[Senate Report 105-21]
[From the U.S. Government Publishing Office]




                                                        Calendar No. 63
105th Congress                                                   Report
                                 SENATE

 1st Session                                                     105-21
_______________________________________________________________________


 
        THE PUBLIC HOUSING REFORM AND RESPONSIBILITY ACT OF 1997

                               __________

                              R E P O R T

                                 of the

                     COMMITTEE ON BANKING, HOUSING,

                           AND URBAN AFFAIRS

                          UNITED STATES SENATE

                              to accompany

                                 S. 462

                             together with

                            ADDITIONAL VIEWS





                  May 23, 1997.--Ordered to be printed


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                 ALFONSE M. D'AMATO, New York, Chairman

PHIL GRAMM, Texas                    PAUL S. SARBANES, Maryland
RICHARD C. SHELBY, Alabama           CHRISTOPHER J. DODD, Connecticut
CONNIE MACK, Florida                 JOHN F. KERRY, Massachusetts
LAUCH FAIRCLOTH, North Carolina      RICHARD H. BRYAN, Nevada
ROBERT F. BENNETT, Utah              BARBARA BOXER, California
ROD GRAMS, Minnesota                 CAROL MOSELEY-BRAUN, Illinois
WAYNE ALLARD, Colorado               TIM JOHNSON, South Dakota
MICHAEL B. ENZI, Wyoming             JACK REED, Rhode Island
CHUCK HAGEL, Nebraska

                    Howard A. Menell, Staff Director

                    Philip E. Bechtel, Chief Counsel

              Melody H. Fennel, Professional Staff Member

                David L. Hardiman, Legislative Assistant

     Steven B. Harris, Democratic Staff Director and Chief Counsel

                       George E. Whittle, Editor

                                 ______

     Subcommittee on Housing Opportunity and Community Development

                     CONNIE MACK, Florida, Chairman

LAUCH FAIRCLOTH, North Carolina      JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             JACK REED, Rhode Island
RICHARD C. SHELBY, Alabama           CHRISTOPHER J. DODD, Connecticut
WAYNE ALLARD, Colorado               RICHARD H. BRYAN, Nevada
CHUCK HAGEL, Nebraska                CAROL MOSELEY-BRAUN, Illinois

                  Christopher D. Lord, Staff Director

                  Kari Davidson, Deputy Staff Director

                  Cheh Kim, Professional Staff Member

                         Susana Limon, Detailee

         Jonathan Miller, 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 Housing..........................................     7
Title II--Section 8 Rental Assistance............................    32
Title III--Safety and Security...................................    43
Title IV--Miscellaneous Provisions...............................    43
Section-by-Section...............................................    44
    Section 1. Short title; Table of Contents....................    44
    Section 2. Findings and purposes.............................    44
    Section 3. Definitions.......................................    44
    Section 4. Effective Date....................................    44
    Section 5. Proposed Regulations; Technical Recommendations...    44
    Section 6. Elimination of Obsolete Documents.................    45
    Section 7. Annual Reports....................................    45
Title I--Public Housing..........................................    45
    Section 101. Declaration of Policy...........................    45
    Section 102. Membership on Board of Directors................    45
    Section 103. Authority of Public Housing Agencies............    45
    Section 104. Definitions.....................................    46
    Section 105. Contributions for Lower Income Housing Projects.    46
    Section 106. Public Housing Agency Plan......................    47
    Section 107. Contract Provisions and Requirements............    48
    Section 108. Expansion of Powers for Dealing with PHA's in 
      Substantial Default........................................    49
    Section 109. Public Housing Site-Based Waiting Lists.........    50
    Section 110. Public Housing Capital and Operating Funds......    50
    Section 111. Community Service and Self-Sufficiency..........    51
    Section 112. Repeal of Energy Conservation; Consortia and 
      Joint Ventures.............................................    52
    Section 113. Repeal of Modernization Fund....................    52
    Section 114. Income Eligibility for Public and Assisted 
      Housing....................................................    52
    Section 115. Demolition and Disposition......................    52
    Section 116. Repeal of Family Investment Centers; Voucher 
      System for Public Housing..................................    53
    Section 117. Repeal of Family Self-Sufficiency; Homeownership 
      Opportunities..............................................    53
    Section 118. Revitalizing Severely Distressed Public Housing.    54
    Section 119. Mixed-Finance and Mixed-Ownership Projects......    54
    Section 120. Conversion of Distressed Public Housing to 
      Tenant-Based Assistance....................................    54
    Section 121. Public Housing Mortgages and Security Interests.    55
    Section 122. Linking Services to Public Housing Residents....    55
    Section 123. Prohibition on Use of Amounts...................    55
    Section 124. Pet Ownership...................................    55
Title II--Section 8 Rental Assistance............................    56
    Section 201. Merger of the Certificate and Voucher Programs..    56
    Section 202. Repeal of Federal Preferences...................    57
    Section 203. Portability.....................................    57
    Section 204. Leasing to Voucher Holders......................    58
    Section 205. Homeownership Option............................    58
    Section 206. Law Enforcement and Security Personnel in Public 
      Housing....................................................    58
    Section 207. Technical and Conforming Amendments.............    58
    Section 208. Implementation..................................    58
    Section 209. Definition......................................    58
    Section 210. Effective Date..................................    58
    Section 211. Recapture and Reuse of Annual Contribution 
      Contract Project Reserves Under the Tenant-Based Assistance 
      Program....................................................    58
Title III--Safety and Security in Public and Assisted Housing....    58
    Section 301. Screening of Applicants.........................    58
    Section 302. Termination of Tenancy and Assistance for 
      Illegal Drug Users and Alcohol Abusers.....................    59
    Section 303. Lease Requirements..............................    59
    Section 304. Availability of Criminal Records for Tenant 
      Screening and Eviction.....................................    59
    Section 305. Definitions.....................................    59
Title IV--Miscellaneous Provisions...............................    60
    Section 401. Public Housing Flexibility in the CHAS..........    60
    Section 402. Determination of Income Limits..................    60
    Section 403. Demolition of Public Housing....................    60
    Section 404. Technical Correction of Public Housing Agency 
      Opt-Out Authority..........................................    60
    Section 405. Review of Drug Elimination Program Contracts....    60
    Section 406. Sense of Congress...............................    60
    Section 407. Other Repeals...................................    60
Changes in Existing Law (Cordon Rule)............................    61
Regulatory Impact Statement......................................    61
Cost Estimate....................................................    61
Additional Views of Senator Allard...............................    72
Additional Views of Senator Enzi.................................    73
Additional Views of Senator Reed.................................    75



                                                        Calendar No. 63
105th Congress                                                   Report
                                 SENATE

 1st Session                                                     105-21
_______________________________________________________________________


        THE PUBLIC HOUSING REFORM AND RESPONSIBILITY ACT OF 1997

                                _______
                                

                  May 23, 1997.--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. 462]

                              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 these programs from the Federal government 
to States and localities, and for other purposes.
    The Senate Committee on Banking, Housing, and Urban Affairs 
marked up S. 462, the ``Public Housing Reform and 
Responsibility Act of 1997,'' on May 8, 1997. The Committee 
considered, as original text for the purposes of amendment, an 
amendment in the nature of a substitute, which incorporated the 
principles of S. 462, as originally introduced by Senator Mack, 
and cosponsored by Senators D'Amato, Bond, Faircloth, and 
Grams. The substitute also included all or parts of 20 
amendments to S. 462 filed by members of the Committee prior to 
the markup in accordance with Committee rules, as well as 
technical and other revisions to S. 462 as originally 
introduced.
    During the markup, the Committee approved one amendment by 
voice vote. An amendment by Senator Reed clarifies the law 
which permits housing authorities to reduce public and assisted 
housing rents of welfare recipients whose benefits have expired 
due to the expiration of a lifetime time limit on welfare 
benefits. In addition, the Committee considered an amendment by 
Senator Boxer, not previously filed, dealing with eradication 
of cockroaches in public housing. The Committee agreed with the 
concept of the Boxer amendment and committed to work toward 
inclusion of the proposal in a manager's amendment. The 
Committee also rejected, by voice vote, an amendment by Senator 
Bennett to strike bill provisions regarding pet ownership.
    S. 462 as amended was ordered reported by a roll call vote 
of 18 to 0 with the following Senators voting in the 
affirmative: D'Amato, Gramm, Shelby, Mack, Faircloth, Bennett, 
Grams, Allard, Enzi, Hagel, Sarbanes, Dodd, Kerry, Bryan, 
Boxer, Moseley-Braun, Johnson, and Reed.

                          purpose and summary

    S. 462, the Public Housing Reform and Responsibility Act of 
1997, 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 an expected overhaul 
and restructuring of Federal housing programs and a greater 
sharing of responsibilities among all participants in the 
Federal system.
    S. 462 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 sector landlords.

               legislative history of the committee bill

    S. 462 continues an effort that began in the 104th Congress 
to reform the nation's public housing system. During the last 
Congress, the Senate unanimously approved S. 1260, a public and 
assisted housing reform measure similar to S. 462. However, no 
conference agreement was reached with the House of 
Representatives prior to the adjournment of the 104th Congress.
    On March 18, 1997, Senator Mack, Chairman of the 
Subcommittee on Housing Opportunity and Community Development, 
introduced S. 462 with Senators D'Amato, Bond, Faircloth, and 
Grams.
    On April 9, 1997, the Subcommittee on Housing Opportunity 
and Community Development held a hearing on S. 462. Testifying 
before the Subcommittee were: The Honorable Andrew M. Cuomo, 
Secretary of the Department of Housing and Urban Development; 
Ms. Cushing Dolbeare, Chair, Policy Committee, National Low 
Income Housing Coalition; Mr. Ricardo Diaz, representing the 
Council of Large Public Housing Authorities; Mr. David Bryson, 
Interim Director, National Housing Law Project; Ms. Deborah 
Vincent, representing the National Association of Housing and 
Redevelopment Officials; Mr. Tom Shuler, representing the 
National Multi-Housing Council; Mr. David Morton, representing 
the Public Housing Authority Directors Association; Mr. Billy 
Easton, Executive Director, New York State Tenants and 
Neighbors Coalition, accompanied by Judy Smith, Board Member, 
New York State Tenants and Neighbors Coalition; and Mr. Deepak 
Bhargava, Director of Public Policy, Center for Community 
Change.

                          need for legislation

    The Public Housing Reform and Responsibility Act of 1997 
addresses a public housing system fraught with 
counterproductive rules and regulations. Over the years, public 
housing agencies (PHAs) have been saddled with requirements 
imposed in previous legislation by Congress and through 
regulation by HUD that make it difficult for even the best PHAs 
to operate effectively and efficiently to innovate, or to 
respond to local needs or conditions. Further, the residents of 
public housing currently 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 
concentrated the poorest households in developments that are 
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 almost 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. Instead, the 
Department will be required to focus its efforts on ensuring 
the accountability of PHAs and addressing problems created in 
housing authorities that fail to meet performance standards.
    Because these circumstances pose an immediate threat to the 
ability of PHAs and the Federal government to maintain and 
monitor a public housing program that ensures the provision of 
decent, safe and affordable housing to residents, the Committee 
believes it is essential to make public housing reform a high 
priority and to develop a comprehensive reform proposal that 
fundamentally alters the historical relationship between HUD, 
housing authorities, and residents.
    Increasing flexibility in the use of Federal resources is 
critical both to increase the economic viability of public 
housing developments and to provide 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 returns greater responsibility over the operation and 
management of public housing to local housing authorities.
    The Committee acknowledges that the Administration 
considers public housing reform to be a major priority. S. 462 
incorporates a number of significant reforms, particularly 
specific management improvements, contained in comprehensive 
public housing legislation transmitted to Congress by the 
Administration on April 17, 1997.

                     explanation of the legislation

Overview

    S. 462 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 
formulas 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 and streamlines and makes flexible the demolition 
and disposition process to permit PHAs to demolish or dispose 
of obsolete or vacant housing developments. It also allows 
housing authorities to participate, via joint ventures or 
partnerships, in the development of mixed-income, mixed-finance 
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. 462 will provide 
housing authorities with greater flexibility to set their own 
rents with protections for very low-income families. S. 462 
returns the so-called ``Brooke Amendment'' to its original 
intent by permitting housing authorities to charge residents up 
to 30 percent of their adjusted incomes for rent. In addition, 
the bill permits housing authorities to develop rental 
policies, such as ceiling rents and exemptions from adjustments 
to earned 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. Further, 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 a 
disproportionate share 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 seek a 
judicial receiver for large PHAs that are unable to make 
significant improvements in their operations, and requires the 
appointment of either judicial or administrative receivers in 
the case of other troubled PHAs. 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 laws 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 to 
work successfully. The bill combines the current section 8 
certificate and voucher programs into a single, tenant-based 
assistance program. The new voucher 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,'' Federal preferences, and unique 
lease requirements that now discourage landlord participation 
in the section 8 programs.
    Over the last two years, the Committee has considered 
proposals 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. Further, the Committee is concerned about 
preliminary data showing high initial tenant rent burdens for 
new admissions to the voucher program. Finally, the Committee 
recognizes that public housing represents a $90 billion federal 
investment that should be preserved, when viable, for future 
generations because of the overall lack of affordable housing.
    Nonetheless, the Committee strongly believes that vouchers 
are an essential part of a broad-based Federally assisted 
housing strategy that promotes affordable housing and 
residential choice. Thus, 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. 462 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, 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 one year from the date of 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 and section 8.
    The Committee is aware that the Department contends that it 
is in the continuing process of reviewing, consolidating, and 
eliminating burdensome and excessive regulations. Nonetheless, 
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.

Annual reports

    S. 462 changes the way in which PHA programs are 
administered and monitored, and the Committee expects that 
these changes will affect both the demographics of families 
receiving assistance and the economic viability of PHAs 
themselves. In addition, changes in public housing rent rules, 
coupled with reforms in welfare programs, are expected to have 
a direct impact on the employment activity and earned income of 
residents. The Committee bill requires HUD to report to 
Congress not less than annually on the direct impact of the 
changes in policy contained in this Act.

