Public Housing: Implementation Status of Selected Provisions of the 1998
Reform Act (Letter Report, 12/08/2000, GAO/GAO-01-98).

The Quality Housing and Work Responsibility Act of 1998 was intended to
give the nation's public housing agencies more flexibility to manage
their public housing or tenant-based section 8 programs. In the two
years since the legislation was passed, the Department of Housing and
Urban Development has provided sufficient guidance for housing agencies
to begin making use of their expanded discretionary authority. GAO
concludes that the agencies appear to be tailoring their policies to fit
their own perceived needs and priorities, adopting only those provisions
that fit their particular circumstances.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-98
     TITLE:  Public Housing: Implementation Status of Selected
	     Provisions of the 1998 Reform Act
      DATE:  12/08/2000
   SUBJECT:  Public housing
	     Housing programs
	     Federal property management
	     Surveys
	     Quality assurance
	     Low income housing
IDENTIFIER:  HUD Section 8 Housing Assistance Program

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GAO-01-98

A

Report to the Chairman, Subcommittee on Housing and Community Opportunity,
Committee on Banking and Financial Services, House of Representatives

December 2000 PUBLIC HOUSING Implementation Status of Selected Provisions of
the 1998 Reform Act

GAO- 01- 98

Letter 3 Appendixes Appendix I: Summary of 11 Selected Provisions of the
Reform

Act and Their Effective Dates 14 Appendix II: Scope and Methodology 18
Appendix III: Survey of Public Housing Agencies

(Includes Final Results, Sampling Errors, and Confidence Intervals) 20

Appendix IV: GAO Contacts and Staff Acknowledgments 29 Tabl es Table 1:
HUD's Issuance of Implementing Guidance for 11

Selected Reform Act Provisions, as of November 29, 2000 8 Table 2: Responses
of Public Housing Agencies to GAO's Survey

on Their Implementation of 10 Discretionary Provisions of the Reform Act 10

Abbreviations

HUD Department of Housing and Urban Development

Lett er

December 8, 2000 The Honorable Rick Lazio Chairman, Subcommittee on Housing
and Community Opportunity Committee on Banking and Financial Services House
of Representatives

Dear Mr. Chairman: Each year, the Department of Housing and Urban
Development (HUD) spends nearly $7 billion to provide about 1.3 million
units of public housing for low- income households nationwide. These units
are managed by over 3,100 public housing agencies. Although public housing
typically meets the basic shelter needs of its residents, concerns have been
raised about how it often concentrates poor and jobless families in
distressed neighborhoods and fails to provide incentives for its residents
to become economically self- sufficient. To address these and other
problems, the Congress passed the Quality Housing and Work Responsibility
Act of 1998, also referred to as the Public Housing Reform Act (Reform Act).
This legislation includes over 80 mandatory and discretionary provisions
aimed at giving public housing agencies more overall flexibility to set
their own policies. It also encourages self- sufficiency on the part of the
residents and involves them in managing their housing through resident
advisory boards. The legislation has the potential to fundamentally change
the nature of public housing and the lives of its residents but can do so
only if public housing agencies understand and implement the act's
provisions.

Concerned about whether public housing agencies are taking advantage of the
greater discretion granted by the Reform Act, you asked us to determine (1)
the status of HUD's efforts to issue implementing guidance for 11 of the
Reform Act's provisions and (2) the extent to which public housing agencies
are implementing these provisions. In selecting these 11 provisions, of
which 10 are discretionary and 1 is mandatory, you chose not to include any
that HUD has already reported on. 1 Public housing agencies can implement
all but 1 of the 10 discretionary provisions included in our review. Local
jurisdictions can implement the remaining discretionary provision by
participating in a HUD demonstration program if their local housing agency
is not a high performer. 2 Appendix I summarizes the 11 provisions we
reviewed.

