    HOPE VI: Progress and Problems in Revitalizing Distressed Public Housing
    (Letter Report, 07/20/98, GAO/RCED-98-187).

    Pursuant to a legislative requirement, GAO reviewed the: (1) progress in
    completing capital improvements and implementing community and support
    services at HOPE VI sites; (2) primary reasons why progress at some HOPE
    VI sites has been slow; (3) extent to which financial leveraging is used
    at HOPE VI sites; and (4) Department of Housing and Urban Development's
    (HUD) capacity to oversee the program.

    GAO noted that: (1) progress in completing capital improvements and
    implementing community and support services varies at HOPE VI sites; (2)
    overall, the rate of spending on capital improvements is increasing, but
    the vast majority of the grant funds remain to be disbursed; (3)
    although housing authorities could spend up to 20 percent of the grant
    funds awarded in fiscal years 1993 through 1996 for community and
    support services to help residents find jobs and become self-sufficient,
    the average expenditure was about 12 percent; (4) to track the progress
    of capital improvements and community and support services, HUD has
    established measures of performance for capital improvements and has
    hired a contractor to collect baseline data on community and support
    services; (5) at the HOPE VI sites visited, progress in implementing
    capital improvements and community and support services has varied with
    structural, social, and management issues specific to each site; (6)
    legal issues covering the preparation of grant agreements, legislative
    and administrative changes in unit replacement and demolition policies,
    and limited HUD staffing have also delayed progress at HOPE VI sites;
    (7) more complex redevelopment plans have created major opposition among
    groups of residents at several sites and produced delays; (8) using HOPE
    VI grants to leverage funding from public and private sources has
    introduced time-consuming requirements for coordinating the different
    sources' procedures and schedules; (9) financial leveraging has
    increased over time, and this trend is expected to continue; (10) a 1998
    HUD policy limiting a property's total development costs to industry
    averages is also expected to encourage leveraging; (11) because HOPE VI
    developments are more complex and costlier than most multi-family
    housing developments, the new policy will require the use of leveraging
    in the future; (12) reorganizing and downsizing have left HUD with fewer
    resources for overseeing HOPE VI grants; (13) streamlining has also left
    few employees in the field with knowledge of HOPE VI issues; (14) HUD
    has hired contractors to provide some additional oversight and has
    restored 11 positions to the HOPE VI program; and (15) although these
    additions will offset some of the staffing cuts, the new staff will need
    time to acquire expertise in the program.

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

     REPORTNUM:  RCED-98-187
         TITLE:  HOPE VI: Progress and Problems in Revitalizing Distressed
                 Public Housing
          DATE:  07/20/98
       SUBJECT:  Housing repairs
                 Urban planning
                 Housing construction
                 Community development programs
                 Declining neighborhoods
                 Federal aid for housing
                 Human resources utilization
                 Public housing
                 Grant administration
    IDENTIFIER:  HUD Hope VI Program
                 Community Development Block Grant
                 HUD 2020 Management Reform Plan

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO report.  Delineations within the text indicating chapter **
    ** titles, headings, and bullets are preserved.  Major          **
    ** divisions and subdivisions of the text, such as Chapters,    **
    ** Sections, and Appendixes, are identified by double and       **
    ** single lines.  The numbers on the right end of these lines   **
    ** indicate the position of each of the subsections in the      **
    ** document outline.  These numbers do NOT correspond with the  **
    ** page numbers of the printed product.                         **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ** A printed copy of this report may be obtained from the GAO   **
    ** Document Distribution Center.  For further details, please   **
    ** send an e-mail message to:                                   **
    **                                                              **
    **                                            **
    **                                                              **
    ** with the message 'info' in the body.                         **
    ******************************************************************

    Cover
    ================================================================ COVER

    Report to Congressional Committees

    July 1998

    HOPE VI - PROGRESS AND PROBLEMS IN
    REVITALIZING DISTRESSED PUBLIC
    HOUSING

    GAO/RCED-98-187

    HOPE VI Program

    (385692)

    Abbreviations
    =============================================================== ABBREV

      CDBG - Community Development Block Grant
      HOPEVI -
      HUD - Department of Housing and Urban Development
      NOFA - notice of funding availability
      KPMG -
      TDC - total development costs
      VA -
      YMCA -

    Letter
    =============================================================== LETTER