                        Title I--Public Housing

Composition of boards of directors of PHA

    The Committee bill requires PHAs to have at least one 
resident or section 8 tenant on their boards of directors. The 
Committee expects that if a PHA's primary function is the 
provision of public housing, than the tenant representative 
will be a resident of public housing rather than section 8. 
With regard to the selection of the resident, the Committee's 
expectation is that the resident to serve on the board will 
represent the interests of all the residents to the greatest 
extent possible. To this end, the bill allows for the election 
of resident board members if provided for in the public housing 
agency plan as developed in consultation with the resident 
advisory board. 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. A second exception is provided for 
PHAs with fewer than 300 units where there is no demonstrated 
resident interest in serving on the board. This determination 
may come only after reasonable notice of the opportunity to 
serve is provided to the resident advisory board.
    The Committee believes that placing a resident on the board 
is important to promote a greater understanding of resident 
concerns and foster a working relationship between PHAs and 
residents. In the view of the Committee, it is important to 
ensure meaningful participation by residents in the important 
decisions that affect their lives. The requirement for a 
resident on the PHA board is inapplicable to PHAs with no board 
of directors.

Rental payments

    The Committee bill amends section 3 of the 1937 Housing Act 
to revise the method by which PHAs calculate rental payments 
for public and assisted housing. Under current law, residents 
must pay a monthly rent equal to the highest of (a) 30 percent 
of monthly adjusted income, (b) 10 percent of monthly gross 
income, or (c) the welfare rent. Generally, rent is set at 30 
percent of monthly adjusted income, commonly referred to as the 
``Brooke Amendment.''
    During the development of this bill, the Committee received 
extensive comments on the rent provisions. Housing authorities 
expressed 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 circumstances. 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 its 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 recognized the validity of both of these 
arguments and, therefore, tried to strike a balanced policy 
taking into account the opposing concerns. Of particular 
concern to the Committee was the detrimental effect current 
rent policies have on the upward mobility of residents and 
their ability to achieve greater financial independence. 
Because the current law generally requires residents to pay 30 
percent of their adjusted income for rent, a resident's rent 
automatically goes up in proportion to increases in income. 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 represent 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 
essential tools to implement a workable system of flat rents, 
ceiling rents, earned income disregards, and minimum rents.
            1. Flat rents
    The Committee bill first addresses the work disincentives 
under current law by allowing PHAs to set flat rents. The 
Committee bill retains the current rent cap of 30 percent but 
permits a PHA to charge less than 30 percent or up to 30 
percent of a household's adjusted income. This provision is 
intended to provide PHAs with greater flexibility to develop a 
system of flat rents designed to retain and attract working 
families in public housing developments.
            2. Ceiling rents
    Another way the Committee bill addresses the work 
disincentive is by establishing a workable system of ceiling 
rents. Section 3(a)(2)(A) of the 1937 Act currently 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 bill authorizes PHAs to establish ceiling 
rents that reflect the reasonable market value of comparable 
housing, but are not less than 75 percent of the cost to 
operate the housing. The Committee bill sets the lower floor at 
75 percent rather than full operating cost because studies have 
shown that in certain rental markets, operating costs exceed 
market values. Where such is the case, many households would be 
priced out of the public housing market making it more 
difficult for PHAs to retain or attract working families and 
create more mixed-income communities. Setting the operating 
cost floor at 75 percent provides PHAs with greater flexibility 
to establish a viable system of ceiling rents that reflect true 
market value.
            3. Earned income adjustments
    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 tenant-
based 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 
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.
    In addition to the 18-month income disregard, the Committee 
bill also provides PHAs the flexibility to disregard any other 
earned income it deems appropriate. This provision was designed 
to be simple and flexible to allow PHAs to develop innovative 
rental policies that reward work and encourage economic self-
sufficiency.
            4. 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 
administered by PHAs. Under the Committee bill, minimum rents 
are voluntary for the PHA and can be anywhere from $0 to $25. 
The purpose of the minimum rent provision is to promote 
personal responsibility and resident investment in their living 
space. It is also intended to ensure that families benefiting 
from housing assistance are making some contribution to support 
operation of their units at a time when there are far more 
families eligible for housing assistance for whom no assistance 
is available who are paying excessive rents in the private 
marketplace.
    This provision is not intended to create excessive hardship 
for those simply unable to pay a minimum rent. 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 persons with 
disabilities who have not yet qualified for disability income, 
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.
    The Committee believes that the reforms in rental policy 
made by this legislation will have a positive effect of 
providing greater incentives for public and assisted 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 and assisted housing 
communities, as well as reducing financial burdens on PHAs 
themselves.

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 resident advisory board. 
The plan must also be consistent with the Comprehensive Housing 
Affordability Strategy (CHAS) for the PHA's jurisdiction and 
include a description of how the contents of the plan are 
consistent with the applicable CHAS.
    The Committee bill calls for a 5-year plan and an annual 
plan. The 5-year plan includes a mission statement for serving 
the needs of low-income and very low-income families in the 
PHA's jurisdiction and a statement of goals and objectives of 
the PHA to serve the needs of those families.
    The annual plan must include: a statement of low-income and 
very low-income housing needs in the community and how the PHA 
intends to address these needs; a statement of financial 
resources and their planned uses; the PHA's general policies 
governing eligibility, selection, admission, assignment, 
occupancy, and rents; the PHA's policies for the maintenance 
and operations of the agency; a statement of the PHA's 
grievance procedures; a plan describing any capital 
improvements; a description of any housing to be demolished or 
disposed of; a description of any developments designated for 
elderly or disabled; a description of any properties to be 
converted to tenant-based assistance; a description of any 
homeownership or self-sufficiency programs; a description of 
policies for safety and crime prevention; a certification of 
compliance with fair housing laws; and an annual audit.
    In developing the plan, the Committee intends for a PHA to 
operate in concert with citizens of its jurisdiction to address 
the housing needs of low and very low-income people. To that 
end, each PHA plan should reflect the housing needs of the 
jurisdiction as they are articulated in the CHAS or 
consolidated plan. Further, each jurisdiction must assure that 
the public housing agency plan is reflected in its consolidated 
plan.
    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 (or 75 days the first year), it 
is deemed approved.
    The intent of the plan 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 to be instrumental in its 
development and have open access to its contents.
    The Committee intends for PHAs, residents, and local 
governments to take the planning process very seriously. This 
legislation represents a very significant departure from 
current law and practice, and creates a greatly expanded role 
for the PHAs and its residents. The plan is the blueprint for 
how the PHA will approach its new responsibilities and serve 
its community as well as possible.
    During the development of this bill, 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 conduct a thorough review of 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 or HUD. Rather, it is 
intended to represent a locally established planning document 
to replace many of the statutory and regulatory requirements 
that have constrained PHAs from operating more efficiently and 
effectively in the past. 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, those with 
fewer than 250 public housing units, and those that only 
administer tenant-based assistance. 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 resident 
involvement in the development of the plan.
    In order to ease the administrative burden of plan 
submission to HUD, the Department has indicated its intention 
of enabling PHAs, to the maximum extent practicable, to submit 
their responses to all HUD planning and reporting requirements 
in one annual document. The Department has also indicated its 
intent to structure these requirements and the HUD system in a 
manner that allows, and eventually could require, PHAs to 
submit their responses by computer. The Committee strongly 
supports and encourages these actions to streamline the 
planning and reporting system. To ensure that HUD can 
accomplish the review of the plans in a timely fashion, the 
bill permits the submission of plans on a staggered basis.
    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 
in great detail. 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 and expects that HUD will examine 
the plans as thoroughly as possible. But, more important, the 
Committee believes that HUD's efforts should be focused on the 
post-audit review to ensure that the PHA is performing well and 
operating according to what is outlined in its plan. Therefore, 
the Committee strongly encourages HUD to focus its attention on 
audits, including audits of PHA performance vis-a-vis their 
plans, and monitoring troubled or at-risk agencies.
    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.

Resident 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. The 
Committee believes that one of the keys to a successful housing 
authority is a meaningful and trusting partnership between the 
PHA and its residents. Therefore, the Committee bill encourages 
PHAs to facilitate resident input and involvement to the 
maximum extent possible and requires the establishment of a 
resident advisory board or boards to participate in the public 
housing agency planning process.
    The role of resident advisory boards 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, each resident 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 
resident advisory board or boards to have veto power over the 
public housing agency plan; however, it does expect the PHA to 
provide the board or boards with a meaningful role in 
developing the plan and to consider fully the comments and 
issues raised by the board throughout the process.
    The Committee envisions that resident advisory boards will 
be formally organized with rules of governance and an orderly 
process for nomination and appointment such that the advisory 
board is representative of a diversity of perspectives among 
the residents. It is anticipated that resident advisory boards 
will establish processes, such as public hearings, town 
meetings, or other means of acquiring information, to assure 
that advisory board members are informed of the opinions of 
other residents. Resident advisory boards are not to be 
considered ad hoc groups convened solely for the purpose of 
reviewing public housing agency plans and then disbanded. 
Rather, they are expected to be permanent organizations that 
meet on a regular basis as is necessary to carry out their 
responsibilities. Further, PHAs are expected to operate in good 
faith with resident advisory boards, providing them with the 
sufficient notice and complete information about issues the 
boards are to consider, so that the boards are able to make 
decisions and recommendations from an informed position. The 
Committee expects that PHAs will allocate sufficient resources 
to assure the effective functioning of resident advisory 
boards.
    The Committee received several comments from housing 
agencies and resident groups that the requirement for the 
establishment of a new resident advisory board may be redundant 
in situations where there already exists established 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 resident advisory 
board. The Committee does not intend for the board requirement 
to create an undue hardship on PHAs, nor does it intend to 
supersede an already successful resident participation process. 
Therefore, the Committee bill allows HUD to waive the 
requirement for the establishment of a new board or boards if 
the PHA demonstrates that an existing resident council or other 
resident organization of the PHA adequately represents the 
interests of the residents of the PHA and can perform the 
advisory functions under the plan.

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. During 
Committee hearings on public housing reform, concerns were 
raised about the effectiveness of the PHMAP process. Reports by 
the HUD Inspector General indicated that in some circumstances 
information reported by PHAs could 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.
    The Committee supports HUD's effort to reevaluate the 
performance evaluation system and determine how to place more 
weight on physical inspections and audits. The Committee also 
supports the Department's intention to seek the advice of 
industry groups, other real estate management experts and 
resident groups as part of this effort to yield improvements in 
the monitoring and evaluation system.
    The Committee bill contains four new additions to PHMAP. 
The new performance indicators include: (1) the extent to which 
the PHA coordinates, promotes, or provides effective programs 
and activities to promote the economic self-sufficiency of 
residents and provides opportunities for residents to be 
involved in the administration of public housing; (2) the 
extent to which the PHA implements effective screening and 
eviction policies and other anti-crime strategies; (3) the 
extent to which the PHA provides acceptable basic housing 
conditions; and (4) the extent to which the PHA successfully 
meets the goals and carries out the activities of the public 
housing agency plan.
    These new indicators of PHA performance reinforce, and are 
consistent with, some 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; to provide residents with 
decent housing in a safe and secure environment; and to place 
greater emphasis on local decision-making.
    The first new indicator involving resident empowerment is 
intended to strengthen the link between housing assistance and 
welfare reform by requiring PHAs to coordinate and promote 
participation by families in self-sufficiency programs. 
Recognizing that the PHA's primary function is to provide 
quality housing, this provision is not intended to require PHAs 
to initiate or necessarily manage such programs, but to 
facilitate linkages between residents and programs initiated 
and managed by appropriate social service agencies.
    The Committee bill includes HUD's proposal to add a 
required PHMAP indicator regarding housing conditions. The 
Secretary of HUD and HUD's Inspector General pointed out that 
under the current PHMAP system, a PHA can escape ``troubled'' 
designation even though a substantial portion of its units 
would not meet basic housing quality standards. The Committee 
shares the Department's concern and, therefore, added this new 
indicator with the belief that it is critical to evaluate the 
basic conditions under which residents live when measuring PHA 
performance.
    The Committee bill also directs the Department to assess 
and rate PHAs based on their performance in developing and 
implementing screening, eviction and other anti-crime 
strategies. The Committee is keenly aware that PHAs which have 
experienced the greatest success in combating crime within 
their developments have worked closely with local law 
enforcement officials as well the residents themselves in the 
formulation and implementation of their anti-crime strategies. 
Therefore, in conducting its PHMAP assessments of anti-crime 
efforts, the Department will also assess PHA efforts to 
coordinate and consult with local government officials and 
residents in their anti-crime efforts.
    The Committee bill also includes a new PHMAP indicator to 
measure PHA compliance with its plan. During the development of 
this legislation, 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 the new performance indicator to 
ensure that PHAs actually perform according to the objectives 
set forth in their plans.
    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. The Committee believes that the Department's 
resources will be better utilized by examining results and 
measuring PHA performance against plan objectives.

Preferences

    The Committee bill repeals Federal preferences for public 
housing and rental 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 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 the unintended consequenceof 
warehousing very low-income families in areas of high concentrations of 
poverty and despair; for example, PHAs, on average, house families 
below 20 percent of area median income--a decrease since 1981 before 
the institution of 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.

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. However, 
the bill provides that in cases of lease terminations for 
serious cases, the PHA may provide a notice within a period, 
which is determined by HUD to be reasonable, that is shorter 
than that provided for under State or local law. This shortened 
notice period could be utilized by a PHA when the health or 
safety of residents, the employees of the PHA, or members of 
the surrounding community are threatened, or where drug-related 
crimes, violent crimes, or any other crimes resulting in a 
felony conviction are involved.

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 
PHAs that default on their contractual obligations.
    The Committee believes that a more aggressive approach to 
troubled authorities is essential to protect the interests of 
the residents and the government's substantial investment in 
the housing stock. S. 462 provides the maximum amount of 
flexibility for the Department to 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, including 
technical assistance, entering into memoranda of agreement to 
force corrective action, and the ability to seek a court-
ordered receivership. HUD has recently intervened to take over 
several large, troubled PHAs. However, the current tools 
frequently have been employed unevenly and inconsistently, and 
in some cases they are insufficient to ensure that the problems 
of troubled authorities can or will be corrected in a timely 
fashion.
    The Committee bill gives PHAs 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 leave the troubled 
list. If this does not occur, 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 believes that this approach is absolutely 
necessary to ensure that decisive action will be taken to 
address the problems of chronically troubled agencies. It helps 
ensure that appropriate actions will be taken whether or not 
HUD has the political will to act. In the Committee's view, HUD 
should not have the discretion to avoid imposing what is, in 
effect, a ``death penalty'' on any housing authority that fails 
to meet basic performance standards, and it points out that HUD 
supports the Committee's position.
    The Committee bill requires, in the case of housing 
authorities with more than 1,250 units--large PHAs--that have 
been in troubled status for at least one year (or one year from 
date of enactment), that HUD seek the appointment of a judicial 
receiver to assume responsibility for the management of the 
authority. Historically, the appointment of a judicial receiver 
has frequently been a time-consuming process. Therefore, to 
assure that immediate action can be taken to correct management 
deficiencies in the troubled agency, the bill permits HUD to 
assume administrative authority over the operations of the 
housing authority during the period prior to the assumption of 
responsibility by the judicial receiver. In the case of a 
housing authority smaller than 1,250 units, the bill requires 
the Department to either petition for the appointment of a 
receiver or assume receivership administratively.
    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 
after taking certain specified steps; demolish or dispose of 
the assets of the agency subject to applicable law; 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 could 
be 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 intended to give HUD the 
maximum flexibility to deal with troubled housing authorities. 
However, the Committee also realizes that HUD's capacity to 
assume direct control over a substantial number of troubled 
agencies may be limited, which is one reason why judicial, 
versus administrative, receivership is mandated for large, 
troubled authorities. The Committee expects HUD, where it has 
the option in the case of smaller PHAs, 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. 462 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.