To conduct our review, among other things, we surveyed 139 public housing
agencies from July through August 2000. Because the provisions you selected
cover both the public housing and section 8 tenant- based programs, we
selected our sample from a list provided by HUD of public housing
authorities that manage units under both programs. 3 Because earlier work by
HUD suggested that housing agencies would implement their discretionary
authority differently depending on their size, our sample included the 15
largest housing agencies, which manage at least 6,600 public housing units
and also manage section 8 units, and 124 other housing agencies, which
manage at least 100 combined public housing and section 8 units. We selected
the 15 largest agencies, which collectively manage about 27 percent of the
nation's public housing inventory. We then randomly selected the 124 other
housing agencies. All 15 of the largest agencies and 115 of the 124 other
agencies returned completed questionnaires. This gave us an overall response
rate of 94 percent. We did not independently verify the agencies' responses
to our survey. Appendix II

1 HUD issued a baseline report on the uses of discretionary authority in
selecting tenants, filling vacancies, determining incomes, setting rents,
and reexamining rents. See The Uses of Discretionary Authority in the Public
Housing Program: A Baseline Inventory of Issues, Policy, and Practice( HUD/
PD& R, July 1999).

2 HUD uses a rating system to measure public housing agencies' performance
and categorizes the agencies as high, standard, and troubled performers. We
recently reported on the system in Public Housing: HUD Needs Better
Information on Housing Agencies' Management Performance( GAO- 01- 94, Nov.
2000).

3 Housing agencies receive funds from HUD to operate and maintain public
housing and administer section 8 tenant- based rental assistance programs.

provides the details of our scope and methodology, and appendix III contains
the survey questions with the agencies' responses.

Results in Brief For the 11 provisions in our review, HUD has issued final
guidance for 7 and proposed guidance for 2 and has started the process of
developing

guidance for 2. HUD officials said that although putting final rules in
place for all of the Reform Act's provisions has proved challenging, the
Department has provided sufficient guidance for housing agencies to begin
implementing the four provisions in our review that have not been finalized.

As would be expected, given the greater discretion provided by the Reform
Act, public housing agencies appear to be tailoring their use of the 11
provisions to fit their own needs and priorities. The largest housing
agencies were more likely than the others to take actions on the
discretionary provisions because they generally viewed the provisions as
helpful in managing their programs. Generally, the other housing agencies
reported not implementing most discretionary provisions, either citing a
lack of resources or noting that the provisions did not fit their
circumstances. Most of the housing agencies we surveyed reported that they
had implemented the mandatory provision, which relates to setting rents. HUD
reviewed a draft of this report and agreed with the information presented in
it.

Background Under the United States Housing Act of 1937, as amended, the
Congress created the federal public housing program to assist communities in

providing decent, safe, and sanitary dwellings for low- income families.
Today, more than 3,100 public housing agencies manage approximately 1.3
million public housing units. Public housing agencies are typically
municipal, county, or state agencies created under state law to develop and
manage public housing units. These agencies contract with HUD to provide
housing in exchange for federal grants and subsidies. Although housing
agencies are not federal agencies, they must adhere to federal laws and
regulations. Public housing agencies also manage HUD's tenant- based section
8 program, which allows eligible households to select their own units in the
private housing market and receive subsidies to cover part of their rent. 4
HUD enters into contracts and provides payments to public housing agencies,
which use these payments to provide rent subsidies to the owners of private
housing on behalf of the assisted households. The United States Housing Act
of 1937 generally governs HUD's public housing and tenant- based section 8
programs.

During the 1990s, the nation's public housing agencies gained broader
latitude- from HUD and the Congress- to establish their own policies in
areas such as tenant selection, income incentives, and rent- setting. In
1996, the Congress enacted legislative reforms that allowed public housing
agencies to set minimum rents and to drop all mandatory federal preferences
for admission based on hardship conditions, such as rent burden or
homelessness. These reforms gave housing agencies greater control over their
social and fiscal environment, enabling them to tailor their policies to
local needs and conditions. Subsequently, on October 21, 1998, the Congress
enacted the Quality Housing and Work Responsibility Act of 1998 (Reform
Act). 5 This act, which extensively amended the United States Housing Act of
1937, embodied many of these 1996 reforms. The act further increased public
housing agencies' discretion and gave them more flexibility to set their own
policies. For example, the act gave them permanent authority to exercise
discretion in tenant selection. As a result,

4 On October 21, 1999, HUD published the final rule to implement the
statutory merger of the section 8 tenant- based certificate and voucher
programs into the new Housing Choice Voucher Program.

