement, after one year from 
the date of enactment, of any rule, regulation or order 
promulgated under the U.S. Housing Act of 1937 prior to the 
enactment of this Act, as it relates to the public housing and 
section 8 tenant-based programs.

Section 7. Annual reports

    This section requires the Secretary to report to the 
Congress annually on what impact the amendments made by this 
Act have had on public housing tenants and households receiving 
tenant-based assistance, and on the economic viability of PHAs.

                   Title I--Public and Indian Housing

Section 101. Declaration of policy

    This section amends section 2 of the 1937 Act to state that 
it is policy of the U.S. to: assist States and localities to 
remedy unsafe housing conditions and the acute shortage of 
decent and safe housing; assist States and localities to 
address the shortage of low-income affordable housing; and vest 
in PHAs that perform well the maximum amount of responsibility 
and flexibility in program administration in conjunction with 
local accountability to public housing tenants and localities.

Section 102. Membership on board of directors

    This section adds a new section 27 at the end of Title I of 
the 1937 Act. The new section requires that a PHA board of 
directors contain at least one member who is a public housing 
resident, except on boards where the members are salaried and 
serve on a full-time basis. It also prohibits discrimination 
against public housing residents in the selection of governing 
bodies of public housing agencies. The requirement for a public 
housing resident on a PHA board is inapplicable to PHAs with no 
board of directors.

Section 103. Authority of public housing agencies

    Subsection (a) permits PHAs to adopt ceiling rents that 
reflect the market value of the public housing units, but are 
not less than the cost to operate the public housing units. 
Until final regulations are issued, PHAs are permitted to set 
ceiling rents (1) at existing ceiling rent levels; (2) equal to 
the 95th percentile of the rent paid for a unit of comparable 
size in the development; or (3) equal to the fair market rent 
for the area in which the unit is located. Subsection (a) also 
allows PHAs to adopt a minimum monthly rent of no more than $25 
for public housing and for section 8 tenant-based and project-
based programs. This subsection allows rental of public housing 
units to police officers who are not otherwise eligible. 
Finally, subsection (a) requires PHAs to establish rental 
policies that encourage and reward employment and economic 
self-sufficiency.
    Subsection (b) permits non-troubled PHAs to set their own 
rents, except that, for families with adjusted incomes below 50 
percent of median income, the rent, in general, cannot be more 
than 30 percent of income or a minimum rent of $25.

Section 104. Definitions

    Subsection (a)(1) amends the definition of ``single 
persons'' to provide discretion for PHAs, as opposed to HUD 
under existing law, to establish a preference for elderly or 
disabled persons before single persons who are otherwise 
eligible.
    Subsection (a)(2) clarifies the definition of ``adjusted 
income.'' The definition would also permit PHAs the flexibility 
to establish any other deduction from income, such as 
employment income, that a PHA deems appropriate.
    Subsection (a)(3) amends the definitions of ``Indian 
Housing Authority'' (IHA) and ``Indian Tribe'' to clarify that 
only Federally recognized tribes and IHAs will be eligible for 
funding under this Act in the future. This amendment does not 
affect IHAs established before the date of enactment.
    Subsection (b) requires PHAs, when calculating a family's 
rental payment under the public housing and section 8 tenant-
based programs, to disregard increases in income for 18 months 
as a result of employment of a member of the family who was 
previously unemployed for one or more years. After the 18 
months, there would be a phase-in of the income increases over 
a three-year period.
    Subsection (c) defines terms used in reference to public 
housing. It makes it clear that costs related to obtaining non-
Federal financing for development are eligible development 
costs and that financing charges for developments with non-
Federal funds are eligible operating costs. Subsection (c) also 
contains new definitions for the following terms: public 
housing agency plan, disabled housing, elderly housing, mixed-
income project, capital fund, and operating fund.

Section 105. Contributions for lower income housing projects

    This section deletes sections 5 (h) through (l) of the 1937 
Act which: permit PHAs to sell public housing units to their 
tenants; require use of solar energy; place restrictions on 
PHAs eligible for development funding; authorize the use of 
development funding for major rehabilitation of obsolete 
housing; and prohibit recapture of development funds until 30 
months after they were made available. The legislation 
transfers authority for PHAs to sell public housing units to 
their tenants to section 117 of this Act.