Site-based waiting lists

    The Committee bill allows PHAs to establish procedures to 
maintain site-based waiting lists for admissions to public 
housing developments. In the view of the Committee, site-based 
waiting lists will provide residents with the maximum amount of 
choice as to where they want to live and, therefore, help 
foster a sense of community in public housing neighborhoods by 
strengthening existing ties to family, school, work, and 
neighborhood institutions. The Committee is mindful that HUD's 
prohibition against site-based waiting lists in the past was 
based on a concern about racial steering and a desire to 
prevent housing discrimination. The Committee bill clearly 
states that any procedures used to establish site-based waiting 
lists must comply with civil rights and fair housing laws and 
further requires full disclosure of all housing choices 
available to all applicants. The Committee anticipates that 
PHAs will assurethat all applicants are aware of their rights 
under the fair housing and civil rights laws. The Committee also 
encourages the Department to monitor the implementation of site-based 
waiting lists to assure that steering does not occur.

Capital and operating funds

    The Committee bill consolidates and streamlines the 
existing public housing funding system by establishing one 
Capital Fund and one Operating Fund for providing financial 
assistance to PHAs. In the view of the Committee, consolidating 
the existing public housing programs and making them eligible 
activities under the two block grants will provide PHAs greater 
flexibility to make decisions that reflect local priorities and 
needs. It also recognizes the limited capacity and inability of 
HUD in an era of downsizing to administer effectively numerous 
categorical programs each with its own set of complex rules and 
regulations.

Prohibition on new construction of public housing

    The Committee bill contains a provision prohibiting the 
construction of any new public housing except for replacement 
purposes with certain exceptions. The exception allows a PHA to 
use its Capital and Operating Funds for the construction and 
operation of new units, but would not have the increased number 
of units reflected in its formula allocation. In other words, 
it is permissible for a PHA to develop new housing 
opportunities if it is efficient and can use its regular 
formula allocation for such purposes. However, the formula will 
not provide additional funding to develop and operate the new 
units. This provision reflects a concern by the Committee that 
PHAs should not be taking on the responsibility for 
administering new units at a time when there are insufficient 
subsidies to operate and maintain the current housing stock.
    During the development of S. 462, concerns were raised that 
such a prohibition would negatively impact a PHA's ability to 
invest and leverage its funds in mixed-income and mixed-finance 
housing projects with other public and private partners--an 
activity that the Committee generally supports and believes 
should be encouraged. Therefore, the provision was amended in 
Committee mark-up to clarify that operating and capital funds 
could be allocated for operating expenses and modernization of 
new units as long as they were part of a mixed-finance project 
and the estimated cost over the useful life of the project is 
less than the estimated cost of providing tenant-based 
assistance.

Operation Safe Home initiative

    The Committee bill would make permanent the authorization 
for the use and appropriation of vouchers in connection with 
witness relocation. Effective witness protection for law-
abiding citizens who have the courage to offer testimony 
against dangerous criminals is essential in the nation's 
efforts to build safe and secure communities.
    The Operation Safe Home initiative, currently administered 
by HUD's Office of Inspector General (OIG), will be funded as a 
set-aside from HUD's Headquarters Reserve. The Committee is 
firmly convinced that the practice of funding this initiative 
as a set-aside from the Drug Elimination Grant program should 
be discontinued. This practice, which provided necessary 
support for the initiative in its early stages, has ironically 
resulted in a decrease in funding for local anti-drug efforts 
and is counter-productive to the nation's efforts to combat the 
scourge of drugs and crime in public and assisted housing. In 
addition, this practice resulted in a diversion of funds 
originally intended to address drug-related crime to the 
Inspector General to combat fraud and equity skimming in public 
housing and the section 8 program. The Committee believes these 
laudable goals should be met with separate funding accounts. 
Therefore, the Operation Safe Home initiative will be provided 
funding from the HUD Headquarters Reserve.
    While the Committee believes that the Operation Safe Home 
initiative has produced heartening results in confiscating guns 
and drugs from public housing, significant questions concerning 
the initiative remain. The Committee is skeptical of the 
desirability of program administration under the auspices of 
the OIG. This practice raises significant concerns regarding 
effective program evaluation and oversight and the Committee 
urges the Department to evaluate alternatives. The Department 
is also urged to define the mission of the OIG more clearly and 
to differentiate between those functions which are inherent 
within the day-to-day operations of the OIG and those requiring 
separate program funding.

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 allows the new Operating Fund formula to 
take energy conservation into account.

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 
maximum 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 residents 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-finance projects, instituting innovative 
managerial improvements, and contracting with other entities in 
order to reduce administrative costs, generate revenues, and 
empower residents. Resident 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 bill includes a provision which 
abolishes the operating subsidy penalty contained in the 
current Performance Funding System. This penalty has served as 
a disincentive for PHAs to engage in joint ventures and other 
entrepreneurial efforts. Instead, PHAs will be able to retain 
amounts generated through activities carried out under this 
section without sustaining a loss in funding through the 
Operating and Capital Funds or other funding sources provided 
under the 1937 Housing Act. However, PHAs will be required to 
utilize such amounts for the provision of low-income housing or 
to otherwise benefit the residents of the PHA. It is the 
Committee's firm intention that PHAs should be granted wide 
discretion in choosing how best to utilize these proceeds. For 
instance, PHAs can use these funds to provide additional low-
income housing by providing capital for mixed-finance 
developments. Also, PHAs could benefit residents through 
economic development by providing employment opportunities or 
by supporting service programs. It is not the Committee's 
intention to see this provision stifled by a requirement that 
PHAs receive prior approval by HUD, beyond that provided in the 
PHA plan requirements, before embarking on business ventures--a 
situation that would amount to micromanagement.

Community service and self-sufficiency

    A central theme of the Committee bill is to promote self-
sufficiency and personal responsibility for families that 
receive housing benefits. The Committee strongly believes that 
housing policy should encourage assisted families to move into 
activities that improve their economic situations and to assume 
a greater degree of responsibility for their living conditions. 
In recognition of the historic welfare reform law passed by the 
Congress last year, the Committee bill contains a number of 
features that aims to further promote work over welfare and 
personal responsibility over public dependency.
    First, the legislation requires able-bodied adult residents 
of public housing to contribute not less than 8 hours a month 
through participation in community service activities (except 
for any political activity) or self-sufficiency activities. 
Residents could perform community service through a variety of 
maintenance activities such as grounds keeping or volunteer 
activities that help their neighbors, such as a neighborhood 
watch program. In addition, PHAs and residents could consider 
the benefits of community gardening. Residents could also 
fulfill the 8 hour requirement by participating in a self-
sufficiency activity, such as literacy or job training courses.
    The Committee does not intend the community service and 
self-sufficiency requirement to be perceived as a punitive or 
demeaning activity. Rather, the Committee expects the 
requirement to be a rewarding activity that will assist 
residents in improving their own and their neighbors' economic 
and social well-being and give residents a greater stake in 
their communities.
    To ensure that the community service and self-sufficiency 
requirement does not impose an undue hardship on public housing 
residents, the Committee bill provides a number of exemptions 
from the requirement. Elderly and disabled residents or 
residents that act as the primary caretaker of someone who is 
disabled would be exempted from the requirement. The Committee 
recognizes that a substantial population of public housing 
residents and assisted families also receive welfare assistance 
and will generally be required to meet the work participation 
requirements prescribed under the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 or under a State 
funded only program. Accordingly, these families and those 
families who are not receiving welfare assistance that fulfill 
the State or locality's work participation requirements would 
be exempted from the 8-hour requirement. Under the welfare 
reform law, to be counted as engaged in work, a welfare 
recipient would have to be participating in an eligible work 
activity for a minimum number of hours. In addition, residents 
who meet the State welfare agency exemption requirements would 
also be exempted. For example, the welfare reform law prohibits 
States from penalizing a single parent caring for a child under 
6 for refusal to work if the parent is able to prove that child 
care was unobtainable. States can also exempt single parents 
who are caring for a child under 12 months of age. Lastly, 
State funded only programs could have additional exemption 
requirements.
    The Committee bill's exemptions would not only make the 
community service and self-sufficiency requirement consistent 
with State and local welfare program requirements, but simplify 
the administrative task in identifying the exemptions.
    The Committee bill allows maximum flexibility on how the 
community service and self-sufficiency requirement can be 
administered. PHAs and their resident advisory boards should 
work together in devising a structure, including the option of 
using residents, to administer this requirement.
    It is critical to note that the community service 
requirement contained in the bill is in no way intended to 
result in the direct or indirect displacement of public housing 
employees or to supplant job opportunities within PHAs. The 
Committee continues to believe that the PHAs themselves are an 
important source of employment opportunities for the residents 
of public and assisted housing and others in the community. The 
Committee commends those PHAs which currently employ persons 
residing within public and assisted housing. It is vital to 
stress that the community service requirement contained in the 
bill vests the ultimate authority for selecting appropriate 
service with the residents themselves--the PHAs will not have 
the authority to demand specific work activities in order to 
fulfill the requirement. The Committee also notes that the 
community service requirement may be complied with through 
activities located within the community at large, and not on 
public housing premises or grounds alone.
    The second provision in the Committee bill that promotes 
personal responsibility relates to the interaction of housing 
assistance and welfare assistance benefits. Under welfare 
reform, a significant number of public housing and assisted 
families will be required to meet State welfare requirements 
and any change in welfare benefits will affect the family's 
adjusted income and thus, the amount of resident contribution 
to rent. This will, therefore, affect the amount of housing 
benefit provided. Under current housing law, a family's share 
of rent is reduced when its income declines, including 
instances where the decline is due to reductions or termination 
of means-tested benefit programs, such as welfare or public 
assistance.
    To support the States' welfare reform efforts, the bill 
contains a number of reforms to the current federal rent policy 
to reward work but to also ensure residents comply with welfare 
and public assistance requirements. The Committee recognizes 
that the current rent structure, which generally requires that 
a family contribute 30 percent of its adjusted income for rent, 
has created disincentives for residents to work. As discussed 
previously, the bill would allowresidents who obtain employment 
to keep their earnings by phasing in rent increases on a gradual basis. 
But, for cases where residents who have committed fraud or who have not 
complied with welfare or public assistance program requirements, their 
housing benefits would not be increased to make up for the reduction in 
cash benefits. In other words, PHAs would not be required to reduce a 
sanctioned family's share of rent. This policy will facilitate State 
welfare reform efforts to ensure that sanctions have real meaning.
    The Committee strongly believes that welfare recipients who 
receive housing assistance should not receive different 
treatment from welfare recipients who do not receive housing 
assistance. Further, housing assistance is a significant 
benefit since only one in four who needs housing assistance 
actually receives it. Therefore, the Committee believes that 
those who are receiving such a benefit should assume personal 
responsibility.
    The Committee bill's sanction policy also mirrors what is 
in the welfare reform law. For example, families are prohibited 
from obtaining an increase in benefits from a means-tested 
public assistance program (such as Food Stamps or housing 
assistance) in cases where a welfare recipient's benefits were 
reduced due to fraud. The welfare reform law also prohibits an 
increase in Food Stamps benefits due to noncompliance with a 
means-tested public assistance program. The Committee bill 
clarifies that the changes to rental policy due to sanctions 
for noncompliance and fraud do not apply in cases where welfare 
benefits are terminated due to the expiration of their benefits 
under the State's lifetime time limits.
    Lastly, the Committee bill encourages greater coordination 
between housing providers and welfare agencies by requiring 
PHAs, to the maximum extent possible, to establish cooperation 
agreements with welfare agencies. The Committee believes that 
it is important for the PHAs to perform outreach efforts to the 
State and local welfare agencies so that residents obtain the 
necessary services and resources recognized under the welfare 
reform law for self- sufficiency efforts and so that PHAs can 
focus their efforts and resources on managing their inventory. 
The Committee also believes that a coordinated approach toward 
welfare reform could benefit both the welfare agency's efforts 
in moving people from welfare to work and, thus, improving the 
economic condition of public housing residents, and the PHA's 
efforts to stretch operating subsidies as far as possible and 
to improve living conditions. The cooperation agreements could 
also facilitate the development of job training and child care 
centers located in or around public housing developments with 
PHAs and welfare agencies sharing costs and resources.
    Further, the cooperation agreements could be used to 
transfer information to welfare agencies on rents, income, and 
assistance to assist the welfare agencies in carrying out their 
functions such as fulfilling reporting requirements under the 
welfare reform law. For example, State welfare agencies are 
required to report to the Secretary of Health and Human 
Services on what sources of public assistance, including 
housing assistance, welfare recipients receive.