5 The reform act was enacted as Title V of the fiscal year 1999
appropriations act for the departments of Veterans Affairs and Housing and
Urban Development and independent agencies.

they may now adopt tenant selection criteria based on local housing needs
and priorities.

The Reform Act included over 80 provisions, with varying effective dates and
statutorily prescribed rulemaking procedures. Some provisions went into
effect when the act was enacted on October 21, 1998, while other provisions
took effect later. Under the act, the Secretary of Housing and Urban
Development can implement any provision in the act by notice unless
otherwise indicated. 6 The act specifies that some provisions must be
implemented by rulemaking or by negotiated rulemaking. 7 HUD's Office of
Policy, Program, and Legislative Initiatives, within the Office of Public
and Indian Housing, administers rulemaking for the Reform Act's provisions.

In February 1999, HUD published a Federal Registernotice providing initial
guidance on provisions that were effective immediately and identifying
several provisions that would later require rulemaking. In December 1999,
HUD published another Federal Registernotice updating its implementation of
the act and indicating where the guidance that had already been issued could
be found. At that time, some of Reform Act's provisions did not require
rulemaking, and rulemaking for other provisions was still in progress. For
those provisions, the notice provided guidance that the public housing
agencies should follow until HUD completed the rulemaking. Since then, HUD
has published other proposed, interim, and final rules for housing agencies
to implement the Reform Act.

Besides publishing guidance on the Reform Act's provisions, HUD held several
training conferences during the summer of 2000 to explain how changes due to
the Reform Act affected its public housing and tenant- based section 8
assistance programs. Four conferences were held for resident leaders, and
two conferences were held for HUD and public housing agency staff. 8 During
these conferences, HUD provided an overview of and

6 Notices include a Federal Registernotice or a direct notice issued by
HUD's Office of Public and Indian Housing, giving HUD staff or program
participants temporary instructions or amend previous instructions for HUD
programs until a handbook revision or change is issued.

7 Rulemaking is a process through which an agency considers and formulates
the issuance, modification, or repeal of a rule. Negotiated rulemaking is a
process through which an agency, using a mediator, must negotiate with
interested parties to develop a rule.

8 During the conferences for HUD and public housing agency staff, about 2
days were devoted to public housing topics and about 2 days to section 8
topics.

explained many of the act's provisions, including some of those we reviewed.

HUD Has Issued Final As of November 29, 2000, HUD had finished implementing
7 of the 11

Guidance for 7 of 11 provisions we reviewed, issued proposed rules for 2
provisions, and

initiated the process to develop rules for 2 provisions, as indicated in
table Provisions

1. HUD has worked to finalize the guidance for the four remaining provisions
but has been hampered by several factors, including the need to devote time
and resources to develop the guidance for other provisions of the act. HUD
hopes to finalize the rules for the four provisions by the end of calendar
year 2000. Until HUD completes the rulemaking, the December 22, 1999,
Federal Registerprovides guidance for housing agencies to follow.

Table 1: HUD's Issuance of Implementing Guidance for 11 Selected Reform Act
Provisions, as of November 29, 2000 Provision Status Date Action

Section 561: Home Rule Flexible Grant Completed February 18, 1999 Notice of
initial guidance on the Reform Act Demonstration published in Federal
Register

Section 538: Linking Services to Public Completed August 10, 1999 Notice of
funding availability published for Housing Residents the ROSS program a

Section 525: Site- based Waiting Lists Completed October 21, 1999 Final rule
published in Federal Register

Section 519: Income from Nonrental Sources b Completed February 3, 2000
Public and Indian Housing Notice 2000- 4 published

Section 523: Family Choice of Rental Payment Completed March 29, 2000 Final
rule published in Federal Register

Section 555: Section 8 Homeownership Option Completed September 12, Final
rule published in Federal Register

2000 Section 515: Joint Ventures and Consortia Completed November 29, 2000
Final rule published in Federal Register

Section 533: Voluntary Conversion of Public Ongoing July 23, 1999 Proposed
rule published in Federal Register