    B-279887

    July 20, 1998

    The Honorable Christopher S.  Bond
    Chairman
    The Honorable Barbara A.  Mikulski
    Ranking Minority Member
    Subcommittee on VA, HUD,
     and Independent Agencies
    Committee on Appropriations
    United States Senate

    The Honorable Jerry Lewis
    Chairman
    The Honorable Louis Stokes
    Ranking Minority Member
    Subcommittee on VA, HUD,
     and Independent Agencies
    Committee on Appropriations
    House of Representatives

    For years, many of the nation's public housing sites have exemplified
    urban decay and substandard living conditions.  To revitalize
    severely distressed urban public housing, the Congress, in October
    1992, established the Urban Revitalization Demonstration Program.
    HOPE VI, as the program is commonly known, provides grants to public
    housing authorities to transform obsolete public housing sites into
    attractive, economically viable communities and to improve the lives
    of public housing residents through community and support service
    programs.  Since fiscal year 1993, the Congress has appropriated over
    $3 billion in HOPE VI grants for 81 sites in 55 cities.

    Because of the significant level of federal investment and questions
    about progress in the program, House Report 105-175 and Senate Report
    105-53, accompanying the fiscal year 1998 appropriations act for the
    departments of Veterans Affairs and Housing and Urban Development,
    and independent agencies, requested that GAO continue its analysis of
    the HOPE VI program.\1

    As agreed with your offices, we reviewed (1) the progress in
    completing capital improvements and implementing community and
    support services at HOPE VI sites, (2) the primary reasons why
    progress at some HOPE VI sites has been slow, (3) the extent to which
    financial leveraging is used at HOPE VI sites, and (4) the Department
    of Housing and Urban Development's (HUD) capacity to oversee the
    program.  To perform our review, we obtained data from HUD, public
    housing authorities, and HUD contractors on the 81 sites that have
    received grants to date.  We also visited 10 sites in eight cities to
    gain an in-depth understanding of issues associated with their
    redevelopment.  We selected these sites because they were
    geographically diverse, had received grants during different fiscal
    years, and were at various stages of progress, especially in those
    cities that had received grants for two separate developments.  (See
    app.  I for further discussion of our objectives, scope, and
    methodology.)

    --------------------
    \1 Public Housing:  Status of the HOPE VI Demonstration Program
    (GAO/RCED-97-44, Feb.  25, 1997) provided preliminary information on
    the program's expenditures and activities.

       RESULTS IN BRIEF
    ------------------------------------------------------------ Letter :1

    Progress in completing capital improvements and implementing
    community and support services varies at HOPE VI sites.  Overall, the
    rate of spending on capital improvements is increasing, but the vast
    majority of the grant funds remain to be disbursed.  Of the 39 sites
    that received grants from fiscal year 1993 through fiscal year 1995,
    23 have started demolition, new construction, or rehabilitation.  As
    of June 1, 1998, 4 of the 42 sites that received grants in fiscal
    years 1996 and 1997 have begun demolition.  At 8 of the 10 sites we
    visited (which received grants in fiscal years 1993 through 1996),
    demolition, new construction, or rehabilitation of the housing units
    has begun.  Although housing authorities could spend up to 20 percent
    of the grant funds awarded in fiscal years 1993 through 1996 for
    community and support services to help residents find jobs and become
    self-sufficient, the average expenditure was about 12 percent.  The
    10 sites we visited were aware of the need to sustain these services
    after their grants run out, and all of the sites have started or
    planned to provide services.  To track the progress of capital
    improvements and community and support services, HUD has established
    measures of performance for capital improvements and has hired a
    contractor to collect baseline data on community and support
    services.

    At the HOPE VI sites we visited, progress in implementing capital
    improvements and community and support services has varied with
    structural, social, and management issues specific to each site.
    Legal issues covering the preparation of grant agreements,
    legislative and administrative changes in unit replacement and
    demolition policies, and limited HUD staffing have also delayed
    progress at HOPE VI sites.  More complex redevelopment plans,
    especially those proposing reductions in density and requiring the
    long-term relocation of some residents, have created major opposition
    among groups of residents at several sites and produced delays.
    Finally, using HOPE VI grants to leverage funding from public and
    private sources, such as state grants or low-income housing tax
    credits, has introduced time-consuming requirements for coordinating
    the different sources' procedures and schedules.