Eligibility for public and assisted housing

    The Committee bill changes the current income eligibility 
standards for public housing and section 8 assistance. For any 
public housing units or project-based section 8 units made 
available for occupancy each fiscal year: (1) not less than 40 
percent must be occupied by families whose incomes do not 
exceed 30 percent of the area median; (2) not less than 75 
percent must 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. For vouchers made available each 
year: (1) not less than 50 percent must be provided to families 
whose incomes do not exceed 30 percent of the area median and 
(2) any remaining assistance must be provided to families whose 
incomes do not exceed 80 percent of the area median. These 
provisions apply 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 and assisted 
housing resident is below 20 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 housing 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, and 90 percent below 60 
percent of the area median income. 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 likely 
implementation 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.
    The Committee believes that the income targeting provisions 
combined with the repeal of Federal preferences in S. 462 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 bill also requires PHAs to achieve a diverse 
mix of incomes in each development including scattered-site 
public housing and prohibits the concentration of very low-
income families in certain public housing developments. The 
Committee included these provisions 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 for PHAs to use the more flexible targeting 
provisions to house only eligible families with higher incomes 
in the scattered-site projects or the most marketable 
developments. The Committee bill does not prescribe, and 
intends for theDepartment not to prescribe, specific 
percentages or number of families at each income level that should 
occupy each project, in order to maximize a PHA's flexibility in 
achieving income mixes according to local conditions. The Committee 
intends for the PHA to have maximum 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 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 residents 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 counterproductive requirement that 
any units demolished or sold be replaced on a one-for-one 
basis. 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. Because 
there typically have been no funds to fulfill the requirement, 
as well as an insufficient number of suitable sites for 
replacement housing, the one-for-one replacement requirement 
has simply prevented the demolition of obsolete and dangerous 
projects.
    In order to safeguard the interests of residents living in 
developments proposed for demolition or disposition, the 
Committee bill includes provisions that ensure that displaced 
residents receive payment for relocation expenses, are offered 
comparable housing, and are provided with necessary counseling 
to find such housing. The Committee bill also requires that an 
application be developed in consultation with residents 
affected by the demolition or disposition.
    The Committee bill also provides any eligible resident 
organization, or nonprofit organization acting on behalf of 
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 
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 
a property where its retention is not in the best interests of 
the residents 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 seriously considered proposals 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 judgements 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 those designated as elderly housing, disabled 
housing, or elderly and disabled housing, scattered-site, or 
mixed-finance 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.HUD may 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 resident 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 33 supportive 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 33. 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 residents or to a conduit organization for sale to 
residents. 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 
residents 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 residents in becoming homeowners.
    In order to expand the opportunities for resident 
homeownership, the Committee includes 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 two 
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 two more years 
will enable housing authorities with projects in progress to 
finish the work in progress. This program provides necessary 
and large capital grants to tear down obsolete public housing 
which would normally be too costly under the Capital Fund.

Mixed-finance projects

    The Committee bill addresses many of the issues faced by 
PHAs that are working with private partners to create mixed-
income and mixed-finance 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, obsoletepublic housing and creating additional housing 
opportunities for low-income families in more stable environments.
    The Committee bill also seeks to encourage public-private 
partnerships and simplify the creation of mixed-finance 
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-finance 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. The Committee intends that HUD have reasonable 
discretion to determine which criteria are applicable. 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 incompetently, in bad faith, or making decisions that 
are detrimental to residents.
    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 of 
such housing immediately 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.
    In order to safeguard the interests of residents living in 
developments identified for conversion, the Committee bill 
includes provisions that ensure that displaced residents 
receive payment for relocation expenses, are offered comparable 
housing, and are provided with necessary counseling to fund 
such housing.

Linking services to public housing residents

    The Committee bill authorizes a new program in section 33 
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 involving resident empowerment 
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.
    Therefore, 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; resident 
management and participation activities; economic and job 
development; and 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 independence and self-
sufficiency of residents.
    The Committee bill requires that for funds appropriated 
under this section, a certain amount 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.

Pet ownership

    For many years, residents of federally assisted housing 
designated for the elderly and disabled persons have been 
allowed to own ``common household pets,'' such as dogs, cats 
and birds, according to regulations issued pursuant to Section 
227 of Public Law 98-181. It has been demonstrated, 
particularly with respect to the elderly, that pet ownership 
can add to the quality of life of individuals, families and 
communities. This bill extends this privilege of pet ownership 
to residents of other federally assisted rental housing (i.e., 
public housing and federally assisted, project-based rental 
housing), subject to reasonable requirements of the owners, if 
the resident maintains each pet responsibly and in accordance 
with applicable laws and regulations.
    The Committee recognizes that owners and managers of 
federally assisted rental housing have an enormous 
responsibility to provide safe and clean living environments 
for their residents, and they are legitimately entitled to 
regulate the conditions of pet ownership. S. 462 permits owners 
to establish pet policies appropriate for their properties. For 
example, residents wishing to keep pets may be charged a 
nominal monthly fee, a reasonable pet deposit, or both. In 
addition, the bill establishes as a condition of ownership 
compliance with applicable State and local public health, 
animal control and animal anti-cruelty rules and regulations.
    Further, it is fair to ask pet owners to comply with other 
reasonable pet ownership requirements of their housing 
developments as practiced by private market rate owners. These 
may include appropriate limits on the number, size and type of 
animals any one resident may own or keep. In the Committee's 
view, it is also appropriate for owners to require the 
spayingor neutering of dogs and cats, to limit pet density, and to 
establish appropriate standards of veterinary care as conditions for 
ownership.
    The Committee intends that the pet ownership provisions of 
S. 462 shall take effect after notice and comment rulemaking by 
HUD, and expects that such rulemaking will be forthcoming in a 
timely manner. In addition, the Committee expects that public 
housing agency plans will address the conditions of pet 
ownership.

                 Title II--Section 8 Rental Assistance

Overview

    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, about 87 percent of tenant-based section 8 
subsidy holders (excluding New York) 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 or unassisted low-income families 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 in some areas. 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 the 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 and convert 
their properties to market rate. As the Committee considers 
broader reforms to HUD's assisted housing programs including 
the conversion of certain project-based assistance to tenant-
based assistance, this bill's reforms will allow vouchers to 
work more effectively.
    In the Committee's view, the administrative reforms to 
tenant-based section 8 programs contained in S. 462 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 tailored 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 couchers

    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 110 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 essentially 
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 establishes minimum 
targeting requirements where 50 percent of new vouchers, both 
incremental and turnover, would be dedicated to families with 
incomes at or below 30 percent of area median income and the 
rest to families below 80 percent of area median. These 
targeting standards are established under a revised section 16 
of the 1937 Housing Act found under 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, which has occurred under the current 
voucher program. The Committee is very concerned that a 
considerable number of current voucher holders that have moved 
or been newly admitted to housing units are paying excessive 
amounts of income for rent. This may be due to artificially low 
payment standards which do not reflect local rental rates, 
improper monitoring of rent levels by PHAs, or other factors. 
The Committee expects HUD to evaluate why this has occurred and 
to monitor the rent burdens under the new voucher program.
    To balance the Committee's concern of excessive rent 
burdens with local flexibility, the Committee bill gives 
housing agencies the discretion to set payment standards 
between 90 and 110 percent of the FMR without HUD's approval. 
Current law for vouchers restricts the payment standard between 
80 and 100 percent of the FMR, with some exceptions up to 120 
percent with HUD approval. The bill also gives HUD the 
discretion to require housing agencies to submit their proposed 
payment standard for approval if the housing agencies propose 
to set payment standards below 90 percent of the FMR or above 
110 percent of the FMR. The Committee believes that it is 
important to allow some flexibility in setting the payment 
standard above the FMR so that voucher holders will have more 
housing choices. Further, the Committee recognizes that recent 
changes to the calculation of the FMR have lowered the FMR 
value, which have restricted housing choices for section 8 
families.
    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.

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 and managers 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 and managers 
have been reluctant to participate, in large part because of 
time-consuming and costly program requirements which conflict 
with normal market practices. In fact, a recent survey found 
that owners and managers representing about 53 percent of 
private multifamily housing properties would accept section 8 
subsidies. 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 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 and housing agencies. The Committee 
recognizes that rules such as ``take one, take all'' and the 
``endless lease'' were created to protect assisted households 
from owner discrimination. The Committee, however, does not 
anticipate that the repeal of these rules will adversely affect 
assisted households because protections will be continued under 
State, 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. These provisions in this bill 
are predicated, in part, onrepresentations by assisted housing 
owners and associations that these changes will, in fact, expand the 
supply of affordable housing.

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, 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 and if such shorter 
terms are considered to be acceptable local market practice. 
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 access to 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 housing 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, 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 at least annually thereafter 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 emphasizes 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.

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 thedifference 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, 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.
    The Committee recognizes that whether families receive 
housing assistance or not, they do not make housing choices 
based on cost alone. Other factors such as distance to work and 
families, crime activity, and transportation play a role in 
where a family elects to live.

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.
    The Committee recognizes that when assisted families leave 
their jurisdictions, an enormous administrative burden for PHAs 
is created. Therefore, in order to make the portability feature 
work more effectively and efficiently, the Committee bill 
authorizes HUD to establish procedures and reserve funds for 
compensating PHAs that issue vouchers to families that move 
into or out of another PHA jurisdiction. This provision 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 PHAs' 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 to make the program 
more flexible and operable for housing agencies to administer. 
First, it allows a family to receive section 8 assistance for 
homeownership through shares in a cooperative housing 
development or through lease-purchase arrangements, 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 the exclusion 
of 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 
encourages PHAs to inform assisted families of this 
homeownership option and foster the implementation of this 
program whether the PHA administers or contracts out the 
program.

Repeal related to single room occupancy (SRO) facilities

    In an effort to streamline the 1937 Housing Act, many 
obsolete or unnecessary provisions are repealed, including one 
which allows tenant-based assistance to be used for housing 
units without a kitchen and/or bathroom. These units are often 
in SRO facilities and are an important permanent housing 
resource for single people who have been homeless. HUD's Office 
of General Counsel has determined that no special legislative 
authority is required to allow tenant-based assistance to be 
used for SROs. The repeal of this provision is intended in no 
way to prohibit or inhibit tenant-based assistance in SROs.

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. In the Committee's 
view, the reforms 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 the section 8 program.
    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. The Committee 
encourages HUD to monitor these efforts through its review of 
the management performance of section 8 administering housing 
agencies. In addition, the Department may continue to evaluate 
the MTO program and report on the results.

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 (GAO) 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.

Recapture and reuse of section 8 reserves

    The Committee bill provides HUD with the authority to 
recapture and reuse housing agency project reserves of unused 
or excess tenant-based section 8 funds for purposes of amending 
current housing assistance contracts or renewing expiring 
housing assistance contracts. With this authority, HUD would be 
able to redistribute recaptured section 8 reserve funds to any 
housing agency.
    HUD currently allows housing agencies to retain unused or 
excess section 8 funds as contingency funds for future use. HUD 
believes that this policy allows housing agencies to cover 
unexpected program cost increases or other contingencies. These 
reserves have grown in recent years due to a budgeting 
procedure which allocates funding to housing agencies based on 
the assumption that assisted families would have no income and, 
therefore, make zero rent contributions. The reality, however, 
is that many residents have earned income and have been 
generally contributing 30 percent of their income for rent.
    In recent years, the Department has been attempting to 
reconcile section 8 contract accounts to determine the amount 
of unused funds in the housing agencies' project reserves. HUD 
identified about $1.6 billion in unspent section 8 funds as of 
the end of fiscal year 1996. It was later determined by the 
Secretary of HUD that this amount could be as high as $5.8 
billion; however, the Secretary has stated that the actual 
amount has not been completely reconciled.
    The Committee was surprised by the amount of reserves 
uncovered. The Committee strongly believes that these excess 
funds should be used for renewal purposes only. The cost of 
renewing all expiring section 8 contracts will grow from $10.2 
billion in fiscal year 1998 to over $20.7 billion in fiscal 
year 2007. The cost of renewing expiring tenant-based section 8 
contracts alone will grow from $8.1 billion in fiscal year 1998 
to $12.9 billion in fiscal year 2007. The Committee urges HUD 
to complete its efforts in reconciling these funds and keeping 
the Committee regularly informed of its progress.

                     Title III--Safety and Security

    The Committee bill builds upon the safety and security 
provisions contained in the Housing Opportunity Program 
Extension Act of 1996 (P.L. 104-120) and includes a number of 
new measures aimed at improving the safety of the residents of 
public and assisted housing. A provision in Title I of the bill 
expands the authority of PHAs to allow police officers to 
reside in public housing, regardless of income limitations, in 
an effort to make public housing safer for its residents. In 
addition, a separate provision in Title II allows owners of 
project-based section 8 housing to exercise the same option.
    The Committee bill combines the screening and eviction 
provisions contained in the Housing Opportunity Program 
Extension Act and expands these provisions to apply to housing 
assisted under the section 8 program. In addition, violent 
criminal acts and criminal acts resulting in a felony 
conviction are added to the list of offenses for which eviction 
standards are required regardless of the geographic location of 
the crime. Also, the bill permits PHAs to request written 
release of records of drug-related activity in order to aid 
PHAs in their screening activities.

                   Title IV--Miscellaneous Provisions

    Title IV contains clarifying and conforming provisions 
relating to the CHAS, income limit determinations in certain 
jurisdictions, the demolition of certain public housing 
developments, a technical correction to the Immigration Reform 
and Control Act of 1996 and other miscellaneous provisions.

Sense of the Congress

    This section contains a sense of the Congress that PHAs 
should consider the needs of individuals who are victims of 
domestic violence when establishing their system of 
preferences. The Committee also urges PHAs to take into account 
the current and future needs of the growing elderly population 
when developing preferences for occupancy. By highlighting 
these particular groups, the Committee does not intend to 
diminish the important needs of other groups or individuals.

Review of drug elimination program contracts

    The Committee bill requires the Secretary to investigate 
all security contracts awarded by grantees under the Public and 
Assisted Housing Drug Elimination Act of 1990 that are public 
housing agencies that own or operate more than 4,500 public 
housing units. The Committee is concerned about allegations 
that certain security firms under such contracts have engaged 
in discriminatory hiring practices and allowed their employees 
to proselytize while on duty. In particular, the Committee is 
concerned about security firms affiliated with the Nation of 
Islam which have received more than $20 million in HUD 
contracts. Further, the Committee seeks to determine if proper 
procurement procedures were followed.
    Legislative action is required to ensure that the Secretary 
thoroughly reviews each security contract, and reports the 
findings of the investigation to Congress. If a security 
contract is not in full compliance with applicable laws and 
regulations, the Secretary must promptly bring the contract 
into compliance, or terminate the contract.

Repeals

    In an effort to streamline the 1937 Housing Act, the 
Committee bill contains several repeals of programs, studies, 
or demonstrations that are either consolidated into the new 
block grants, expired, inactive, or already completed. The 
Committee intends to continue, and urges HUD to assist in, 
efforts to identify additional programs and initiatives that 
can be repealed or consolidated under the new block grant 
structure.

Cockroach eradication

    The Committee is very concerned that a recent study 
sponsored by the National Institute of Allergy and Infectious 
Diseases relates severe asthma in children to exposure to 
cockroaches, and finds a high incidence of such cases in 
children growing up in public housing. It is the intention of 
the Committee to include a provision addressing the eradication 
of cockroaches when S. 462 is considered by the full Senate.

                           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 Responsibility of 1997.

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 (PHA) 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, the economic viability of PHAs, and 
the effectiveness of the rent policies established by this Act 
on the employment status and earned income of public housing 
residents.