Section 106. Public housing agency plan

    Subsection (a) adds a new section 5A of the 1937 Act, 
establishing requirements for the submission of written public 
housing agency plans.
    This section requires each PHA to submit to HUD a public 
housing agency plan which must be developed in consultation 
with a local advisory board and be consistent with the 
jurisdiction's comprehensive housing affordability strategy 
(CHAS).
    The plan must contain generally: a certification that the 
PHA is a public body authorized to develop and operate low-
income housing; an annual statement of policy identifying goals 
and objectives of the PHA, including all proposed costs and 
activities under the Capital and Operating Funds; and a 
statement of housing needs of low-income families in the 
community and other low-income families on the waiting list, 
and the means by which the PHA intends, to the maximum extent 
practicable, to address those needs.
    The plan must also include policies, rules, and regulations 
concerning, among other things: (1) tenant selection and 
admission including screening; preferences for selection and 
admission; income verification procedures; administration of 
waiting lists; assignment requirements; occupancy requirements; 
rent rules; and procedures for designating projects as elderly 
or disabled; (2) the management of the public housing agency 
including a description of the PHA's organization and the 
administration of the Operating Fund; policies concerning the 
rental of properties; policies relating to a safe and secure 
environment; policies relating to mixed-income projects; 
policies relating to services to families; procedures for the 
implementation of work requirements under section 12(c); 
procedures for identifying management weaknesses; objectives 
for improving management practices; a description of management 
initiatives to control costs; a plan for preventative and 
routine maintenance; policies for the conversion of public 
housing to tenant-based assistance; policies relating to the 
operation of any homeownership program; and objectives for 
management controls and management improvements; and (3) the 
management and administration of the Capital Fund including a 
description of the PHA's capital needs; plans for ensuring a 
safe and secure environment in public housing developments; 
policies relating to mixed-income projects; an annual and, if 
appropriate, five-year plan for the modernization of existing 
units; a plan covering emergencies and disasters; plans 
covering the use of funds for new or additional units, plans 
for the sale of units; plans for the conversion of public 
housing units to vouchers; and any plans for the demolition and 
disposition of public housing units. Other items the plan must 
include are a description of any programs to enhance the 
economic and social self-sufficiency of tenants and the results 
of an annual audit conducted by an independent certified public 
accounting firm.
    In addition, the new subsection 5A(c): (1) requires each 
PHA to establish a local advisory board representing tenants, 
members of the community, and local government officials to 
assist in developing the PHA plan; allows HUD to waive the 
requirement pertaining to tenant representation on the local 
advisory board if the PHA demonstrates that the existing 
resident organizations adequately represent the interests of 
the tenants; (2) requires a public hearing on the plan with 
public notice and an opportunity to inspect the plan; (3) 
requires each PHA, in conjunction with the State or local 
government, to establish procedures to ensure that the plan is 
consistent with the CHAS; (4) requires that any significant 
amendments to the plan be adopted at a duly-called meeting of 
public housing commissioners (or other comparable governing 
body); be considered by the local advisory board; be consistent 
with the CHAS; and be approved by HUD; (5) requires HUD to 
review and approve plans and significant amendments within 60 
days of submission and allows HUD to reject plans and 
significant amendments only if they are incomplete, 
inconsistent with information available to HUD, or prohibited 
by law; (6) allows HUD to request additional information from 
troubled or near-troubled PHAs; and (7) allows HUD to establish 
streamlined planning requirements for small, non-troubled PHAs 
and high-performing PHAs.
    Subsection (b) requires negotiated rulemaking within one 
year for development of regulations on the plan and also 
requires HUD to issue an interim rule within 120 days of 
enactment. This subsection also allows HUD to develop separate 
rules and regulations for the Indian housing program.
    Subsection (c) requires the General Accounting Office (GAO) 
to audit and review a representative sample of PHAs and report 
to Congress on the degree of compliance of PHAs with their 
plans. The GAO must conduct the audit within one year of the 
effective date of the regulations and report to Congress within 
2 years after the plans are initially required to be submitted 
to HUD.

Section 107. Contract provisions and requirements

    Subsection (a) amends section 6(a) of the 1937 Housing Act 
by adding a provision requiring that any contract for loans, 
contributions, sales, leases, mortgages, or any other agreement 
made pursuant to this Act be consistent with the public housing 
agency plan.
    Subsection (b) repeals section 6(c) that, in general, 
contains the system of Federal and local preferences for 
admission to public housing. PHAs will have the flexibility to 
develop their own preference system for admission to public 
housing.
    Subsection (c) repeals an obsolete provision requiring 
excess funds from annual contribution contracts to be offset 
against subsequent year annual contributions.
    Subsection (d) makes technical amendments to the Public 
Housing Management Assessment Program (PHMAP) for assessing the 
management performance of PHAs and adds two new PHMAP 
indicators: (1) the extent to which the PHA provides effective 
programs to promote economic self-sufficiency of residents and 
provides opportunities for residents to be involved in the 
administration of public housing, and (2) the extent to which 
the PHA successfully meets the goals and carries out the 
activities of the public housing agency plan. Subsection (d) 
also allows HUD to use a simplified system of performance 
indicators for PHAs with fewer than 250 units.
    Subsection (e) deletes provisions specifying the timing of 
notices of lease terminations and instead allows PHAs to follow 
State law. Subsection (e) also expands the grounds for eviction 
for criminal activity.
    Subsection (f) deletes a provision in section 6(o) of the 
1937 Act concerning the Family Unification program. The bill 
makes activities under the Family Unification program eligible 
as long as they are contained in the public housing agency 
plan.
    Subsection (g) deletes section 6(p) of the 1937 Act, which 
requires a preference for public housing development for areas 
with an inadequate supply of very low-income housing.
    Subsection (h) generally requires law enforcement agencies 
to make available to PHAs information on criminal convictions 
of applicants or residents within the past 5 years. Subsection 
(h) also denies housing assistance to any tenant evicted from 
housing for drug-related criminal activity for a 3-year period 
unless the evicted tenant successfully completes a 
rehabilitation program approved by the PHA.
    Subsection (i) provides a transition to allow PHAs to 
establish local preferences between the date of enactment of 
the Act and approval of the PHA plan.