    Financial leveraging has increased over time, and this trend is
    expected to continue.  During fiscal years 1993 and 1994, when the
    HOPE VI grants averaged about $45 million, the program did not
    emphasize leveraging.  But by fiscal year 1997, when the average
    grant was about $21.6 million, most of the newly selected sites
    planned to rely on leveraged financing to accomplish their capital
    improvements.  A 1998 HUD policy limiting a property's total
    development costs to industry averages is also expected to encourage
    leveraging.  Because HOPE VI developments are more complex and
    costlier than most multifamily housing developments, the new policy
    will require the use of leveraging in the future.

    Reorganizing and downsizing have left HUD with fewer resources for
    overseeing HOPE VI grants.  During the past 2 to 3 years, when the
    number of grants has more than doubled and leveraged financing has
    become more common, staffing cuts in headquarters have reduced the
    number of grant managers and experts in leveraged financing from 11
    to 4, a reduction of more than 60 percent.  Streamlining has also
    left few employees in the field with knowledge of HOPE VI issues.
    HUD has hired contractors to provide some additional oversight, and
    in April 1998, the Department decided to restore 11 positions to the
    HOPE VI program.  Although these additions will offset some of the
    staffing cuts, the new staff will need time to acquire expertise in
    the program.

       BACKGROUND
    ------------------------------------------------------------ Letter :2

    In 1989, the Congress established the National Commission on Severely
    Distressed Public Housing to explore the factors contributing to
    structural, economic, and social distress; identify strategies for
    remediation; and propose a national action plan to eradicate
    distressed conditions by the year 2000.  In 1992, the Commission
    reported that approximately 86,000, or 6 percent, of the nation's
    public housing units could be considered severely distressed because
    of their physical deterioration and uninhabitable living conditions,
    increasing levels of poverty, inadequate and fragmented services
    reaching only a portion of the residents, institutional abandonment,
    and location in neighborhoods often as blighted as the sites
    themselves.  Although the Commission did not identify specific
    locations as severely distressed, it recommended that funds be made
    available to address distressed conditions and that these funds be
    added to the amounts traditionally appropriated for modernizing
    public housing.

    In response to the Commission's report, the Congress, through
    appropriations legislation, created the HOPE VI demonstration program
    to provide a more comprehensive and flexible approach to revitalizing
    distressed urban communities.  Through a combination of capital
    improvements and community and support services, the program seeks to
    (1) transform public housing communities from islands of despair and
    poverty into vital and integral parts of larger neighborhoods and (2)
    create environments that encourage and support the movement of
    individuals and families toward self-sufficiency.\2

    HUD's Office of Urban Revitalization within the Office of Public and
    Indian Housing manages the HOPE VI program.  In addition, HUD's
    Office of Public Housing Partnerships advises housing authorities on
    leveraging opportunities.  HUD has hired three consulting firms to
    help housing authorities establish community and support services.
    In 1997, the Department also began hiring contractors, primarily KPMG
    Peat Marwick, to develop management systems for HUD and to help
    housing authorities oversee HOPE VI revitalization sites.

    To select housing authorities for participation in the HOPE VI
    program, HUD publishes a notice of funding availability (NOFA)
    setting forth the program's current requirements and available funds.
    Housing authorities then prepare applications from which HUD selects
    those that best satisfy the notice's requirements and signs grant
    agreements that, in the absence of regulations, serve as contracts
    with the housing authorities.  Each grantee then submits a
    revitalization plan to HUD for approval; this plan incorporates a
    budget and schedule for implementing the grantee's HOPE VI capital
    improvements and community and support services.  After approving the
    revitalization plan, HUD gives the grantee access to funding from the
    Treasury.

    --------------------
    \2 Gayle Epp, "Emerging Strategies for Revitalizing Public Housing
    Communities," Housing Policy Debate, Vol.  7, No.  3 (1996), pp.
    563-88.

       PROGRESS OF CAPITAL
       IMPROVEMENTS AND SUPPORT
       SERVICES VARIES
    ------------------------------------------------------------ Letter :3

    Progress in completing capital improvements and implementing
    community and support services varies at HOPE VI sites.  Although the
    rate of spending for capital improvements has increased, the vast
    majority of the grant funds have yet to be disbursed.  While the
    planned capital improvements were not complete at any of the HOPE VI
    sites as of June 1, 1998, residents were living in rehabilitated or
    newly constructed units at 11 sites.  All of the housing authorities
    have completed or are developing plans for community and support
    services.  Generally, housing authorities have not spent as much as
    the program allows for these services.  HUD has established measures
    of performance for capital improvements and has begun to collect
    baseline data for use in measuring the results of community and
    support services.