                        Title I--Public Housing

Section 101. Declaration of Policy

    This section amends section 2 of the 1937 Act to state that 
it is the 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 29 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 or Section 8 recipient, except on boards where the 
members are salaried and serve on a full-time basis. This 
section also allows for the election of the resident board 
member if provided for in the public housing agency plan 
developed in consultation with the resident advisory board. In 
addition, the requirement does not apply to a PHA with less 
than 300 units if the PHA has provided reasonable notice to the 
resident advisory board of the opportunity for a resident to 
serve on the board and no resident expresses an interest in 
serving on the board. It also prohibits discrimination against 
public housing residents in the selection of governing bodies 
of PHAs.

Section 103. Authority of Public Housing Agencies

    Subsection (a) amends the Brooke Amendment rent calculation 
by allowing PHAs to set rents that do not exceed 30 percent of 
a public housing resident's adjusted income rather than 
charging rents based on a straight percentage of adjusted 
income. This provision does not apply to recipients of tenant-
based assistance.
    Subsection (b) permits PHAs to adopt ceiling rents that 
reflect the reasonable market value of the public housing 
units, but are not less than 75 percent of the monthly cost to 
operate the public housing units and to make a deposit to a 
replacement reserve. Subsection (b) also allows PHAs to adopt a 
minimum monthly rent of no more than $25 for publichousing and 
for section 8 tenant-based and project-based programs. This subsection 
also allows rental of public housing units to police officers who are 
not otherwise eligible. In addition, this subsection allows a PHA with 
less than 250 units to rent a unit to an individual or family that is 
not low-income on a month-to-month basis if there are no eligible 
families on the waiting list. The PHA must also ensure that the rent is 
not less than the operating cost of the unit, the over-income family 
vacates the unit if an eligible family applies for residence, and 
reasonable public notice of the availability of the unit is provided. 
Finally, subsection (b) requires PHAs to establish rental policies that 
encourage and reward employment and economic self-sufficiency.
    Subsection (c) provides a transitional provision for the 
establishment of ceiling rents until final regulations are 
issued. PHAs are permitted to set ceiling rents: (1) at 75 
percent of the monthly cost to operate the public housing 
units; (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.

Section 104. Definitions

    Subsection (a)(1) amends the definition of ``single 
persons'' by striking the sentence establishing 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 adjustments to earned income that a PHA 
deems appropriate.
    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. The 18-month earned income disregard would 
only apply to tenant-based assistance programs provided that 
funds are appropriated on or after October 1, 1997. This 
subsection also grandfathers any household with an income 
disallowance under current law.
    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-
finance 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 residents 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 resident advisory board and be consistent with the 
jurisdiction's comprehensive housing affordability strategy 
(CHAS).
    Under this section, PHAs are required to submit a 5-year 
plan and an annual plan. The 5-year plan calls for a mission 
statement for serving the needs of low-income families in the 
PHA's jurisdiction and a statement of goals and objectives of 
the PHA to serve the needs of those families. The annual plan 
must include: a statement of low-income housing needs in the 
community and how the PHA intends to address the needs; a 
statement of financial resources and their planned uses; the 
PHA's general policies governing eligibility, selection, 
admission, assignment, occupancy, and rents; the PHA's policies 
for the maintenance and operations of the agency; a statement 
of the PHA's grievance procedures; a plan describing any 
capital improvements; a description of any housing to be 
demolished or disposed of; a description of any developments 
designated for elderly or disabled; a description of any 
properties to be converted to tenant-based assistance; a 
description of any homeownership or self-sufficiency programs; 
a description of policies for safety and crime prevention; a 
certification of compliance with fair housing laws; 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 (or 75 days the first year), it 
is deemed approved.
    In addition, the new subsection 5A(e) requires: (1) each 
PHA to establish a resident advisory board but allows HUD to 
waive the requirement for the establishment of new boards if 
the PHA demonstrates that existing resident organizations 
adequately represent the interests of the residents and have 
the ability to perform the advisory functions required under 
this section; (2) a public hearing on the plan with public 
notice and an opportunity to inspect the plan; and (3) 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 resident advisory board; 
be consistent with the CHAS; and be approved by HUD. Under this 
subsection, HUD is required to review and approve plans and 
significant amendments within 60 days (or 75 days the first 
year) 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. This subsection also allows HUD to request additional 
information from troubled or near-troubled PHAs and to 
establish streamlined planning requirements for small, non-
troubled PHAs, high-performing PHAs, and PHAs that only 
administer tenant-based assistance.
    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.
    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 PHAswith 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) of the 1937 Act that, 
in general, contains the system of Federal and local 
preferences for admission to public housing allowing PHAs 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 four new PHMAP 
indicators: (1) the extent to which the PHA coordinates, 
promotes, or provides effective programs and activities to 
promote the economic self-sufficiency of residents and provides 
opportunities for residents to be involved in the 
administration of public housing; (2) the extent to which the 
PHA implements effective screening and eviction policies and 
other anti-crime strategies; (3) the extent to which the PHA is 
providing acceptable basic housing conditions; and (4) 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) adds violent crimes and criminal acts 
resulting in felony convictions to the list of offenses for 
which eviction is called for, regardless of the geographic 
location of the acts. Subsection (f) deletes the current 
provision which specifies the timing of notices of lease 
terminations. Instead, PHAs would provide such notices, as 
provided under State or local laws, except that PHAs would be 
allowed to use shorter notice periods, as determined reasonable 
by HUD, when the health or safety of the PHA residents or 
employees, or members of the surrounding community are 
threatened or when drug-related or violent crimes or criminal 
acts resulting in felony convictions have occurred, regardless 
of the geographic location of such acts.
    Subsection (g) 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 
under the new block grants.
    Subsection (h) 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 (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 for Dealing With PHAs in Substantial 
        Default

    This section amends section 6(j)(3) of the 1937 Act that 
give HUD options for dealing with PHAs in substantial default 
under their Annual Contributions Contracts.
    Subsection (a) amends the four options available to HUD for 
dealing with substantial defaults. Provisions providing for 
solicitation of proposals for alternative management of public 
housing and permitting HUD to require an agency to provide for 
alternative management of public housing would be extended to 
cover section 8 and any other program of an agency. A new 
clause is added to authorize HUD to take possession of the PHA, 
including all or part of any project or program.
    Subsection (a) establishes procedures for dealing with 
troubled housing authorities. For any troubled PHA that cannot 
correct its troubled status on the later of the date of 
troubled designation and the date of enactment of this Act, the 
Secretary would be required: (1) in the case of a PHA with 
1,250 or more units, to petition for the appointment of a 
judicial receiver, or (2) in the case of a PHA with fewer than 
1,250 units, to either petition for the appointment of a 
judicial receiver or take possession of the PHA and appoint an 
individual or entity to act as an administrative receiver. The 
administrative receiver would assume the responsibilities of 
the Secretary for administration of all or part of the PHA. In 
the case of a public housing agency with 1,250 or more units 
the Secretary may, during the period between the date on which 
a petition is filed and the date on which the receiver assumes 
responsibility, take possession of all or part of any project 
or program of the PHA.
    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 that, in the written opinion of the receiver 
or HUD, substantially impede the correction of the substantial 
default. HUD would be given such additional powers as a 
district court could confer on a receiver to achieve the 
purposes of the receivership.
    Subsection (a) permits a court to terminate receivership 
when the court determines that all defaults have been cured or 
the PHA is capable of again discharging its duties.
    Subsection (b) would make this section applicable to 
actions taken before, on, or after the effective date of this 
Act. This subsection would also make clear that it is 
applicable to any receivers appointed for a PHA before the date 
of enactment of this section.

Section 109. Public Housing Site-Based Waiting Lists

    This section adds a new provision to section 6 of the 1937 
Housing Act allowing PHAs to establish site-based waiting lists 
for admissions to public housing developments. This section 
requires any procedures for site-based waiting lists to comply 
with title VI of the Civil Rights Act of 1964, the Fair Housing 
Act, and other applicable civil rights laws. It also requires 
that PHAs provide full disclosure of any housing options 
available within the PHA to individuals applying for public 
housing assistance.

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. 
In general, the Capital Fund may be used for: development and 
modernization, vacancy reduction, deferred maintenance, code 
compliance, management improvements, demolition and 
replacement, resident relocation, empowerment activities, 
security, and homeownership activities.
    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. This section also contains 
a condition on the use of capital funds; the condition requires that 
any public housing developed with capital funds be operated under the 
public housing rules for a 40-year period and any public housing 
modernized using capital funds be maintained and operated under the 
public housing rules for a 20-year period.
    Under this section, the Operating Fund may be used for: 
management systems, routine preventative maintenance, anti-
crime and anti-drug activities, resident services, resident 
management and participation activities, operation of mixed-
finance projects, insurance, energy costs, and administration 
of the public housing community service and self-sufficiency 
requirement 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 effectively 
administer 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 with certain 
exceptions; (3) requires HUD under certain circumstances to 
provide operating and capital assistance directly to resident 
management corporations managing public housing projects under 
contract with a PHA; and (4) 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. In addition, this 
section includes a two percent set-aside for emergencies, 
settlement of litigation, and costs to administer the Operation 
Safe Home program and requires HUD and the Office of Inspector 
General to report on the feasibility of transferring the 
Operation Safe Home Program to the Department of Justice.
    This section also includes a provision requiring PHAs to 
obligate their Capital Funds within 18 months and spend any 
capital assistance within 4 years with certain exceptions or be 
subject to the withholding of future assistance or recapture of 
funds.
    Finally, this section requires the formulas 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. It also provides that HUD not take into 
account in developing the transitional formula any reduction of 
or increase in rental income where a PHA establishes an interim 
rental policy that allows rental amounts to be less than 30 
percent of a family's monthly adjusted income.

Section 111. Community Service and Self-Sufficiency

    This section amends section 12 of the 1937 Housing Act by 
adding three new provisions related to community service and 
self-sufficiency. The first provision under subsection (c) 
would establish a requirement for adult public housing 
residents to participate in a community service or self-
sufficiency activity for not less than 8 hours per month. This 
requirement also provides for exemptions to someone who is: (1) 
elderly; (2) disabled or a primary caretaker of someone who is 
disabled; (3) engaged in an eligible work activity; or (4) 
otherwise exempt as defined under a State welfare program. This 
section uses the same definition for work activities under the 
welfare reform law. Second, under circumstances where the 
welfare or public assistance benefits of a public housing or 
section 8 family is reduced due to noncompliance or an act of 
fraud, the family's share of rent may not be reduced during the 
period of the reduction. It also clarifies that the sanctions 
provision does not apply where a family's benefits are reduced 
due to the expiration of time limits. Lastly, this section 
establishes a requirement for PHAs to enter into cooperation 
agreements with State or local welfare agencies for purposes of 
transferring information between the agencies and to target 
assistance to public housing and section 8 families.

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. Also, PHAs will be able to retain amounts 
generated from activities carried out under this section 
without incurring a reduction in funds provided under the 
Operating or Capital Funds or other funding sources provided 
under this Act. Such amount must be used for low-income housing 
or for the benefit of the residents.

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 Public and Assisted Housing

    This section replaces section 16 of the 1937 Act involving 
income eligibility for public housing, tenant-based assistance, 
and project-based assistance.
    The new subsection (a) states that for any public housing 
units (including those in a mixed-finance project) 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 be made available to families with incomes 
at or below 60 percent of the area median, and 40 percent of 
the units be made available to families with incomes at or 
below 30 percent of the area median. This subsection also 
allows PHAs to establish a different eligibility standard for 
good cause in accordance with their public housing agency plan 
and if approved by HUD.
    In addition, subsection (a) prohibits a PHA from 
concentrating very low-income families in certain public 
housing developments and requires PHAs to achieve a diverse 
income mix among tenants in each development and among 
scattered-site public housing.
    The new subsection (b) sets out the income eligibility 
standards for tenant-based assistance providing that a PHA may 
serve families up to 80 percent of the area median income but 
must set aside 50 percent of the tenant-based assistance that 
becomes available each year for families with incomes at or 
below 30 percent of the area median income. This subsection 
also allows housing agencies for good cause to establish a 
different eligibility standard for tenant-based assistance if 
approved by HUD. Subsection (b) also establishes thesame 
eligibility requirements for section 8 project-based assistance as for 
public housing under subsection (a).

Section 115. Demolition and Disposition

    This section replaces section 18 of the 1937 Act concerning 
the demolition and disposition of public housing.
    The new section streamlines the requirements for demolition 
and disposition and 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. In addition, 
this section 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 and if the application was not 
developed in consultation with the affected residents or 
resident advisory board.
    The new section 18 also: (1) provides residents with the 
opportunity to purchase developments in the case of proposed 
sales--not demolitions; (2) 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 (3) 
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, allows PHAs to develop a plan to 
convert public housing units to a system of tenant-based 
assistance and requires PHAs to develop a conversion assessment 
within 2 years of enactment. The assessment must include a cost 
analysis, market analysis, and 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. HUD is allowed to waive the 
assessment requirement for some projects or classes of projects 
or allow for a streamlined assessment.
    In addition, the new section 22 allows a PHA to implement a 
conversion plan: (1) if the conversion assessment demonstrates 
that the conversion will principally benefit the residents, 
PHA, and community; (2) if the costs of conversion do not 
exceed the costs of continued operation as public housing; and 
(3) if the plan is not inconsistent with the data available to 
HUD or with the PHA's assessment plan. The section also states 
that the funds to provide tenant-based assistance 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 residents 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 their 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 (b) contains conforming amendments and 
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, 1999.

Section 119. Mixed-Finance and Mixed-Ownership Projects

    This section adds a new section 30 to the 1937 Act to allow 
PHAs to own, operate, or assist in the development of mixed-
finance 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-finance project.
    The new section 30 permits a mixed-finance 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-finance 
development be exempt from local taxes. Where a PHA is unable 
to fulfill its contractual obligations to a mixed-finance 
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 31 to the 1937 Act that 
requires, to the extent provided for in appropriations, each 
PHA, in consultation with residents 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. PHAs must use guidelines based on criteria established 
by the National Commission on Severely Distressed Public 
Housing in determining which projects are distressed.
    Subsection (a) requires a PHA to provide displaced families 
with notification of the elimination of the distressed units, 
any necessary counseling, and actual and reasonable relocation 
costs. PHAs are also required to offer each displaced family 
comparable housing that meets housing quality standards 
including tenant-based assistance, project-based assistance, 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.
    Subsection (b) repeals parallel language to this section in 
section 202 of the Departments of Veteran Affairs and Housing 
and Urban Development, and Independent Agencies Appropriations 
Act of 1996.