Housing to Tenant- based Assistance Section 536: Public Housing
Homeownership Ongoing September 14, Proposed rule published in Federal
Register

1999 Section 516: Public Housing Agency No rule c c Mortgages and Security
Interests Section 539: Mixed Finance Public Housing No rule c c

a The Resident Opportunities and Self- sufficiency program consolidated the
funding for several HUD programs. b Section 519 established a capital fund
and an operating fund for public housing in section 9 of the United States
Housing Act of 1937, as amended. Our review was limited to subsection 9( l),
which allows public housing agencies to retain income from nonrental
sources.

c HUD is in the process of developing the rule for this provision. However,
the December 22, 1999 Federal Register notice allows public housing agencies
to submit proposals under this provision.

Source: GAO's presentation of information from HUD.

While noting that HUD is working to develop final implementing guidance for
all of the Reform Act's provisions, agency officials cited reasons why some
provisions in our review may not yet have final rules. According to the
Deputy Assistant Secretary for Policy, Program, and Legislative Initiatives,
HUD set priorities for rulemaking to recognize specific deadlines in the new
law, ensure the individual rights of public housing residents or section 8
recipients, and implement significant changes in law that could not
otherwise be implemented. Additionally, the official said the time and
resources spent on required negotiated rulemaking may have affected the
development of rules for the four provisions for which rules are not yet
final. 9

Housing Agencies Compared with the other housing agencies, the largest
housing agencies

Differ in Their are implementing 8 of the 10 discretionary provisions by a
significantly

higher percentage. The largest agencies also demonstrated more
Implementation of

awareness of a ninth discretionary provision, which allows for converting
Selected Provisions

public housing to tenant- based assistance (section 533) after submitting an
evaluation report, which is due to HUD by October 2001. A tenth
discretionary provision, the Home Rule Demonstration (section 561), is
applicable only when agencies are not high performers, and the discretion to
implement the provision lies with the local jurisdiction, not with the
housing agency. Many of the agencies in our sample responded that this
provision did not apply to them. Finally, most housing agencies reported
implementing the one mandatory provision in our review. This provision
(section 523) requires a family to choose each year whether it will pay a
flat rent or a rent based on a percentage of its income.

9 The Reform Act required HUD to develop allocation formulas for the capital
fund, operating fund, and section 8 renewals through negotiated rulemaking
procedures. Our review did not include these formulas.

Largest Housing Agencies As table 2 indicates, a significantly higher
percentage of the largest housing

Are Taking More Actions to agencies we surveyed reported taking actions to
implement 8 of the 10

Implement 8 of 10 discretionary provisions we reviewed. Consistent with
their actions, the

Discretionary Provisions largest agencies also more often viewed these
discretionary provisions as

helpful in managing their public housing or tenant- based section 8
programs.

Table 2: Responses of Public Housing Agencies to GAO's Survey on Their
Implementation of 10 Discretionary Provisions of the Reform Act

Percentage of the largest housing Estimated percentage of other agencies

housing agencies Provision

(Number of responses) (Sampling error) a

Section 533: Housing agency knew about the voluntary 87%

24 conversion requirement and the deadline (N = 13) (ï¿½ 8%)

Section 515: Housing agency entered into business 80%

52% arrangements such as joint ventures and consortia b (N = 12) (ï¿½ 9%)

Section 519: Housing agency received income from 80%

60% nonrental sources (N = 12) (ï¿½ 9%)

Section 539: Housing agency requested HUD's approval 73%

8% for a mixed finance project (N = 11) (ï¿½ 5%)

Section 538: Housing agency applied for ROSS program 67%

11% funding in 1999 and 2000 c (N = 10) (ï¿½ 6%)

Section 525: Housing agency maintains site- based waiting 53%

18% lists (N = 8) (ï¿½ 7%)

Section 561: Local government not eligible for Home Rule 36%

42% Flexible Grant Demonstration because housing agency is a

(N = 5) (ï¿½ 9%) high performer

Section 536: Housing agency established a 27%

8.5% homeownership program (N = 4) (ï¿½ 5.5%)

Section 516: Housing agency entered into agreements 20%

d granting security interests to others (N = 3) Section 555: Housing agency
sought HUD's approval of a

7% d

section 8 homeownership program (N = 1) Notes: The differences between the
largest and the other housing agencies are statistically significant for all
but the Home Rule Flexible Grant Demonstration provision.