Section 108. Expansion of powers

    This section amends section 6 of the 1937 Act involving 
troubled PHAs.
    Subsection (a) establishes procedures for dealing with 
troubled housing authorities. At the Secretary's discretion, 
this section provides troubled PHAs with one year to 
demonstrate improvement. If the PHA has not demonstrated 
satisfactory improvement after one year, the Secretary must 
declare the agency in substantial default and either petition 
for a receiver or take possession of the PHA or any of its 
projects.
    Subsection (a) also provides additional powers where HUD or 
a receiver has taken over a PHA to: abrogate contracts impeding 
correction of the substantial default; demolish or dispose of 
PHA properties and transfer ownership to resident-supported 
nonprofit entities; break up the troubled PHA into one or more 
new PHAs; and preempt State or local law relating to civil 
service requirements, employee rights, procurement, or 
financial controls which substantially impede the correction of 
the substantial default.
    Subsection (b) states that this section applies to PHAs 
found to be in substantial default on or after the date of 
enactment.

Section 109. Public housing designated for the elderly and disabled

    This section amends section 7 of the 1937 Act involving 
designated housing.
    Subsection (a) allows a PHA to designate developments (or 
portions thereof) for the elderly, disabled or both. It 
eliminates current onerous requirements for HUD approval of the 
designation of this housing, which have limited the ability of 
PHAs to reasonably designate housing.
    Subsection (b) allows a PHA to offer units to ``near-
elderly'' families in developments designated for the elderly 
where there are not enough elderly families to fill the units 
in the designated housing.
    Subsection (c) states that the decision by a disabled 
family not to occupy a unit or accept assistance shall not 
adversely affect the family with respect to a PHA offering them 
another public housing unit or other assistance.
    Subsection (d) prohibits the eviction of any tenant who is 
lawfully residing in a unit as a result of the designation of 
the project.
    Subsection (e) denies occupancy to any person in a 
designated project where that person's illegal use (or pattern 
of illegal use) of drugs or abuse (or pattern of abuse) of 
alcohol constitutes a disability and provides a PHA with 
reasonable cause to believe that such person's occupancy in 
such housing could interfere with the health, safety, or right 
to peaceful enjoyment of the project by the tenants. Subsection 
(e) also requires an applicant for designated housing to sign a 
statement stating that no person who will be occupying the unit 
illegally uses drugs or abuses alcohol in a manner that would 
interfere with the health, safety, or right of peaceful 
enjoyment of the tenants of the project.

Section 110. Public housing capital and operating funds

    This section rewrites section 9 of the 1937 Act involving 
annual contributions.
    Under the amended section 9, all public housing programs 
are merged into two funds, a Capital Fund and Operating Fund. 
Under this section, the Capital Fund, in general, may be used 
for: development and modernization, vacancy reduction, deferred 
maintenance, code compliance, management improvements, 
demolition and replacement, tenant relocation, empowerment 
activities, and security.
    This section provides several factors for HUD to consider 
in developing the Capital Fund formula including: the number of 
units and percentage occupied by very low-income families, the 
number of units converted to vouchers; the costs to 
rehabilitate; reconstruct, develop; or demolish units; the 
degree of household poverty; security costs; and the ability of 
the PHA to administer effectively the Capital Fund.
    Under this section, the Operating Fund may be used for: 
management systems, routine preventative maintenance, anti-
crime and anti-drug activities, tenant services, resident 
management activities, operation of mixed-income projects, 
insurance, energy costs, and administration of the public 
housing work program under section 12.
    This section provides several factors for HUD to consider 
in developing the Operating Fund formula including: operating 
costs, the number of units and percentage occupied by very low-
income families, the degree of household poverty, activities to 
promote economic self-sufficiency, the number of chronically 
vacant units, security costs, and costs to administer 
effectively the Operating Fund.
    The amended section 9 also: (1) allows a PHA to use up to 
20 percent of its Capital Fund for activities eligible under 
the Operating Fund; (2) disallows the use of assistance under 
the Capital or Operating Funds for the construction of public 
housing that would result in a net increase in the number of 
public housing units owned and operated by the PHA; (3) 
requires HUD to provide operating and capital assistance 
directly to resident management corporations managing public 
housing projects under contract with a PHA; (4) calls for HUD 
to establish formulae and programs for Indian housing programs; 
(5) authorizes HUD to provide technical assistance (TA) funds 
to PHAs and resident organizations including training and TA to 
PHAs at risk of becoming troubled or already troubled; (6) 
includes a two percent set-aside for emergencies, settlement of 
litigation, and costs to administer a witness relocation 
program with the Department of Justice; (7) requires the 
formulae for the Capital and Operating Funds to be established 
through negotiated rulemaking and provides for a transition 
period whereby operating and modernization funds would be 
allocated to PHAs according to current distribution mechanisms 
under sections 9 and 14 of the 1937 Act; and (8) authorizes 
drug elimination grants for use in eliminating drug-related 
crime and drug elimination clearinghouse services, but sunsets 
the program October 1, 1998.

Section 111. Labor standards

    This section amends section 12 of the 1937 Act involving 
labor standards.
    Section 111 adds a new Subsection (c) to section 12 that 
requires adult members of families to contribute at least 8 
hours of volunteer work within the community in which the adult 
resides. Such volunteer work may not include political 
activity. Exceptions from the work requirement include the 
elderly, the disabled, those working 20 hours per week, 
students, those receiving vocational training, those otherwise 
meeting work requirements of a public assistance program, or 
single parents who are primary caretakers of children under 6.