          RATE OF SPENDING FOR CAPITAL
          IMPROVEMENTS HAS INCREASED
    ---------------------------------------------------------- Letter :3.1

    Although limited to date, the pace of spending for HOPE VI sites has
    accelerated.  Figure 1 shows cumulative grant levels, obligations,
    and disbursements as of the beginning of each fiscal year and as of
    May 1998.  It also shows that while the program was established in
    fiscal year 1993, grant money was not available to housing
    authorities until fiscal year 1995.

       Figure 1:  Total Grant Awards,
       Housing Authority Obligations,
       and Treasury Disbursements

       (See figure in printed
       edition.)

    Source:  HUD.

    Because almost all of the sites funded in fiscal years 1996 and 1997
    are still in the planning stages, virtually all the disbursements
    through March 1998 were for the 39 sites funded during the program's
    first 3 fiscal years (1993 through 1995).  Because of the time lag
    between planning and construction and many site-specific delays,
    disbursements during fiscal year 1997 and the first half of fiscal
    year 1998 ($302 million) were more than twice as high as
    disbursements during fiscal years 1995 and 1996 ($138 million).  But
    as of March 1998, 73 percent of the grants awarded during the first 3
    fiscal years remained to be disbursed ($1.1 billion).

    At the 10 sites we visited, 31 percent of the grant awards had been
    disbursed.  Figure 2 shows the spending activity, as of May 1998, at
    the 10 selected sites.

       Figure 2:  Grant Awards,
       Housing Authority Obligations,
       and Treasury Disbursements, as
       of May 1998, for Selected Sites

       (See figure in printed
       edition.)

    Note:  The totals for the HOPE VI grants include any amounts for
    planning and supplemental awards.  Each grant is listed by the year
    in which the implementation grant was awarded.

    Source:  HUD.

    The sites nearing completion--Centennial Place in Atlanta, Hillside
    Terrace in Milwaukee, and Kennedy Brothers Memorial in El Paso--have
    expended the majority of their HOPE VI grants.  In contrast, Boston's
    Mission Main and Chicago's Robert Taylor B sites do not have
    HUD-approved revitalization plans and do not expect to begin
    construction before late 1998 and 2000, respectively.

    New York City has expended only $1.1 million of the $68.6 million
    awarded for the Arverne and Edgemere HOPE VI sites, two adjoining
    sites that plan to combine two separate grants into one HOPE VI
    effort.  Almost half of the disbursement is from a $500,000 planning
    grant awarded in fiscal year 1993 and spent on the planning to
    revitalize a different public housing site in the neighborhood.
    However, after reaching an impasse with the tenants' association at
    the original site, the housing authority shifted the implementation
    grant to Edgemere in December 1996.  HUD officials do not expect
    rehabilitation at the Arverne and Edgemere sites to begin before late
    1999.  (App.  II describes each site we visited.)

          CAPITAL IMPROVEMENTS HAVE
          BEGUN AT MOST EARLY SITES
    ---------------------------------------------------------- Letter :3.2

    Although capital improvements have begun at most of the 39 HOPE VI
    sites funded from fiscal year 1993 through fiscal year 1995, very few
    are near completion.  According to HUD's data, at 11 sites, some
    residents have moved into newly constructed or rehabilitated units,
    and at 23 sites, demolition, rehabilitation, or new construction has
    started.  There have been no capital improvements at the five
    remaining sites.  At several sites, deteriorated high-rise and
    mid-rise buildings are being demolished and replaced with
    lower-density structures.  In addition, infrastructure improvements,
    such as new street patterns, are breaking down the physical barriers
    that isolated many HOPE VI sites from the neighboring communities.
    At some sites, mixed-income communities have replaced concentrations
    of poverty, and new community centers, together with plans for police
    stations, schools, and shopping districts, are helping to integrate
    the sites with neighboring areas.