Further information about each of the provisions in this table appears in
appendix I.

a The sampling error should be added to and subtracted from the estimate to
obtain the confidence interval for the estimate. See appendix II for a
complete discussion of the sampling error.

b Some of these arrangements were entered into before the Reform Act was
passed. c The Resident Opportunities and Self- sufficiency program
consolidated the funding for several HUD programs. d Estimate does not
differ significantly from 0.

Source: GAO's survey data.

The largest agencies were also more aware of the requirements of a ninth
provision concerning the voluntary conversion of public housing stock. This
provision- section 533- requires housing agencies to evaluate the continued
operation of their units as public housing and to compare this option with
the conversion of the units to tenant- based assistance. While housing
agencies are not required to submit this evaluation report to HUD until
October 1, 2001, a greater percentage of the largest housing agencies were
aware of this requirement. However, these agencies were either uncertain
whether the provision would help them in managing their operations or
thought it would hinder their programmanagement. Only one of the largest
housing agencies viewed the provision as helpful. Many of the other housing
agencies reported not being aware of the provision, and most, like the
largest housing agencies, were uncertain of its effects or believed it would
hinder their management.

Agencies Cited Several The housing agencies cited several reasons for not
taking actions to

Reasons for Not implement the discretionary provisions. Those most
frequently cited were

Implementing Particular a lack of resources and the perception that the
provisions did not fit the

Provisions agencies' needs. Another provision, which under certain
conditions allows

a local jurisdiction to administer an agency's public housing and section 8
tenant- based funds, applies only to agencies that are not high performers,
and many of the agencies we surveyed reported that they were high
performers.

A lack of resources was one reason many other housing agencies gave for not
implementing several provisions. For example, they often did not seek
approval for mixed- finance public housing (section 539) because they did
not have the funds necessary for such an undertaking. Likewise, many other
housing agencies reported not applying for funding to link services to
public housing residents (section 538) because they did not have the time
and/ or technical expertise to prepare the grant application or they found
the provision administratively burdensome.

The perception that provisions were not applicable to their needs or would
not be of value to them was another frequently cited reason for not taking
actions to implement certain discretionary provisions. Many agencies
reported not establishing site- based waiting lists (section 525) because
they had determined that centralized waiting lists were more appropriate to
their needs. For example, one agency reported not adopting site- based
waiting lists because it had few developments that were near each other.
Likewise, some of the largest agencies had not entered into agreements to
mortgage or sell security interests in their public housing developments
(section 516) because they did not see the benefits of doing so.

Section 561, the Home Rule Flexible Grant Demonstration, applies only when
housing agencies are not high performers. Five of the 14 largest housing
agencies and many of the others reported that they were high performers and,
therefore, their local jurisdiction could not participate in the program. If
a housing agency is not a high performer, this provision allows the local
jurisdiction to assume responsibility for and administer the agency's public
housing and section 8 tenant- based funds for 1 to 5 years. However, half of
the largest housing agencies reported that the demonstration project would
greatly hinder their ability to operate and manage their programs. Many of
the other housing agencies were uncertain of the provision's effects or
indicated it would neither hinder nor help their operations.

Most Housing Agencies Most of the largest and other housing agencies
reported that they had

Report Compliance With the complied with the mandatory provision on the
household's choice of rental

Mandatory Provision payment (section 523) by issuing the required statement
of policy on public

housing rents. Most of the housing agencies had established a policy, and
most had fully implemented the policy. The agencies that had not established
or implemented a policy cited various reasons. For example, one housing
agency reported it was awaiting approval from its board of directors, and
another said it was developing a marketing strategy to attract working
families.