Section 112. Repeal of energy conservation; consortia and joint 
        ventures

    This section repeals section 13 of the 1937 Act, which 
requires life cycle cost analyses of energy systems for new 
construction and modernization developments.
    Section 112 establishes a new section 13 that permits any 
two or more PHAs to form a consortium to receive assistance and 
allows PHAs to enter into joint ventures, partnerships or other 
business arrangements with other entities to administer public 
housing programs.

Section 113. Repeal of modernization fund

    This section repeals the public housing modernization 
program in section 14 of the 1937 Act and makes numerous 
technical and conforming amendments.

Section 114. Income eligibility for assisted housing

    This section replaces section 16 of the 1937 Act involving 
income eligibility for public housing and tenant-based 
assistance.
    Subsection (a) states that for any units or vouchers that 
become available each year, PHAs are allowed to serve families 
up to 80 percent of the area median income, but requires that 
75 percent of the units or vouchers be made available to 
families with incomes at or below 60 percent of the area 
median, and 40 percent of the units or vouchers be made 
available to families with incomes at or below 30 percent of 
the area median.
    Subsection (a) also requires PHAs to achieve a diverse 
income mix among tenants in each development and among 
scattered site public housing.
    Subsection (b) denies housing assistance to any person who 
the PHA determines is illegally using drugs or if the PHA has 
reasonable cause to believe that such person's illegal use (or 
pattern of illegal use) of drugs or abuse (or pattern of abuse) 
of alcohol could interfere with the health, safety, or right of 
peaceful enjoyment of other tenants. Subsection (b) also allows 
a PHA to evict a tenant who is illegally using drugs or whose 
illegal use of drugs or abuse of alcohol, is determined by the 
PHA to interfere with the health, safety, or right of peaceful 
enjoyment of the premises by tenants of the public housing 
project.
    Subsection (c) states that these provisions do not apply to 
Indian housing.

Section 115. Demolition and disposition

    This section replaces section 18 of the 1937 Act concerning 
the demolition and disposition of public housing.
    Section 115 makes the following amendments to section 18: 
(1) streamlines the requirements for demolition and 
disposition; (2) establishes standards that PHAs must meet in 
order to sell or demolish public housing units (In order to 
demolish a project, a PHA must certify that the project is 
obsolete and not cost-effective to rehabilitate. In order to 
sell a project, the PHA must certify that its retention is not 
in the best interests of the tenants or the PHA); (3) allows 
HUD to disapprove an application for demolition and disposition 
if it determines that any certification made by the PHA is 
clearly inconsistent with the information available to HUD; (4) 
provides tenants with the opportunity to purchase developments 
in the case of proposed sales--not demolitions; (5) permits any 
replacement units to be built on the same site but only if the 
number of replacement units is fewer than the number of units 
demolished; and (6) repeals the one-for-one replacement 
requirement.

Section 116. Repeal of family investment centers; voucher system for 
        public housing

    Subsection (a) amends section 22 of 1937 Act by repealing 
the program for family investment centers and replacing it with 
a new section involving a voucher system for public housing.
    Section 22, as amended: (1) allows PHAs to develop a plan 
to convert public housing units to a system of tenant-based 
assistance (or vouchers); (2) requires PHAs to develop a 
conversion assessment within 2 years of enactment (The 
assessment must include a cost analysis, market analysis, 
impact analysis on the affected community, and a plan to 
achieve such a conversion if the PHA intends to take any action 
with regard to converting any developments to vouchers); (3) 
allows HUD to waive the assessment requirement for some 
projects or classes of projects or allow for a streamlined 
assessment; (4) allows a PHA to implement a conversion plan if 
the conversion assessment demonstrates that the conversion will 
principally benefit the residents, PHA, and community; if the 
costs of conversion do not exceed the costs of continued 
operation as public housing; and if the plan is not 
inconsistent with the data available to HUD or with the PHA's 
assessment plan; and (5) states that the funds to provide 
vouchers shall be added to the housing assistance payment 
contract.
    Subsection (b) includes a savings provision for any 
contracts under the Family Investment Centers program entered 
into prior to date of enactment of this Act.

Section 117. Repeal of family self-sufficiency; homeownership 
        opportunities

    Subsection (a) amends section 23 of the 1937 Act by 
repealing the Family Self-Sufficiency Program and replacing it 
with a new section allowing PHAs to sell their units to their 
residents and allowing PHAs to provide assistance to residents 
to purchase a home. Section 23, as amended: (1) includes 
purchase requirements that require tenants to occupy the 
property as their principal residence and to certify that they 
will occupy the property for one year and require PHAs to 
recapture 75 percent of the proceeds if a family sells the 
property within one year; (2) allows PHAs to use sale proceeds 
for low-income housing consistent with its public housing 
agency plan; and (3) allows PHAs to use operating or capital 
funds or other earned income to provide assistance to residents 
to purchase a principal residence, including a residence other 
than public housing.
    Subsection (c) makes it clear that the amendments made by 
this section do not affect any contracts under the Family Self-
Sufficiency Program entered into prior to the date of enactment 
of this Act.