    At 8 of the 10 sites we visited, both demolition and new construction
    or rehabilitation have begun.  The results of the capital
    improvements at some of the sites were dramatic:

      -- At Centennial Place in Atlanta, nearly all of the over 1,000
         original units were demolished and replaced with a mixture of
         subsidized and market-rate units of equally high quality.  In
         addition, three of the site's original structures were
         rehabilitated for historic reasons.  Street patterns were
         reworked to reflect the grid pattern found elsewhere, thereby
         helping to integrate the site with the rest of the city.  (See
         fig.  3.)

       Figure 3:  Centennial Place,
       Atlanta, Georgia

       (See figure in printed
       edition.)

      -- At Chicago's Cabrini Homes Extension, after 3 years of delays,
         four of eight high-rise buildings have been demolished as
         planned, and new row houses, duplexes, and mid-rise buildings
         are under construction or have been completed on adjacent
         property.  (See fig.  4.) Of the planned new units, 30 percent
         are reserved for Cabrini families, 20 percent for
         moderate-income families, and 50 percent for households paying
         market rates.

       Figure 4:  Construction
       Adjacent to Cabrini Homes
       Extension, Chicago, Illinois

       (See figure in printed
       edition.)

      -- At Hillside Terrace in Milwaukee and Kennedy Brothers Memorial
         in El Paso, the capital improvements consisted primarily of
         rehabilitation.  However, some units were demolished at both
         sites to reconfigure the streets, not only to provide easier
         access for residents and public services but also to discourage
         gang-related drug traffic.  Green spaces were substituted for
         concrete at both sites, and street lights and walkways were
         installed to match those of the surrounding neighborhoods.  In
         addition, community centers were expanded.  In El Paso,
         neighbors who had asked that the brick wall around the HOPE VI
         site be built higher to block out the public housing community
         agreed with the site plan, which proposed to demolish the wall
         and replace it with a see-through wrought iron fence.  (See fig.
         5.)

       Figure 5:  Kennedy Brothers
       Memorial Apartments, El Paso,
       Texas

       (See figure in printed
       edition.)

          FUNDING AVAILABLE FOR
          COMMUNITY AND SUPPORT
          SERVICES HAS DECREASED
    ---------------------------------------------------------- Letter :3.3

    Most of the community and support services at HOPE VI sites are
    designed to provide residents with employment training and
    opportunities to become more self-sufficient.  When calculated on a
    per-unit basis, the funding for these services has decreased since
    the program's early years.  However, the decline in funding may not
    have much impact on the services, and most sites are working on plans
    to sustain the services after the grants run out.

    For the grants awarded from fiscal year 1993 through fiscal year
    1996, up to 20 percent of the grant funds could be spent for
    community and support services.\3

    However, according to HUD's data, at the 39 sites that received
    funding during this period, only about 12 percent of the total grant
    funding was budgeted, on average, for community and support services.
    Figure 6 shows the budget and spending for community and support
    services, as of April 1998, at the 10 sites we visited.

       Figure 6:  Spending for
       Community and Support Services,
       as of April 1998, for Selected
       Sites

       (See figure in printed
       edition.)

    Sources:  HUD and KPMG Peat Marwick.

    Starting with the grants awarded in fiscal year 1997, HUD changed the
    allocation for community and support services from up to 20 percent
    of the grant funds to up to $5,000 per unit.  The net effect of this
    change was to lower the total amount available for such services.
    HUD program officials said that they are not concerned about the
    reduction in funding for community and support services because
    neither the original nor the revised guidelines would provide enough
    support to maintain the services over the long term.  Housing
    authority officials we spoke with also expressed little concern about
    the decrease because most housing authorities were not spending to
    the limit and were attempting to build self-sustaining programs.

    The HOPE VI sites we visited were aware of the need to sustain their
    community and support service programs after their HOPE VI funds run
    out.  For example, Atlanta's Centennial Place has created a full-time
    position for a staff member to focus on fund-raising and
    collaborating with local agencies to sustain the programs developed
    under HOPE VI.  Other sites, such as Orchard Park in Boston and Pico
    Aliso in Los Angeles, had service organizations in the neighborhood
    before the HOPE VI program started, and their HOPE VI money has
    provided these organizations with facilities and equipment to offer
    more comprehensive services.  A March 1998 HUD Inspector General's
    report expressed concern that Kennedy Brothers Memorial in El Paso
    will not have enough funds to support its current plans for community
    and support services unless it leverages additional public and
    private support.\4 The El Paso housing authority's executive director
    responded by terminating a number of support service contracts and
    developing a plan with a community development corporation to
    initiate volunteer programs and fund-raising efforts to sustain
    operations after the HOPE VI grant runs out.