Section 121. Public Housing Mortgages and Security Interests

    This section adds a new section 32 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 33 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; economic 
and job development; resident management and resident 
participation activities; and other activities designed to 
improve the economic self-sufficiency of residents.
    The new section 33 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. Prohibition on Use of Amounts

    This section states that no HUD funds to carry out this Act 
may be used to indemnify contractors or subcontractors of the 
government against costs associated with judgments of 
infringement of intellectual property rights.

Section 124. Pet Ownership

    Section 124 creates a new Section 35 of the 1937 Act.
    Subsection (a) permits a resident of a dwelling unit in 
federally assisted housing to own or keep one or more common 
household pets in a dwelling unit, subject to the reasonable 
requirements of the owner of the federally assisted rental 
housing, if the resident maintains each pet responsibly and in 
accordance with applicable rules and regulations. Reasonable 
requirements may include requiring the payment of a nominal 
fee, a pet deposit, or both, to cover the operating costs to 
the project relating to the presence of pets.
    Subsection (b) prohibits discrimination against any person 
in connection with admission to, or continued occupancy of, any 
unit by reason of ownership of common household pets.
    Subsection (c) defines ``federally assisted rental 
housing'' as any public housing project or any rental housing 
receiving project-based rental assistance.
    Subsection (d) provides that this section shall take effect 
upon the date of effectiveness of regulations issued by the 
Secretary pursuant to notice and comment rulemaking.

                 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) are 
permitted to set a payment standard above 90 percent of HUD's 
fair market rents (FMR) and below 110 percent of the FMR. PHAs 
may also request to set a payment standard outside the 90 to 
110 percent of FMR range if approved by HUD. HUD is also 
required to monitor rent burdens and any payment standard that 
results in a significant percentage of section 8 assisted 
families paying more than 30 percent of adjusted income for 
rent. Based on this review, HUD could require the PHA to modify 
its payment standard.
    (2) Tenant rent contribution. The monthly amount of tenant 
rent contribution would be set at the greatest of (a) 30 
percent of the family's monthly adjusted income, (b) 10 percent 
of the family's monthly income, or (c) if a family is receiving 
welfare assistance, the portion of the welfare assistance that 
is designated to meet housing costs. This section also deletes 
the ``shopping incentive'' provision which allows families to 
pay less rent if they lease a unit renting for less than the 
payment standard.
    (3) 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 
adjusted income.
    (4) Program eligibility. Program eligibility for the new 
voucher program would include very low-income families, 
previously assisted families, low-income families that meet 
eligibility criteria specified by the PHA, families that 
qualify under a homeownership program, and certain families 
that reside in properties eligible for preservation incentives.
    (5) Family income review. PHAs are required to conduct 
reviews of assisted family incomes. These reviews must be 
conducted at least annually.
    (6) Local preferences. PHAs are permitted to establish 
local preferences consistent with their public housing agency 
plan. (Federal preferences are repealed in Section 202.)
    (7) ``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 voucher 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 and if such shorter terms are considered to be 
acceptable local market practice; (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.
    (8) Inspection of Units. PHAs are required to inspect 
section 8 units at least annually 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.
    (9) Vacated units. The bill would ensure that subsidy 
payments are not being made during any time after an assisted 
family vacates a unit.
    (10) 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.
    (11) Timely payments. PHAs are also 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 such cases, the penalties will be paid out of the PHA's 
administrative fees.
    (12) 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. As currently allowed under the 
existing certificate program, PHAs will have the discretion to 
project-base up to 15 percent of their section 8 vouchers.
    (13) Witness relocation. HUD, in consultation with the HUD 
Office of Inspector General, is required to provide section 8 
assistance to relocate families under a witness relocation 
program.

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 or through 
a lease-purchase arrangement, 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, PHAs would be allowed to contract 
with a nonprofit entity to administer the program.
    The bill also amends the law by allowing participation only 
if the PHA determines that the families have sufficient 
resources.

Section 206. Law Enforcement and Security Personnel in Public Housing

    This section amends section 8 by permitting owners of 
project-based section 8 housing properties to rent to police 
officers and other security personnel.

Section 207. 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 and section 8(n)--the single room occupancy 
authority.

Section 208. Implementation

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

Section 209. Definition

    This section expands the term public housing agency for 
purposes of the section 8 program to include entities that 
serve multiple jurisdictions.

Section 210. 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.

Section 211. Recapture and Reuse of Annual Contribution Contract 
        Project Reserves Under the Tenant-Based Assistance Program

    This section would provide HUD with the authority to 
recapture and reuse unspent section 8 contract reserves for 
purposes of amending or renewing section 8 contracts.

     Title III--Safety and Security in Public and Assisted Housing

Section 301. Screening of Applicants

    This section provides that a family is ineligible for 
Federally-assisted housing for three years if evicted by reason 
of drug-related criminal activity or for a reasonable time (as 
may be determined by the PHA) for other criminal activity. In 
addition, this section requires a PHA or owner of Federally-
assisted housing to establish standards prohibiting admission 
of persons or families who the PHA or owner determines to be 
using a controlled substance or who the PHA or owner has 
reasonable cause to believe that such household member's 
illegal use (or pattern of use) of a controlled substance or 
abuse of alcohol (or pattern of abuse) of alcohol would 
interfere with the health, safety, or right of peaceful 
enjoyment of the premises by other residents. In order for a 
PHA to make that determination, this section also allows a PHA, 
under certain conditions, to require each person applying for 
housing assistance to sign a release authorizing the PHA to 
obtain written information related to the applicant's current 
illegal use of a controlled substance or abuse of alcohol.
    A PHA or owner of Federally-assisted housing may deny 
admission to any applicant household that, during a reasonable 
period prior to applying for housing assistance, had engaged in 
any criminal activity. A PHA or owner may require that an 
applicant household prior to admission authorize the PHA to 
obtain any relevant criminal records from the National Crime 
Information Center, police departments, or other law 
enforcement agencies.

Section 302. Termination of Tenancy and Assistance for Illegal Drug 
        Users and Alcohol Abusers

    This section requires a PHA or owner of Federally-assisted 
housing to establish safeguards and lease provisions allowing 
termination of assistance to residents who the PHA or owner 
determines to be engaging in the use of a controlled substance 
or whose illegal use of a controlled substance interferes with 
the health, safety, or right of peaceful enjoyment of the 
premises by other residents.

Section 303. Lease Requirements

    This section provides that leases for Federally-assisted 
housing must contain provisions setting forth grounds for 
termination that include criminal activity and activity which 
threatens the health and safety of other residents.

Section 304. Availability of Criminal Records for Tenant Screening and 
        Eviction

    This section provides that the National Crime Information 
Center, police departments, state law enforcement agencies 
designated as registration agencies under a state registration 
program, or other law enforcement agencies shall provide to the 
PHA upon its request information regarding the criminal 
background of an adult applicant for housing assistance. An 
applicant must be given an opportunity to dispute any such 
information. PHAs may be charged a reasonable fee for provision 
of the information.

Section 305. Definitions

    This section sets forth the definitions of certain terms 
used in this title.

                   Title IV--Miscellaneous Provisions

Section 401. 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. It also requires the 
CHAS to include a description of how the CHAS will help address 
the needs of public housing and is consistent with the local 
public housing agency plan.

Section 402. 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 403. Demolition of Public Housing

    This section permits PHAs to be eligible for Capital and 
Operating Funds for certain public housing units demolished 
under the authority of section 415 of the Department of Housing 
and Urban Development--Independent Agencies Appropriations Act 
of 1988.

Section 404. Technical Correction of Public Housing Agency Opt-Out 
        Authority

    This section makes a technical correction to clarify when 
PHAs may opt-out of compliance with section 214 of the Housing 
and Community Development Act of 1980.

Section 405. Review of Drug Elimination Program Contracts

    This section requires the Secretary to review all security 
contracts awarded by grantees under the Public and Assisted 
Housing Drug Elimination Act of 1990 that are public housing 
agencies that own or operate more than 4,500 public housing 
units. The Secretary shall determine whether such contractors 
have complied with anti-discrimination laws and regulations and 
shall submit the findings of the investigation in a report to 
Congress.

Section 406. Sense of Congress

    This section expresses the sense of Congress that PHAs 
should consider preferences for individuals who are victims of 
domestic violence when establishing preferences for the 
selection of residents.

Section 407. Other Repeals

    This section repeals several programs, studies, or 
demonstrations that are either merged into the Capital or 
Operating Funds, expired, inactive, or already completed 
including: the Public Housing One-Stop Perinatal Services 
Demonstration, Public Housing Childhood Development Program, 
Indian Housing Childhood Development Program, Public Housing 
MINCS Demonstration, Public Housing Energy Efficiency 
Demonstration, Public and Assisted Housing Youth Sports 
Programs, Report Regarding Fair Housing Objectives, and Special 
Projects for Elderly and Handicapped Families.

                 CHANGES IN EXISTING LAW (CORDON RULE)

    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 community service 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. 462 prepared by the 
Congressional Budget Office.

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 23, 1997.
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 has 
prepared the enclosed cost estimate for S. 462, the Public 
Housing Reform and Responsibility Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Carla Pedone.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

S. 462--The Public Housing Reform and Responsibility Act of 1997

    Summary: S. 462 would significantly change the programs 
through which the bulk of federal low-income housing assistance 
is currently provided. It would amend or delete many sections 
of the United States Housing Act of 1937, which authorizes the 
public housing program and the section 8 rental assistance 
program. S. 462 also would consolidate a host of public housing 
programs and merge two rental assistance programs.
    CBO estimates that S. 462 would authorize appropriations 
totaling $107 billion over the fiscal years 1998-2002, assuming 
that all expiring section 8 contracts would be renewed and that 
all programs authorized by the bill would be funded at the 1997 
level adjusted for inflation. If programs affected by the bill, 
except section 8, are assumed to be funded at the 1997 level, 
without adjustment for inflation, the authorizations in the 
bill would total an estimated $104 billion over the five-year 
period. CBO estimates that enactment of this bill would result 
in direct spending savings of $62 million over the period. 
Therefore, pay-as-you-go procedures would apply.
    S. 462 contains several intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act of 1995 (UMRA), but 
CBO estimates that the total cost of these mandates would not 
exceed the threshold established under that act ($50 million in 
1996, adjusted annually for inflation). The bill contains other 
provisions that could have a significant budgetary impact on 
public housing agencies, but they would not be considered 
mandates as defined in UMRA. The bill contains one private-
sector mandate, but that requirement would have virtually no 
net cost to private-sector entities.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of this bill is summarized in Tables 1 and 2. 
Table 1 shows the authorizations in the bill increasing 
gradually from $17.6 billion for 1998 to $24.9 billion for 
2002, assuming that the programs authorized without specific 
funding levels receive appropriations equal to the 1997 funding 
adjusted for inflation and that all expiring section 8 
contracts are renewed. Total outlays for the affected programs 
would increase from about $23 billion in 1997 to $26 billion in 
2002, including the outlays in those years from sums 
appropriated in previous years. As a basis for comparison, the 
table also includes the spending totals under the CBO baseline 
with adjustments for inflation, which, pursuant to the Budget 
Enforcement Act of 1990, is constructed assuming that all 
expiring contracts under section 8 of the Housing Act of 1937 
are renewed.
    Table 2 shows similar figures but assumes no adjustments 
for inflation, either in the funding authorized by the bill or 
in the corresponding programs in the CBO baseline. (Funding 
levels in Table 2 allow for renewal of all expiring section 8 
contracts, which are adjusted for inflation.)
    The costs of this legislation fall within budget function 
600 (income security).
    Basis of estimate: CBO assumes that the bill would be 
enacted by October 1, 1997, and that the necessary sums would 
be appropriated by the beginning of each fiscal year.

Public housing

    Title I of the bill would revise the statutes governing the 
federal public housing program. The existing program is 
administered by local public housing agencies (PHAs) that own 
and manage low-income housing projects. The activities of the 
PHAs are supervised closely by the Secretary of the U.S. 
Department of Housing and Urban Development (HUD).
    Under the program established by the bill, funding for most 
public housing programs would be merged into one of two funds, 
a capital fund and an operating fund. In addition, S. 462 would 
revise the current grant program for revitalizing severely 
distressed public housing and authorize it for fiscal years 
1998 and 1999. The bill would also authorize a revised 
supportive services program. PHAs would receive funding in the 
form of block grants and would be given greater flexibility in 
managing public housing. With certain constraints, a PHA could 
choose to use its grant to cover operating expenses or capital 
needs.

                  TABLE 1.--ESTIMATED COST TO THE FEDERAL GOVERNMENT WITH INFLATION ADJUSTMENTS                 
----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal years, in millions of dollars      
                                                           -----------------------------------------------------
                                                              1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Spending for Housing Assistance Under Current Law:                                                              
    Budget Authority......................................   10,625        0        0        0        0        0
    Estimated Outlays.....................................   23,253   18,960   11,422    9,010    6,996    5,510
Proposed Changes--Subject to Appropriation:                                                                     
    Estimated Authorizations of Appropriations............        0   17,558   19,661   21,364   23,191   24,924
    Estimated Outlays.....................................        0    5,030   13,410   15,940   18,452   20,605
Proposed Changes--Direct Spending:                                                                              
    Estimated Budget Authority............................        0        0        0        0        0        0
    Estimated Outlays.....................................        0       -8      -13      -13      -14      -14
Spending for Housing Assistance Under S. 462:                                                                   
    Budget Authority/Estimated Authorizations.............   10,625   17,558   19,661   21,364   23,191   24,924
    Estimated Outlays.....................................   23,253   23,982   24,819   24,937   25,434   26,101
                                                                                                                
                        MEMORANDUM                                                                              
                                                                                                                
CBO Baseline with Inflation Adjustments:                                                                        
    Budget Authority......................................   10,625   17,545   19,751   22,071   23,932   25,697
    Estimated Outlays.....................................   23,253   23,901   24,469   24,930   25,497   26,259
----------------------------------------------------------------------------------------------------------------
Note.--This table does not include spending for HUD's administrative expenses.                                  