Section 118. Revitalizing severely distressed public housing

    This section rewrites section 24 of the 1937 Act involving 
the revitalization of several distressed public housing. This 
new simplified program allows HUD to provide competitive grants 
to PHAs for demolition of obsolete projects, site 
revitalization and replacement housing. The competition will be 
based on: (1) the need for additional resources; (2) the need 
for affordable housing; (3) the supply of other housing 
available and affordable to voucher holders; and (4) the local 
impact of the proposed revitalization.
    This section sunsets the grant program on October 1, 1998.

Section 119. Mixed-income and mixed-ownership projects

    This section adds a new section 28 to the 1937 Act to allow 
PHAs to own, operate, or assist in the development of mixed-
income projects. The proportion of public housing units to 
total units should equal the proportion of public housing 
financial commitment to total financial commitments in the 
mixed-income project.
    The new section 28 permits a mixed-income development to 
elect to have all units taxable, or for the PHA to elect that 
the public housing units that are part of the mixed income 
development be exempt from local taxes. Where a PHA is unable 
to fulfill its contractual obligations to a mixed-income 
development as a result of a reduction in appropriations for 
capital or operating funds, this section allows the entity that 
owns or operates the development to deviate (under regulations 
developed by HUD) from otherwise applicable restrictions 
governing public housing rents and income eligibility to 
preserve the viability of the units.

Section 120. Conversion of distressed public housing to tenant-based 
        assistance

    This section adds a new section 29 to the 1937 Act that 
requires, to the extent provided for in appropriations, each 
PHA, in consultation with tenants and the local government, to 
identify public housing units that are distressed and develop a 
plan for removal of such units over a five year period. Public 
housing agencies shall use guidelines based on criteria 
established by the National Commission on Severely Distressed 
Public Housing in determining which projects are distressed.
    The new section 29 requires a PHA to provide families with 
notification of the elimination of the distressed units and 
provide affected families with vouchers, other project-based 
section 8, or units in another public housing project. Where 
the PHA fails to adequately develop or implement a plan for 
removing distressed properties from the public housing 
inventory, this section requires HUD to take actions to ensure 
the removal of such units.

Section 121. Public housing mortgages and security interests

    This section adds a new section 30 to the 1937 Act to allow 
PHAs to mortgage or grant a security interest in any project 
where approved by HUD. Each mortgage or security interest must 
have a term that is consistent with the terms of private loans 
in the market area and that does not exceed 30 years, and have 
conditions that are consistent with conditions to which private 
loans in the market area are subject.

Section 122. Linking services to public housing residents

    This section adds a new section 31 to the 1937 Act to allow 
HUD to make grants to PHAs, resident management corporations, 
resident councils, or resident organizations for supportive 
services and resident empowerment activities to assist public 
housing residents in becoming economically self-sufficient.
    Grants may be used for: physical improvements to a public 
housing project in order to provide space for supportive 
services for residents; the provision of service coordinators; 
the provision of services related to work readiness; resident 
management activities; and other activities designed to improve 
the self-sufficiency of residents.
    The new section 31 requires that $25,000,000 of the amount 
appropriated for this program be made available to resident 
councils, resident organizations, and resident management 
corporations.

Section 123. Applicability to Indian housing

    This section states that except as otherwise provided, 
amendments made by this bill are also applicable to Indian 
housing.

                 Title II--Section 8 Rental Assistance

Section 201. Merger of the certificate and voucher programs

    This section amends section 8(o) of the 1937 Act to create 
a single tenant-based assistance program from the section 8 
existing certificate and voucher programs. Some of the features 
of the new voucher program include the following:
    (1) Payment standard.--Public housing agencies (PHA) may 
set a payment standard above 90 percent of HUD's fair market 
rents (FMR) and below 120 percent of the FMR. The subsidy value 
is generally the difference between the payment standard and 30 
percent of a tenant's adjusted income.
    (2) Rent burden cap.--If the tenant wishes to lease a unit 
where the initial rent on a unit exceeds the payment standard, 
tenants may pay the difference up to 40 percent of their 
income.
    (3) Program eligibility.--Eligibility remains the same as 
current law. Those who qualify include very low-income 
families, previously assisted families, low-income families, 
families that qualify under a homeownership program, and 
certain families that reside in properties eligible for 
preservation incentives.
    (4) Local preferences.--PHAs are allowed to establish local 
preferences consistent with their public housing agency plan. 
(Federal preferences are repealed in Section 202.)
    (5) Drug evictions.--Voucher holders who have been evicted 
from housing for drug-related criminal activity are ineligible 
for assistance during a 3-year period from the date of such 
eviction, unless the tenant successfully completes a 
rehabilitation program.
    (6) ``Endless lease.''--The amendment eliminates the 
``endless lease'' rule, which prevents an owner from 
terminating a section 8 tenancy unless the owner institutes 
court action. The new program: (a) permits PHAs to approve 
section 8 leases for a term of not less than one year unless a 
shorter lease term will improve the tenant's housing 
opportunities; (b) allows owners to use a standard market lease 
that is used in the locality by the owner; and (c) clarifies 
that a section 8 tenant would have access to remedies under 
State, tribal, and local law on the same basis as any other 
tenant.
    (7) Inspection of Units.--PHAs are required to inspect 
section 8 units periodically to ensure that the units meet 
decent and safe housing quality standards (HQS) established by 
HUD, the local housing agency, or local codes, whichever are 
stricter and do not severely restrict housing choice. The 
provision also requires that HUD designate another entity to 
make inspections and rent determinations for units that are 
owned by PHAs.
    (8) Expedited inspection demonstration project.--The new 
voucher program retains current requirements for a PHA to 
inspect units to assure they meet HQS but also provides for the 
creation of a demonstration program where HUD would establish 
procedures that would expedite the inspection process. The 
demonstration would also test procedures in expediting repairs 
of section 8 units.
    (9) Rent reasonableness.--PHAs are required to check for 
rent reasonableness in the same way that they do under the 
existing tenant-based programs. Families may also request PHA 
assistance in negotiating a reasonable rent.
    (10) Timely payments.--PHAs are required to make timely 
payments of rent to owners or they could be subject to late 
payment penalties in cases where PHAs are responsible for the 
late payment and where late fees are permissible under local 
law. In these cases, the penalties will be paid out of the 
PHA's administrative fees.
    (11) Manufactured housing.--Rental assistance is still 
permissible to families who own a manufactured home and rent 
the property on which the home is located.
    (12) Project-basing.--PHAs will have the discretion to 
project-base up to 15 percent of their section 8 vouchers.
    (13) Elimination of ``shopping incentive.''--The bill 
deletes the provision which allows families to pay less rent if 
they lease a unit renting for less than the payment standard.