Conclusions One objective of the Reform Act was to provide the nation's
public housing agencies with greater discretion over many aspects of their
public housing

and tenant- based section 8 programs. In the 2 years since the legislation
was passed, it seems that HUD has provided sufficient guidance for housing
agencies to begin making use of their expanded discretionary authority. In
deciding how to exercise their discretionary authority, public

housing agencies indeed appear to be tailoring their policies to fit their
own perceived needs and priorities, adopting those they believe will help
them manage their programs.

Agency Comments We provided HUD with a draft of this report for its review
and comment. HUD officials advised us that they agreed with the information
presented in

the report and provided technical clarifications, which we incorporated as
appropriate.

We performed our work between April 2000 and October 2000 in accordance with
generally accepted government auditing standards. As noted, appendix II
discusses our scope and methodology.

As arranged with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days after
the date of this letter. At that time, we will send copies to the Honorable
Andrew M. Cuomo, Secretary of Housing and Urban Development, and other
interested parties. We will also make copies available to others on request.

If you have any questions about this report, please call me or Carol
Anderson- Guthrie at (214) 777- 5739. Other key contributors to this report
are listed in appendix IV.

Sincerely yours, Stanley J. Czerwinski Director, Physical Infrastructure

Appendi xes Summary of 11 Selected Provisions of the

Appendi xI

Reform Act and Their Effective Dates Provision Effective date Summary of
provision Mandatory:

Section 523: October 1, 1999 Section 523 amends section 3( a) of the United
States Housing Act

of 1937 (U. S. Housing Act). This section requires housing agencies Family
Choice of Rental Payment

to develop policies that give families a choice, to be exercised annually,
of paying rent as either (1) an amount that shall not exceed 30 percent of
their adjusted gross income or (2) a flat rent, which the public housing
agency is to determine for each unit in its inventory. In making these rent
determinations, public housing agencies are to strive to develop rent
structures that do not create disincentives for residents to work and become
self- sufficient.

Discretionary:

Section 515: October 1, 1999 Section 515 creates a new section 13 of the U.
S. Housing Act. This

section permits any two or more public housing agencies to form a Joint
Ventures and Consortia

consortium to receive assistance and allows public housing agencies to enter
into joint ventures, partnerships, or other business arrangements with other
entities to administer public housing programs. Under this section, public
housing agencies will have great flexibility in determining the scope of
responsibility of any consortia they may form. For example, two public
housing agencies may form a consortium for the purpose of sharing managerial
responsibilities, administering a joint section 8 program, or effecting a
complete merger.

Public housing agencies will also 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 the Reform Act. Such amounts must be used for low- income
housing or the benefit of the residents.

Section 516: October 1, 1999 Section 516 adds a new section 30 to the U. S.
Housing Act to allow

public housing agencies to mortgage or grant a security interest in Public
Housing Agency Mortgages and

any project where approved by HUD. In making such authorization, Security
Interests

HUD may consider the ability of the public housing agency to use the
proceeds of the mortgage or security interest for low- income housing, the
ability of the public housing agency to make payments on the mortgage or
security interest, and other criteria. Section 516 also provides that no
action taken under this provision shall result in any liability to the
federal government.

Section 519: February 3, 1999 Section 519 of the Reform Act amends section 9
of the U. S.

Housing Act to establish a capital fund and an operating fund for Public
Housing Capital and Operating Funds

public housing. Section 9( l) provides that income from nonrental sources
(as determined by the Secretary) is to be retained by public housing
agencies and used only for low- income housing or the benefit of assisted
residents, without any decrease in the amounts received by the housing
agency from the capital and operating formula accounts.

Provision Effective date Summary of provision

Section 525: October 1, 1999 Section 525 adds a new provision to section 6
of the U. S. Housing

Act allowing public housing agencies to establish site- based waiting Site-
based Waiting Lists

lists for admission 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 public housing agencies provide full
disclosure of any housing options available within the public housing agency
to individuals applying for public housing assistance.

Section 533: October 1, 1999 Section 533 amends section 22 of the U. S.
Housing Act to allow a

public housing agency to convert any public housing project (or a Voluntary
Conversion of Public Housing to

portion) to tenant- based assistance if, after conducting a Tenant- based
Assistance

conversion assessment, the public housing agency determines that the
conversion: (1) will not be more expensive than continued operation of the
housing project, (2) will benefit the residents of the housing project, and
(3) will not adversely affect the availability of affordable housing in the
community. All public housing agencies must conduct and submit to HUD a
conversion assessment no later than October 1, 2001. HUD may waive the
assessment requirement or allow for a streamlined assessment.