                TABLE 2.--ESTIMATED COST TO THE FEDERAL GOVERNMENT WITHOUT INFLATION ADJUSTMENTS                
----------------------------------------------------------------------------------------------------------------
                                                                   By fiscal years, in millions of dollars      
                                                           -----------------------------------------------------
                                                              1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
Spending for Housing Assistance Under Current Law:                                                              
    Budget Authority......................................   10,625        0        0        0        0        0
    Estimated Outlays.....................................   23,253   18,960   11,422    9,010    6,996    5,510
Proposed Changes--Subject to Appropriation:                                                                     
    Estimated Authorizations of Appropriations \1\........        0   17,372   19,256   20,772   22,359   23,831
    Estimated Outlays.....................................        0    4,989   13,263   15,655   17,996   19,946
Proposed Changes--Direct Spending:                                                                              
    Budget Authority......................................        0        0        0        0        0        0
    Estimated Outlays.....................................        0       -8      -13      -13      -14      -14
Spending for Housing Assistance Under S. 462:                                                                   
    Budget Authority/Estimated Authorizations.............   10,625   17,372   19,256   20,772   22,359   23,831
    Estimated Outlays.....................................   23,253   23,941   24,672   24,652   24,978   25,442
                                                                                                                
                        MEMORANDUM                                                                              
                                                                                                                
CBO Baseline without Inflation Adjustments:                                                                     
    Budget Authority \1\..................................   10,625   17,360   19,345   21,433   23,037   24,526
    Estimated Outlays.....................................   23,253   23,864   24,333   24,655   25,056   25,609
----------------------------------------------------------------------------------------------------------------
\1\ Funding levels include renewals of all expiring Section 8 contracts with inflation adjustments.             
Note.--This table does not include spending for HUD's administrative expenses.                                  

    S. 462 also would authorize PHAs to demolish or otherwise 
dispose of distressed public housing projects and to provide 
tenant-based aid in situations where the cost of maintaining a 
project as public housing over its remaining useful life would 
exceed the cost of tenant-based assistance over that period. 
Over the long term, this provision would reduce combined 
outlays of the capital grant, operating grant, and voucher 
programs. The net impact on spending patterns of these programs 
in the short term is uncertain, however, because the 
characteristics of the distressed projects vary. In some cases, 
the combined costs of removing a project from the inventory and 
of issuing vouchers may be greater than the short-run cost of 
operating a project as public housing; in other cases, they may 
be less.
    Of the amounts that would be appropriated for the capital 
fund, the Secretary would be allowed to retain up to 2 percent 
for a headquarters reserve fund. This fund would be used for 
needs resulting from natural disasters or other unforeseen 
events. Based on the Secretary's previous use of reserve funds, 
we assume that the Secretary would retain all of the funds 
allowed and that they would be disbursed within two years.
    S. 462 does not specify the amounts of funding authorized 
for the future years. Based on 1997 appropriations totaling 
about $6 billion, CBO estimates that S. 462 would authorize 
appropriations over the 1998-2002 period of $30.7 billion, 
assuming adjustment for inflation, or $28.4 billion, assuming 
that 1997 funding levels are continued without adjustment for 
inflation (see Tables 3 and 4).

Section 8 rental assistance

    S. 462 would authorize additional tenant-based section 8 
assistance to replace aid for tenants currently being assisted 
under certain other housing programs or to help them relocate 
elsewhere, for example, under the witness protection program. 
The bill does not, however, specify the amount of the 
authorization. Therefore, this estimate reflects the 1997 
appropriation of $240 million, projected with and without 
adjustments for inflation.
    Because the bill would modify certain aspects of the 
existing section 8 project-based program, CBO assumes that the 
bill would implicitly authorize funding for the renewal of 
expiring section 8 contracts. Under CBO's baseline assumptions, 
without the amendments to the section 8 programs contained in 
S. 462, the total authorization over the five-year period would 
amount to an estimated $52.1 billion for renewing tenant-based 
aid and $18.2 billion for project-based aid. The bill has 
several provisions in Title I and Title II that would change 
the cost of renewals, and, in some cases, affect spending from 
previous appropriations. The net impact of those provisions 
over the five-year period would be a reduction in the estimated 
authorizations for renewals of $0.5 billion and a direct 
spending savings of $62 million. The major program changes and 
their estimated budgetary impact are discussed below (see Table 
5).

                  TABLE 3.--ESTIMATED AUTHORIZATIONS BY PROGRAM TYPE WITH INFLATION ADJUSTMENTS                 
----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal years, in millions of dollars  
                                                                    --------------------------------------------
                                                                       1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Public Housing Spending                                                                                         
    Capital Fund:                                                                                               
        Estimated Authorization Level..............................    2,254    2,316    2,377    2,441    2,508
        Estimated Outlays..........................................        0      248      818    1,382    1,870
    Secretary Reserve:                                                                                          
        Estimated Authorization Level..............................       51       53       54       55       57
        Estimated Outlays..........................................       26       52       53       55       56
    Operating Fund:                                                                                             
        Estimated Authorization Level..............................    3,229    3,317    3,406    3,497    3,593
        Estimated Outlays..........................................    1,550    3,239    3,359    3,449    3,542
    Severly Distressed Public Housing Grants:                                                                   
        Estimated Authorization Level..............................      564      579        0        0        0
        Estimated Outlays..........................................        0       11       52      159      262
    Supportive Services:                                                                                        
        Estimated Authorization Level..............................       62       63       65       67       68
        Estimated Outlays..........................................        2       24       45       62       65
    Total--Public Housing:                                                                                      
        Estimated Authorization Level..............................    6,161    6,328    5,902    6,061    6,225
        Estimated Outlays..........................................    1,578    3,575    4,327    5,106    5,795
Section 8 Aid:                                                                                                  
    New Tenant-Based Aid:                                                                                       
        Estimated Authorization Level..............................      246      253      259      266      274
        Estimated Outlays..........................................       16      237      253      260      267
    Renewals of Tenant-Based Aid:                                                                               
        Estimated Authorization Level..............................    8,218    9,363   10,669   11,487   12,362
        Estimated Outlays..........................................    2,763    7,483    8,537    9,513   10,256
    Renewals of Project-Based Aid:                                                                              
        Estimated Authorization Level..............................    1,999    2,858    3,672    4,507    5,182
        Estimated Outlays..........................................      673    2,136    2,922    3,694    4,424
    Amendments:                                                                                                 
        Estimated Authorization Level..............................      923      948      973      999    1,026
        Estimated Outlays..........................................        0        0        0        0        0
    Changes in Cost of Subsidies:\1\                                                                            
        Estimated Authorization Level..............................       12      -89     -111     -128     -145
        Estimated Outlays..........................................        0      -21      -99     -121     -137
    Total--Section 8:                                                                                           
        Estimated Authorization Level..............................   11,397   13,333   15,462   17,130   18,699
        Estimated Outlays..........................................    3,452    9,835   11,613   13,346   14,810
Total:                                                                                                          
    Estimated Authorization Level..................................   17,558   19,661   21,364   23,191   24,924
    Estimated Outlays..............................................    5,030   13,410   15,940   18,452  20,605 
----------------------------------------------------------------------------------------------------------------
\1\ See Table 5 for details.                                                                                    


                TABLE 4.--ESTIMATED AUTHORIZATIONS BY PROGRAM TYPE WITHOUT INFLATION ADJUSTMENTS                
----------------------------------------------------------------------------------------------------------------
                                                                        By fiscal years, in million of dollars  
                                                                    --------------------------------------------
                                                                       1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Public Housing Spending:                                                                                        
    Capital Fund:                                                                                               
        Estimated Authorization Level..............................    2,205    2,205    2,205    2,205    2,205
        Estimated Outlays..........................................        0      243      794    1,323    1,764
    Secretary Reserve:                                                                                          
        Estimated Authorization Level..............................       50       50       50       50       50
        Estimated Outlays..........................................       25       50       50       50       50
    Operating Fund:                                                                                             
        Estimated Authorization Level..............................    3,145    3,145    3,145    3,145    3,145
        Estimated Outlays..........................................    1,510    3,114    3,145    3,145    3,145
    Severely Distressed Public Housing Grants:                                                                  
        Estimated Authorization Level..............................      550      550        0        0        0
        Estimated Outlays..........................................        0       11       50      154      252
    Supportive Services:                                                                                        
        Estimated Authorization Level..............................       60       60       60       60       60
        Estimated Outlays..........................................        2       23       43       58       60
    Total--Public Housing:                                                                                      
        Estimated Authorization Level..............................    6,010    6,010    5,460    5,460    5,460
        Estimated Outlays..........................................    1,537    3,441    4,082    4,730    5,271
Section 8 Aid:                                                                                                  
    New Tenant-Based Aid:                                                                                       
        Estimated Authorization Level..............................      240      240      240      240      240
        Estimated Outlays..........................................       16      231      240      240      240
    Renewals of Tenant-Based Aid: \1\                                                                           
        Estimated Authorization Level..............................    8,212    9,337   10,611   11,381   12,194
        Estimated Outlays..........................................    2,763    7,476    8,510    9,453   10,148
     Renewals of Project-Based Aid: \1\                                                                         
        Estimated Authorization Level..............................    1,999    2,858    3,672    4,507    5,182
        Estimated Outlays..........................................      673    2,136    2,922    3,694    4,424
    Amendments:                                                                                                 
        Estimated Authorization Level..............................      900      900      900      900      900
        Estimated Outlays..........................................        0        0        0        0        0
    Changes in Cost of Subsidies: \2\                                                                           
        Estimated Authorization Level..............................       12      -89     -111     -128     -145
        Estimated Outlays..........................................        0      -21      -99     -121     -137
    Total--Section 8:                                                                                           
        Estimated Authorization Level..............................   11,362   13,246   15,312   16,899   18,371
        Estimated Outlays..........................................    3,452    9,822   11,573   13,266   14,675
Total:                                                                                                          
        Estimated Authorization Level..............................   17,372   19,256   20,772   22,359   23,831
        Estimated Outlays..........................................    4,989   13,263   15,655   17,996  19,946 
----------------------------------------------------------------------------------------------------------------
\1\ Funding levels include renewals of all expiring Section 8 contacts with inflation adjustments.              
\2\ See Table 5 for details.                                                                                    

    Minimum Rents. Section 103 would allow PHAs to set minimum 
rents up to $25 per month for the section 8 programs that they 
administer, which include the tenant-based programs and the 
section 8 moderate rehabilitation program. Under the section 8 
program, tenants generally pay 30 percent of their adjusted 
income for rent. Based on data provided by HUD, CBO estimates 
that this provision would affect less than 6 percent of 
assisted families and would increase their rent contributions 
on average by about $15 per month. Federal outlays for section 
8 assistance would drop by an estimated $58 million over five 
years (see Table 5). Of that amount, $12 million would be 
savings in outlays flowing from previously appropriated funds 
and thus would be considered direct spending.
    Disregard of Certain Earnings. Section 103 also stipulates 
a disregard of certain earned income in the determination of 
rent contributions for families with tenant-based assistance. 
The provision would only apply to aid funded from 1998 and 
later years' budget authority. Earnings by any adult who had 
not been employed during the previous year would not be counted 
as income for a period of 18 months. After that period, any 
rent increase would be phased in over three years. Because 
adults who would have worked anyway would receive additional 
assistance, subsidies would increase for those households. 
Based on census data CBO estimates that about 6 percent of 
assisted families would receive additional subsidies initially. 
To the extent that the provision would induce additional adults 
to become employed, the cost of renewing their section 8 
assistance would be reduced after the first 18 months of 
employment. Although it is difficult to predict how many 
households would respond to such an incentive, CBO assumed for 
this estimate that about 3 percent of assisted families 
(excluding the elderly) would respond initially, and more in 
subsequent years. CBO estimates that on balance this provision 
would increase net outlays of tenant-based assistance by $94 
million over the five-year period.
    Disallowance of Rent Reductions. Section 111 would disallow 
a reduction in rent payments for families with tenant-based 
section 8 assistance, if their income fell as a result of 
noncompliance with welfare or public assistance program rules. 
Based on recent findings by the General Accounting Office and 
data from the Department of Health and Human Services and from 
HUD, CBO estimates that about 11 percent of families whose 
benefits are terminated or reduced because of sanctions also 
receive tenant-based section 8 assistance. CBO estimates that 
the average loss of income is between $1,200 and $1,300 per 
year. As a result, federal outlays would be reduced by about 
$30 million over the 1998-2002 period, of which $3 million 
would be direct spending savings.
    Elimination of Shopping Incentive. Section 201 would merge 
the two current forms of tenant-based assistance--the 
certificate and voucher programs--into one revised voucher 
program. Generally, under the current certificate program, the 
government pays the difference between a unit's rent and 30 
percent of the tenant's adjusted income, provided thatthe 
unit's rent does not exceed the so-called Fair Market Rent. Under the 
voucher program, the government pays the difference between a payment 
standard, which is similar to the Fair Market Rent, and 30 percent of 
the tenant's income. If the tenant chooses a unit that rents for less 
or more than the payment standard, the tenant may pocket (under the 
``shopping incentive provision'') or must pay, respectively, the 
difference between that rent and the payment standard. The revised 
voucher program would combine features of both programs by, among other 
things, eliminating the shopping incentive but allowing tenants to rent 
units with rents above the payment standard. Assuming that the 
revisions would be implemented as of October 1, 1998, CBO estimates 
that the elimination of the shopping incentive would reduce federal 
outlays by $0.4 billion over the 1999-2002 period.
    Repeal of Preference Rules. Section 202 would repeal 
federal preference rules for admitting new recipients of 
section 8 assistance, both for tenant-based and project-based 
programs. Current rules give priority to applicants on waiting 
lists who have the most severe housing problems and who 
typically have much lower incomes than other eligible families. 
For tenant-based assistance, the bill would permit PHAs to 
establish local preferences consistent with their public 
housing plan. CBO is uncertain whether and how that provision 
would change the cost of tenant-based assistance because it 
would depend on the priorities of the individual PHAs. CBO 
expects that private owners of projects with section 8 project-
based assistance would have incentives to offer a portion of 
their newly vacant units to working families with somewhat 
higher incomes to serve as role models and possibly make such 
projects more desirable to live in. Because such tenants would 
pay a larger share of the rent, spending for federal subsidies 
would decline by an estimated $84 million over the five-year 
period, of which $47 million would be direct spending.

HUD's administrative costs

    CBO expects that, on balance, enacting this bill could 
result in administrative savings to the federal government in 
the long run but we cannot estimate those savings because we do 
not have sufficient information as to how HUD would implement 
the changes. Those savings are expected to result from 
consolidating various programs and streamlining their 
requirements, as well as shifting certain program oversight 
activities from HUD to well-run PHAs.
    Certain provisions of the bill, however, would impose 
additional administrative responsibilities on HUD, such as 
reviewing the various types of plans that PHAs must submit, 
providing technical assistance, and developing distribution 
formulas for the two consolidated grant programs. In the near 
term, HUD might also incur some additional costs to implement 
the revised voucher program.