Section 202. Repeal of Federal preferences

    This section repeals Federal preferences for all section 8 
programs--both project-based and tenant-based.

Section 203. Portability

    The state/metropolitan portability feature is expanded to a 
national level. Also, discretion is provided to HUD for 
creating a pool to reimburse PHAs which lose vouchers to 
tenants leaving their jurisdictions. The reimbursement pool 
will allow the receiving PHA to absorb the new vouchers without 
a loss to the sending PHA. This section also prohibits assisted 
households from receiving a voucher if they have moved out of 
their unit in violation of a lease.

Section 204. Leasing to voucher holders

    This section eliminates the ``take one, take all'' rule, 
which requires owners to accept all section 8 tenants once they 
have begun participating in the program.

Section 205. Homeownership option

    This section amends the current homeownership option 
authority by allowing voucher holders to obtain homeownership 
through shares in a cooperative housing development, whether or 
not the family is a first-time homeowner. The provision also 
alters the assistance formula for families receiving assistance 
for homeownership which would make it comparable to the new 
formula for tenant-based assistance. Further, the provision 
allows PHAs to contract with a nonprofit entity to administer 
the program.
    Current law allows families participating in the Family 
Self-Sufficiency (FSS) program to participate in the 
homeownership program regardless of income. The bill amends the 
law by allowing participation only if the PHA determines that 
the families have sufficient resources.

Section 206. Technical and conforming amendments

    This section repeals the 90-day notice requirement which 
compels a landlord to provide a 90-day notice to HUD when the 
landlord decides to terminate a section 8 contract.
    This section also repeals the Moving to Opportunity 
demonstration program authority.

Section 207. Implementation

    This section requires that HUD use negotiated rulemaking 
procedures to develop regulations that carry out the amendments 
made by this Act.

Section 208. Effective date

    This section provides that the amendments made by Title II 
shall be effective not later than 1 year after the date of 
enactment of this Act.

                  Title III--Miscellaneous Provisions

Section 301. Public housing flexibility in the CHAS

    This section amends the 1990 National Affordability Housing 
Act to require that the Comprehensive Housing Affordability 
Strategy (CHAS) include a description of how the jurisdiction 
will help address the needs of public housing and coordinate 
with the local public housing agency plan.

Section 302. Repeal of certain provisions

    This section repeals section 957 of the 1990 National 
Affordable Housing Act and Section 923 of the Housing and 
Community Development Act of 1992 involving income disregards. 
Neither section has been implemented.

Section 303. Determination of income limits

    This section excludes Rockland County, NY from the New York 
City metropolitan area for purposes of determining the income 
level of low-income families.

Section 304. Demolition of public housing

    This section permits the demolition of certain public 
housing units that were prohibited from being demolished by 
section 415 of the Department of Housing and Urban 
Development--Independent Agencies Appropriations Act of 1988.

                        CHANGES IN EXISTING LAW

    In the opinion of the Committee, it is necessary to 
dispense with the requirements of paragraph 12 of Rule XXVI of 
the Standing Rules of the Senate in order to expedite the 
business of the Senate.