Section 536: October 1, 1999 Section 536 adds section 32 to the U. S.
Housing Act, which

authorizes a new public housing homeownership program that Public Housing
Homeownership

replaces, but is substantially based on, the former section 5( h) program
implemented by 24 C. F. R. part 906. This section allows public housing
agencies to design homeownership programs for the sale of public housing
units to public housing residents, to entities for resale to residents or
other low- income persons, or directly to low- income persons.

The purchasing family must provide not less than 1 percent of the
downpayment from its own resources. Resale restrictions are imposed on
purchasers for 5 years after sale to prevent purely speculative purchases.
Homeownership programs under this section are not subject to the demolition
or disposition requirements of section 18 of the 1937 act.

Provision Effective date Summary of provision

Section 538: October 21, 1998 Section 538 adds a new section 34 to the U. S.
Housing Act to allow

HUD to make grants to public housing agencies, resident Linking Services to
Public Housing

management corporations, resident councils, or resident Residents

organizations for supportive services and resident empowerment activities to
assist public housing residents in becoming economically self- sufficient.

Grants may be used for (1) physical improvements to a public housing project
to provide space for supportive services for residents; (2) the provision of
service coordinators and congregate housing services programs for the
elderly and disabled; (3) the provision of services related to work
readiness and economic and job development; (4) resident management and
resident participation activities; and (5) other activities designed to
improve the economic self- sufficiency of residents. All grants require a
match of at least 25 percent of the grant amount. The match can be in- kind
and/ or cash contributions.

Section 539: October 1, 1999 Section 539 adds a new section 35 to the U. S.
Housing Act. Under

this section, a public housing agency may provide operating and Mixed
Finance Public Housing

capital funds for a “mixed- finance project” in the form of a
grant, loan, or guarantee, for the construction or rehabilitation of public
housing units. A mixed- finance project is one that is financially assisted
by private resources, which can include low- income housing tax credits.

Section 555: October 21, 1998 Section 555 amends section 8( y) of the U. S.
Housing Act and

authorizes a public housing agency to provide tenant- based Section
8Homeownership Option

assistance for an eligible family that purchases a dwelling unit that will
be occupied by the family.

This section amends section 8( y) in several ways to make the program more
flexible and easier for housing agencies to administer by (1) allowing
voucher holders to obtain homeownership through shares in a cooperative
housing development or through lease- purchase arrangements, whether or not
they are first- time homeowners; (2) altering the assistance formula for
families receiving assistance for homeownership, so as to make it comparable
to the new formula for tenant- based assistance; (3) allowing public housing
agencies to contract with a nonprofit entity to administer the program; (4)
allowing participation only if the public housing agency determines that the
families have sufficient resources; and (5) eliminating the requirement that
at least 80 percent of the down payment amount must come from the
homebuyer's own resources.

Provision Effective date Summary of provision

Section 561: October 21, 1998 Section 561 adds a demonstration program
through which eligible

jurisdictions, typically units of general local government, can Home Rule
Flexible Grant Demonstration

receive public housing and tenant- based assistance for up to 5 years to
meet specified performance goals. Throughout the demonstration period, up to
100 jurisdictions may participate, except those served by public housing
agencies designated as high performers under the Public Housing Assessment
System or any successor assessment program.

The demonstration program gives local government leaders the option to
combine federal housing assistance funds into a flexible seamless grant for
use in meeting the housing needs of their communities. The funds must be
used by these communities to provide housing for low- income families.

Appendi xII

Scope and Methodology To determine the status of HUD's development of
implementing rules and guidance for the 11 selected provisions of the Reform
Act, we interviewed HUD officials and reviewed documents we obtained from
them. In addition, we reviewed relevant HUD notices published in the Federal
Register. We also contacted representatives of the public housing industry
to discuss how housing agencies are exercising their discretion to act on
the Reform Act's provisions.