                                TABLE 5.--ESTIMATED CHANGES IN COST OF SUBSIDIES                                
----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal years, in millions of dollars  
                                                                    --------------------------------------------
                                                                       1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Minimum Rent up to $25:                                                                                         
    Estimated Authorization Level..................................       -5      -11      -12      -12      -12
    Estimated Outlays..............................................       -2       -8      -12      -12      -12
Disregard of Certain Earnings:                                                                                  
    Estimated Authorization Level..................................       20       30       23       15        8
    Estimated Outlays..............................................        4       33       27       18       12
No Rent Decrease in Cases of Noncompliance with Welfare Rules:                                                  
    Estimated Authorization Level..................................       -3       -5       -6       -7       -8
    Estimated Outlays..............................................       -1       -5       -6       -7       -8
Eliminate Shopping Incentive:                                                                                   
    Estimated Authorization Level..................................        0      -97     -106     -109     -113
    Estimated Outlays..............................................        0      -39     -102     -109     -113
Repeal Federal Preference Rules:                                                                                
    Estimated Authorization Level..................................        0       -6       -9      -14      -21
    Estimated Outlays..............................................        0       -3       -6      -11      -17
Total Changes:                                                                                                  
    Estimated Authorization Level..................................       12      -89     -111     -128     -145
    Estimated Outlays..............................................        0      -21      -99     -121     -137
                                                                                                                
                                                 DIRECT SPENDING                                                
                                                                                                                
Minimum Rent up to $25:                                                                                         
    Estimated Budget Authority.....................................        0        0        0        0        0
    Estimated Outlays..............................................       -4       -5       -2       -1        0
No Rent Decrease in Cases of Noncompliance with Welfare Rules:                                                  
    Estimated Budget Authority.....................................        0        0        0        0        0
    Estimated Outlays..............................................       -1       -1       -1        0        0
Repeal Federal Preference Rules:                                                                                
    Estimated Budget Authority.....................................        0        0        0        0        0
    Estimated Outlays..............................................       -3       -7      -10      -13      -14
Total Changes:                                                                                                  
    Estimated Budget Authority.....................................        0        0        0        0        0
    Estimated Outlays..............................................       -8      -13      -13      -14      -14
----------------------------------------------------------------------------------------------------------------

    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act of 1985 specifies pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts through fiscal year 1998. CBO estimates that the 
changes to the section 8 program in S. 462 would result in 
direct spending savings of $8 million in 1998.
    Estimated impact on State, local, and tribal governments: 
S. 462 contains several intergovernmental mandates defined in 
UMRA. CBO estimates that the total cost of these mandates--
primarily preemptions of state and local laws--would not be 
significant. The bill also contains a number of other 
provisions that are conditions of receiving federal financial 
assistance, and while these conditions are not mandates as 
defined in UMRA, their enactment would have a significant 
budgetary impact on public housing agencies. CBO estimates that 
compliance with these new conditions would result in additional 
costs to PHAs totaling $65 million in the first year and about 
$35 million annually thereafter. These costs would be at least 
partially offset by increased rental income that would result 
from new flexibility given to PHAs. S. 462 would not impose 
mandates or have other budgetary impacts on tribal governments.

Mandates

    A number of provisions in S. 462 would preempt state and 
local laws by allowing HUD, or a receiver of a PHA, to be 
exempt from certain state and local laws and by requiring a 
PHA's Board of Directors to include a public housing resident. 
Such preemptions are mandates under UMRA. CBO estimates that 
their enactment would not require state or local governments to 
expend additional funds and that any loss of fee or penalty 
revenue from these provisions would be small.
    Other provisions in the bill would require public agencies 
to provide information to PHAs. First, the bill would require 
police departments and other law enforcement agencies to 
provide PHAs with information regarding the criminal conviction 
records of adult applicants for federally assisted housing. CBO 
expects that PHAs would make as many as 100,000 new requests 
for information. A survey of police departments indicates that 
the cost of providing such information generally ranges from 
$10 to $20 a request. In total, CBO estimates that the 
incremental annual costs of this mandate would be less than $2 
million. The bill would allow police departments to charge a 
reasonable fee for any information provided, and CBO expects 
that affected agencies would charge such fees to cover 
additional costs.
    Second, the bill would require various types of medical 
facilities and treatment centers to provide PHAs with 
information regarding the illegal use of controlled substances 
or abuse of alcohol by adult applicants for housing assistance. 
CBO has no basis upon which to estimate how often PHAs would 
make such request of public medical facilities. However, the 
bill would allow these facilities to charge a reasonable fee 
for any information provided, and CBO expects that the 
facilities would charge such fees to cover additional costs.
    Other impacts
    The bill would impose several new requirements on PHAs. 
These requirements are conditions of receiving assistance from 
HUD, and thus are not mandates under UMRA. They include 
establishing and enforcing community service work requirements 
for adult residents of public housing and preparing more 
detailed public housing agency plans. The bill also contains 
provisions that would provide PHAs additional administrative 
flexibility, including the authority to increase rental income 
over current levels.
    PHAs would be required to implement and administer 
community service work requirements for adult residents of 
public housing. (Alternatively, adult residents could choose to 
participate in self-sufficiency programs.) PHAs would also be 
encouraged to enter into cooperative agreements with state and 
local welfare agencies to provide information about assistance 
programs. Under the bill, HUD would evaluate PHAs on how well 
they coordinate, promote, or provide effective programs that 
promote the economic self-sufficiency of public housing 
residents.
    This provision would apply to all public housing or tenant-
based section 8 residents receiving assistance with certain 
exceptions. Among those excluded from the work requirements and 
self-sufficiency agreements would be the elderly, disabled, and 
those complying with (or excluded from) work requirements under 
other public assistance programs. Based on information from 
HUD, CBO expects that these new requirements would apply to 
less than one-third of the households in these programs 
(800,000 out of 2.7 million).
    Information from public housing organizations indicates 
that PHAs, particularly small ones, would require additional 
staff to comply with this new requirement. (Many large PHAs 
already have similar programs.) In total, CBO estimates that in 
order to comply with this provision PHAs would have to hire 
more than 1,100 new personnel and that additional costs would 
total about $35 million per year (assuming salary and benefits 
of $30,000 per full-time staff member).
    S. 462 would also require each PHA to submit a Public 
Housing Agency Plan to HUD. PHAs currently provide much of the 
information that would be required by HUD in one form or 
another. PHAs would be required to submit some new information 
and to aggregateexisting information from various reports into 
a new document (possibly in a new format). CBO expects that most PHAs 
would comply with the requirement by hiring consultants or additional 
staff with costs varying between $5,000 and $10,000 per agency. Smaller 
housing agencies would likely incur costs at the higher end of the 
range because of limited staff resources. More than two-thirds of the 
nation's approximately 3,400 PHAs fall into this group. CBO estimates 
total compliance costs to be approximately $30 million in the first 
year. A portion of these costs could continue into future years if PHAs 
hire permanent staff to meet these requirements.
    Other provisions in S. 462 would provide PHAs with 
additional flexibility in administering their programs. One of 
these provisions would address the income mix of public housing 
residents and would allow PHAs to increase their rental income 
by selecting tenants for admission with slightly higher income 
levels than are allowed under current law. Information 
available to CBO from public housing organizations indicates 
that increases in rental income to PHAs would be modest, at 
least in the short term.
    Estimated impact on the private sector: Section 301 of the 
bill would impose a requirement on physicians as well as 
private and public medical centers, clinics, and other types of 
medical facilities. In particular, at the request of a public 
housing agency, those entities would be required to provide the 
PHA with information relating to a housing applicant's illegal 
use of controlled substances and their abuse of alcohol. The 
physicians and other entities would be able to charge the PHAs 
a fee for this information, however, so the net cost of the 
mandate to private-sector entities would be virtually zero.
    Estimate prepared by: Federal Costs: Carla Pedone and 
Susanne Mehlman. Impact on State, Local, and Tribal 
Governments: Marc Nicole. Impact on the Private Sector: Bruce 
Vavrichek.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.
                   ADDITIONAL VIEWS OF SENATOR ALLARD

    I believe that the Public Housing Reform and Responsibility 
Act is sound legislative policy. It contains provisions that 
allow for necessary reforms to public housing programs and aims 
to redistribute the power out of the federal government.
    I have proposed an amendment to the legislation that moves 
more power away from bureaucracies. My amendment would give 
states the option to take over their housing programs--similar 
to the welfare reform that was enacted last Congress. States 
would receive funds in the form of block grants for public 
housing and housing assistance. States would then have the 
option of converting their housing program to vouchers or some 
other method of housing assistance for low income families.
    Vouchers are very popular, which is demonstrated by the 1.5 
million families who are currently using vouchers or 
certificates. Vouchers empower individuals and would promote 
competition within Public Housing Authorities and within the 
community, thereby lowering costs and improving conditions for 
the residents. Vouchers or other alternatives can be less 
expensive than the current public housing program; they can 
save the government money, and improve conditions for the 
tenants.
    The public housing system is in need of dramatic 
restructuring and reform. I will continue to work with the 
Committee toward this end.

                                                    Wayne Allard.  
                    ADDITIONAL VIEWS OF SENATOR ENZI

    I appreciate the consideration of the amendments I proposed 
to this Public Housing Reform bill. This bill includes several 
important provisions that will put rural and urban Public 
Housing Agencies on equal footing. The added provisions address 
the uniqueness of rural housing problems.
    I feel we have made S. 462 more flexible with the 
incorporation of my amendment that allows the small, rural PHAs 
some exceptions to the resident requirement on the Board of 
Directors. The rural Public Housing Authorities that have less 
than 300 units need the flexibility to form their plan 
according to their own needs. This addition to the bill was 
needed because some small housing authorities are unable to 
find a resident who will sit as a member on the Board of 
Directors because of either resident disinterest or the high 
resident turnover rate in some developments.
    I am also pleased to see included in the managers amendment 
the resident option to either work or participate in self-
sufficiency programs. This option allows the residents the 
opportunity to acquire the job skills necessary to enter the 
job market. Conforming the exceptions of this requirement to 
the existing welfare laws should also make it simpler and less 
burdensome for the PHAs to enforce.
    The factor that enhances a community the most is 
homeownership. With homeownership comes responsibility and 
pride in the community. Since the ultimate goal for public 
housing residents is the ownership of a home, then we should 
include more opportunities for the residents to achieve that 
goal. I believe we can tie the community service requirement to 
the purchase of a home for public housing residents. A 
homeownership credit would be an incredible incentive for 
residents to comply with the service requirement, and we could 
reward residents with an increased credit for their 
``overtime'' service if they work more than the requirement. 
This ``sweat equity'' approach would give residents a reason to 
comply with the service requirement and take care of their 
property. The service performed by the public housing residents 
would then have a two-fold purpose of contributing to the goals 
of the local community and assisting the residents in 
homeownership. I urge the Chairman to continue to pursue means 
by which public housing residents can achieve the goal of 
homeownership.
    I also want to see the committee address the minimum rent 
requirement so it will not be an appropriations issue every 
year. The Subcommittee on Housing Opportunity and Community 
Development has requested that HUD provide information on the 
impact an increased minimum rent has on those in public 
housing. HUD has not provided the subcommittee with this impact 
information yet, but evidence exists that a 25 dollar minimum 
rent can hinder the operations of a public housing agency. The 
Brooke Amendment can burden a public housing agency in a high 
energy cost state like Wyoming. If the PHAs are not allowed to 
set minimum rent above $25, their survival capabilities are 
limited since they are required by the Brooke Amendment to pay 
the utilities if the resident cannot afford it. This can 
actually result in a negative rent for the Public Housing 
Agencies.
    We have made great progress towards less burdensome 
regulations and requirements with this housing bill. Let's not 
stop here. I feel there is more to be done to provide the 
incentive and ability for residents to move from dependency to 
homeownership.

                                                 Michael B. Enzi.  
                    ADDITIONAL VIEWS OF SENATOR REED

    As we enter an era in which the federal government is 
limited in its ability to provide or assist in the provision of 
affordable housing, we must ensure the integrity of existing 
programs that assist low- and moderate-income citizens. The 
Community Development Block Grant (CDBG) program is one such 
example.
    Since its establishment in 1974, the CDBG program has 
provided federal block grants to states and local communities 
for investment in community development initiatives to benefit 
low- and moderate-income individuals. Specifically, CDBG funds 
have been used for housing rehabilitation, public works 
projects, economic development, public services, acquisition 
and clearance of property, and urban renewal. Recent studies 
have shown that CDBG has achieved its intended purpose--between 
FY93 and FY96, 93.7% of CDBG funds were used on activities 
benefitting people with incomes below 80% of the area median.
    Despite the tremendous success of the CDBG program, it has 
been documented that some states and localities have used 
program funds for an unintended purpose--to steal jobs from 
other areas, a practice commonly referred to as ``job 
pirating.'' States and local governments can use CDBG money to 
pirate jobs in a number of ways. They can offer low or zero 
percent loans to corporations, which are subsidized with CDBG 
funds. They can also pay for the costs of site preparation, 
street improvements, or lighting.
    Perhaps the most egregious example of job pirating occurred 
in Milwaukee, Wisconsin, where it was revealed that Briggs & 
Stratton, an engine manufacturer, used $855,000 in CDBG money 
to subsidize the expansion of plants in Missouri and Kentucky 
which led to the relocation of 2000 jobs. In another example, 
$500,000 in CDBG funds were used to subsidize the relocation of 
an athletic helmet manufacturing plant from Knoxville, 
Tennessee to Salem, Illinois, resulting in the loss of 50 jobs.
    The most disturbing aspect of the job pirating issue is 
that money is being shifted away from the intended 
beneficiaries--low- and moderate-income people--to corporations 
that are not in need of a subsidy. In the era of NAFTA, where 
many manufacturing jobs are being moved abroad, we cannot 
afford to allow our states to use federal community development 
money to subsidize the movement of precious manufacturing jobs 
from one state to another. Federal community development money 
should not be allowed to subsidize a ``race to the bottom.''
    In the 104th Congress, bipartisan legislation was 
introduced in the House and Senate to prohibit localities from 
using CDBG funds to subsidize job relocation. This legislation 
followed the recommendation of the White House Conference on 
Small Business which called on Congress to ban the use of 
federal funds for luring jobs from one area to another. This 
legislation would also have made the CDBG program consistent 
with every single other federal economic development grant 
program, each of which has anti-piracy provisions.
    As the Senate prepares to consider S. 462 on the floor, I 
strongly urge my colleagues to adopt provisions prohibiting the 
use of CDBG monies for job pirating. Such provisions will 
ensure that CDBG funds reach communities that are most in need 
of assistance and will provide parity with other federal grant 
programs that prohibit piracy. This issue is of particular 
urgency as the federal government continues to reduce 
assistance to low-income communities, and I hope my colleagues 
will be compelled to support my efforts to include anti-piracy 
provisions in S. 462.

                                                       Jack Reed.  

                                
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