                      REGULATORY IMPACT STATEMENT

    In accordance with paragraph 11 of Rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
statement regarding the regulatory impact of the bill.
    On balance, the Committee believes that the various 
provisions of the reported measure would reduce regulatory and 
administrative burdens. In addition to significant programmatic 
reforms, the Committee bill would sunset all existing rules, 
regulations or orders issued under the United States Housing 
Act of 1937, unless they are re-proposed by the Department of 
Housing and Urban Development (HUD).
    Title I of the bill would consolidate approximately 10 
separate programs into two formula block grants, and it 
provides for substantially less Federal regulation of the day-
to-day management and operation of well-run housing 
authorities. It reduces or eliminates numerous program 
requirements that public housing authorities have found 
particularly burdensome or costly, and which frequently have 
required up-front approval by HUD. These include providing 
increased flexibility in the use of public housing 
modernization funds, repeal of certain requirements for the 
demolition and disposition of public housing; and repeal of the 
Family Self-Sufficiency Program, which is an unfunded mandate.
    Title II of the bill would consolidate two parallel rental 
assistance programs and streamline program requirements for 
both public housing authorities and private rental property 
owners.
    The Committee does create a new public housing agency 
planning process, and requires most housing authorities to 
conduct a one-time assessment of the costs of administering 
each of their public housing developments. The bill also would 
establish a work requirement for some public housing residents, 
which housing authorities would be required to administer. 
However, the Committee believes that any cost that might be 
incurred in administering this program could be offset by 
having participating residents themselves administer it.

                             COST ESTIMATE

    In accordance with rule XXVI(11)(a), the Committee submits 
the following estimate of the costs of S. 1260 prepared by the 
Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, December 18, 1995.
Senator Alfonse M. D'Amato,
Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. 
        Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has reviewed S. 1260, the Public Housing Reform and Empowerment 
Act of 1995, as ordered reported by the Committee on Banking, 
Housing, and Urban Affairs on October 26, 1995. This bill would 
extensively revise the major programs through which the U.S. 
Department of Housing and Urban Development (HUD) provides 
housing assistance to low-income households.

                    impact on the federal government

    Although the bill would reduce HUD's administrative role in 
assisted housing, federal funding through the annual 
appropriations process would remain the major source of program 
financing. S. 1260 does not authorize any appropriations, nor 
does CBO estimate that the bill would have any effects on 
direct spending. Therefore, pay-as-you-go procedures would not 
apply to this bill.
    Title I of the bill would establish a capital fund and an 
operating fund into which would be placed any sums appropriated 
for fiscal year 1998 or later. The capital fund would be used 
to finance the development and modernization of public housing 
projects and other activities specified in the bill. The 
operating fund would make assistance available to local public 
housing agencies (PHAs) to assist them to meet this operating 
and management responsibilities. The Congress provided $6.0 
billion dollars in fiscal year 1995 for these activities.
    The bill would give PHAs considerably more flexibility to 
set tenant rents and would provide the PHAs with other 
management options as well. The Secretary of HUD, however, 
would be given more power to control or, if necessary, dispose 
of seriously troubled housing projects.
    Title II would amend section 8 of the United States Housing 
Act of 1937. Section 8 includes the principal low-income rental 
assistance program of the federal government. The bill would 
replace the two methods currently authorized for tenant-based 
assistance. Assistance would still be directed to households 
with low or very-low incomes, and rents would still be based on 
similar, unassisted units. As with public housing, local 
housing authorities would have more control over the management 
of the program at the local level.
    The basic costs of providing housing assistance to low-
income tenants through PHAs would not be significantly affected 
by S. 1260, but the bill could affect the amount of resources 
the department would need to administer the programs. 
Initially, S. 1260 would require HUD to issue new regulations 
implementing the revised program, but it would also reduce the 
budgetary resources needed to run the program in the longer 
run. The precise timing and amount of these resource 
requirements would depend upon the nature and number of new 
regulations the department eventually would issue, and these 
cannot be predicted at this time.

                 Impacts on State and Local Governments

    CBO estimates that the provisions of S. 1260 would affect 
public and Indian housing agencies (PHAs) by imposing some new 
reporting and public review requirements on them that could 
result in short-term costs totaling about $40 million in the 
first year. Some of these costs could continue into future 
years if PHAs hire permanent staff to meet these requirements. 
The bill would also provide these agencies flexibility in 
managing programs that could result in long-term savings that 
would at least partially offset these costs.
    New Reporting and Public Review Requirements.--S. 1260 
would require PHAs to submit a comprehensive plan to HUD that 
would provide much of the information that HUD currently 
requires in one form or another. Because PHAs would have to 
provide new information and aggregate existing information from 
various reports into a new document (possibly in a new format), 
CBO expects that many PHAs would be required to hire 
consultants or additional staff.
    PHAs would also be required to establish a new public 
review process by creating local advisory boards. These new 
boards would be responsible for reviewing and commenting on the 
plans developed by the PHAs. CBO believes that the introduction 
of new public boards would result in delays in carrying out the 
new plan and additional constraints on PHA staff resources.
    CBO estimates that the nation's approximately 3,300 PHAs 
would incur additional costs that vary between $10,000 and 
$25,000 per agency. Small housing agencies (those with under 
250 units) would likely incur costs at the higher end of the 
range because of limited staff resources. The bill would allow 
HUD to permit streamlined plans for certain PHAs, and we 
estimate that more than two-thirds of all PHAs would qualify to 
submit such plans. For purposes of this estimate, we assume 
that HUD would allow streamlined plans, and estimate that 
compliance costs for PHAs submitting such plans would vary 
between $5,000 and $12,500 per agency. In total, CBO estimates 
compliance costs to be approximately $40 million in the first 
year.
    The bill does not provide any additional funds to PHAs for 
implementing these plans nor does it provide for any penalties 
for noncompliance. CBO assumes that PHAs would pay these costs 
out of the operating subsidies or administrative fees that they 
receive from the federal government. To the extent these funds 
are used for development of these new plans, PHAs would have to 
reorganize their priorities and reduce other spending.
    Public Housing Agency Flexibility.--S. 1260 would provide 
PHAs flexibility to repealing all rules, regulations, and 
orders currently pertaining to public housing programs and 
requiring HUD to implement new rules and regulations. The new 
regulations under S. 1260 would be less restrictive than 
current regulations, thereby easing to administrative burdens 
borne by the PHAs. For instance, greater flexibility in setting 
rents might allow PHAs to increase their rental income over the 
long term. This flexibility could lead to savings for PHAs. CBO 
cannot predict what types of regulations would be issued by HUD 
or how the PHAs would respond, and thus we cannot estimate the 
savings at this time.
    If you wish further details on this estimate, we will be 
pleased to provide them.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).