To determine the extent to which public housing agencies have taken action
to implement the 11 selected provisions of the Reform Act, we surveyed a
random sample of public housing agencies. Specifically, we sent a mail
questionnaire to a sample of 139 public housing agencies. We pretested the
questionnaire at seven public housing agencies in Georgia and Maryland to
ensure that our questions were clear, unbiased, and precise and that
responding to the survey did not place an undue burden on the agencies. We
did not verify the accuracy of the agencies' responses. We sent follow- up
mailings and called agencies to stimulate responses to the survey.

From a list of public housing agencies provided by HUD, we identified 1,430
that met our criteria for sampling. These were public housing agencies that
administered both public housing and section 8 units, with a combined total
of at least 100 units. Housing agencies with fewer than 100 units were
excluded from the public housing agency population for purposes of sampling.
We included all 15 of the largest public housing agencies, which we defined
as those with 6, 600 or more public housing units and at least 1 section 8
unit, in our sample. 1 We refer to these agencies in our report as the
“largest” agencies. From the remaining 1, 415 public housing
agencies that administered at least 100 combined public housing and section
8 units, we selected a random sample of 124. We refer to these agencies in
our report as “other” agencies.

Because we used a sample (called a probability sample) to develop our
estimates for “other” public housing agencies, each estimate has
a measurable precision, or sampling error, which may be expressed as a plus/
minus figure. A sampling error indicates how closely we can reproduce from a
sample the results that we would obtain if we were to take a complete count
of the universe using the same measurement

1 Although the Puerto Rico Housing Authority is one of the largest agencies,
it was not included in our sample because it does not administer any section
8 units.

methods. By adding the sampling error to and subtracting it from the
estimate, we can develop upper and lower bounds for each estimate. This
range is called a “confidence interval.” Sampling errors and
confidence intervals are stated at a certain confidence level. For example,
a confidence interval at the 95- percent confidence level means that in 95
out of 100 instances, the sampling procedure we used would produce a
confidence interval containing the universe value we are estimating.

We conducted our survey from July through August 2000. All 15 of the largest
housing agencies and 115 of the 124 other housing agencies returned
completed questionnaires. This gave us an overall response rate of 93.5
percent. The results we report for the random sample of 124 public housing
agencies generalize to 1, 312 similarly sized public housing agencies (about
93 percent of the universe of such agencies).

Because the primary purpose of our survey was to estimate the extent to
which and how housing agencies were implementing their discretionary
authority, no attempt was made to verify the agencies' responses or to
evaluate the reported actions' conformance to HUD's rules.

We were also asked to provide descriptive information on how housing
agencies were implementing a provision entitled Section 512 Community
Service and Family Self- sufficiency. We contacted 46 housing agencies and
obtained information on the work and self- sufficiency activities they had
or planned for their residents to meet the requirements of this provision.
On November 17, 2000, we briefed your staff on the results of this work.

Survey of Public Housing Agencies (Includes Final Results, Sampling Errors,
and

Appendi xI II Confidence Intervals)

Appendi xI V

GAO Contacts and Staff Acknowledgments GAO Contacts Stanley J. Czerwinski
(202) 512- 7631 Carol Anderson- Guthrie (214) 777- 5739 Acknowledgments In
addition to those named above, Johnnie Barnes, Carolyn Boyce, Sherrill

Dunbar, Bess Eisenstadt, John McGrail, and Tina Smith made key contributions
to this report.

(385856) Lett er

GAO United States General Accounting Office

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Contents

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Appendix I

Appendix I Summary of 11 Selected Provisions of the Reform Act and Their
Effective Dates

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Appendix I Summary of 11 Selected Provisions of the Reform Act and Their
Effective Dates

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Appendix I Summary of 11 Selected Provisions of the Reform Act and Their
Effective Dates

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Appendix II

Appendix II Scope and Methodology

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Appendix III

Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

Page 24 GAO- 01- 98 1998 Public Housing Reform Act

Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

Page 25 GAO- 01- 98 1998 Public Housing Reform Act

Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix III Survey of Public Housing Agencies (Includes Final Results,
Sampling Errors, and Confidence Intervals)

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Appendix IV

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