                 ADDITIONAL VIEWS OF SENATOR FAIRCLOTH

    I support S. 1260. This legislation is a good first step in 
reforming public housing, however, I personally believe that 
public housing has been a failure and may be beyond simple 
reform.
    I question whether public housing is the method that we 
should use to meet affordable housing needs. This year the U.S. 
will spend over $10 billion on housing assistance. The federal 
government will also provide nearly $3 billion in operating 
subsidies to public housing authorities. We simply cannot 
afford to continue increasing the public housing stock. We have 
to provide more housing vouchers for assistance and provide 
incentives to the private sector to increase the stock of 
affordable housing.
    Because of these concerns, an important part of this bill 
is the limit on building new public housing. At the Committee 
mark-up, I offered an amendment to stop construction of public 
housing that would cause there to be a net increase in new 
public housing units.
    Beyond this issue, S. 1260 has some very good provisions, 
chief among them is the work requirement as contained in 
section 111 of the bill. Last year, I offered this as an 
amendment to housing legislation. I strongly believe that the 
state of public housing, its safety and physical condition, 
will be greatly improved if residents are required to volunteer 
eight hours a month within the community.
    I also support the provision in S. 1260 that encourages 
public housing authorities to develop policies that reward 
employment and economic self sufficiency. Further, in order to 
improve the safety of public housing, S. 1260 allows police 
officers to live in public housing even though they might not 
otherwise qualify for public housing assistance.
    Section 106 of S. 1260 requires each public housing agency 
to develop a comprehensive annual plan demonstrating its 
commitment to many important goals. Unfortunately, under the 
bill, the Secretary is permitted to develop an alternative 
``streamlined plan'' for small and high-performing public 
housing authorities. This provision may exclude nearly 80% of 
the public housing authorities from having to develop the 
comprehensive plan.
    Section 107 of the bill allows public housing authorities 
to access criminal records of tenants for screening and 
eviction purpose. I am concerned that this may be unfairly 
limited to just ``convictions'' and not criminal arrest 
records. Further, accessing the records is limited to five 
prior years, which I think is too short a time period.
    Section 116 permits public housing authorities to convert 
public housing units to vouchers that are tenant based 
assistance. This section requires each public housing authority 
to undergo a conversion assessment plan, including a cost 
analysis to determine if a conversion to vouchers would be less 
expensive. Regrettably, under the bill, even if the PHA 
determines that vouchers would be less expensive, there is no 
hard trigger requiring them to make such a conversion. I 
support a mandatory conversion if it would be less expensive to 
convert to vouchers.
    Section 120 of the legislation requires that all distressed 
public housing be converted to housing vouchers. I strongly 
support this provision, however, it is conceivable that the 
bill permits this to done over a ten year period, not five 
years. I prefer the shorter time period with no extensions.
    Finally, I regret that the bill does not address the long 
term future of the Department of Housing and Urban Development 
(HUD). HUD was created in 1965. When it was created, the 
purpose of this Department was to revitalize our urban areas 
and provide safe, decent housing for all Americans.
    In short, I think HUD has been an enormous failure. Since 
1965, HUD has spent hundreds of billions of dollars--that 
adjusted to inflation--probably exceeds a trillion dollars. Yet 
today, despite this massive spending, I do not think the 
American people are any better off.
    HUD is a massive bureaucracy with over 11,000 employees. It 
has over 240 housing programs--so many that the Secretary of 
HUD did not even know HUD had that many. HUD has over $192 
billion dollars in un-used budget authority. HUD has even 
entangled the American taxpayer in 23,000 long term contracts 
that run until the year 2020.
    HUD's spending is increasing so rapidly that by the year 
2000, housing assistance will be the largest discretionary 
spending function in our budget.
    Knowing all of this, I do not see how the U.S. can afford 
not to abolish HUD. I have often said that if one wanted to 
provide housing assistance to four million families, would 
anyone design the current HUD has the method to do so.
    At Committee, I offered a reasonable approach for 
eliminating HUD. I proposed that HUD remain a Cabinet 
Department for another three years until October 1, 1998.
    In the interim, the amendment I offered in Committee calls 
for a GAO study, a CBO study, and finally, a Presidential 
Commission to study housing and make recommendations for 
eliminating HUD.
    This would put in place a time certain by which HUD would 
not exist. The comprehensive studies would allow time and 
careful consideration to eliminate HUD and permit a redesign of 
America's housing programs. I think this is a necessary part of 
any housing bill that this Congress considers.
                                                   Lauch Faircloth.

                                
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