    --------------------
    \3 For the grants awarded from fiscal year 1993 through fiscal year
    1995, the guidelines required the locality to match at least 15
    percent of the amount reserved for support services.

    \4 HOPE VI Grants:  Housing Authority of the City of El Paso, Texas,
    HUD District Inspector General for Audit, Southwest District
    (98-FW-201-1003, Mar.  6, 1998).

          COMMUNITY AND SUPPORT
          SERVICES VARY
    ---------------------------------------------------------- Letter :3.4

    At the 10 sites we visited, we observed a variety of community and
    support services designed to improve the lives of the residents.
    These services included community businesses sponsored through the
    HOPE VI program; job placement services and entrepreneurial training
    programs; technology learning centers affording access to computers;
    day care and health care centers; and Boys and Girls Clubs providing
    after-school activities.  For example, Centennial Place in Atlanta
    and Cabrini Homes Extension in Chicago have community programs
    designed to provide residents with the tools needed to launch their
    own businesses and become self-sufficient.  Both Pico Aliso in Los
    Angeles and Cabrini Homes Extension have silk-screening companies
    training residents and providing them with experience in working
    together in a productive environment.  Homeboy Industries, the Pico
    Aliso silk-screening business, is a profitable venture bringing
    residents from different gangs together to work.

    At Hillside Terrace in Milwaukee and Kennedy Brothers Memorial in El
    Paso, residents are providing voluntary community services, such as
    Neighborhood Watch.  Kennedy Brothers also hired an off-duty police
    officer to patrol the site, and residents are removing graffiti to
    keep the site clean.  Moreover, according to the El Paso housing
    director, residents at other public housing sites are aware of the
    social successes at the HOPE VI site and are trying to duplicate them
    in their communities through volunteer programs such as Neighborhood
    Watch.

          HUD HAS PERFORMANCE
          INDICATORS FOR CAPITAL
          IMPROVEMENTS AND IS
          DEVELOPING OUTCOME-BASED
          MEASURES FOR SERVICES
    ---------------------------------------------------------- Letter :3.5

    Measures of outcomes are important for tracking the success of the
    HOPE VI program.  HUD's Office of Policy Development and Research is
    conducting a three-phase, 10-year evaluation of conditions at HOPE VI
    sites.  The first phase, completed in August 1996, contained baseline
    data on conditions at 15 sites funded in the first year of the
    program, historical descriptions of the distressed housing at these
    sites, and planned revitalization activities.  The second phase,
    expected to begin in the summer of 1998, will assess conditions at
    the sites as they are reoccupied.  The third phase will evaluate
    conditions at the sites 3 to 5 years after they have been reoccupied.

    HUD's performance plan, required under the Government Performance
    Results Act of 1993,\5 lists performance indicators for capital
    improvements at HOPE VI sites, but not for community and support
    services.  HUD has asked the housing authorities to develop such
    measures and has requested baseline data from all HOPE VI grantees
    for use in measuring the outcomes of community and support services.

    HUD's performance indicators for HOPE VI capital improvements include
    the number of units demolished, rehabilitated, and replaced.  The
    replacement units include newly constructed public housing units and
    units obtained through Section 8 certificates, which provide rental
    assistance to private landlords on behalf of low-income households.
    HUD has contracted with KPMG Peat Marwick to gather data on the
    progress of capital improvements at the HOPE VI sites.  (See app.
    III for a chart with information on the status of demolition and unit
    revitalization for all sites.)

    To create a baseline for measuring the results of community and
    support services, HUD asked all HOPE VI grantees for data on
    employment, economic development, job training, education, community
    building, homeownership, crime reduction, and other social issues.\6
    HUD officials told us that they believe it is important to have
    evaluative measures to justify their expenditures for these services.
    HUD's effort to collect baseline data should be a first step toward
    developing consistent national data on the outcomes of HOPE VI
    community and support services.

    --------------------
    \5 The Government Performance and Results Act of 1993 requires
    federal agencies to prepare annual performance plans to provide
    congressional decisionmakers with information on the results to be
    achieved for a proposed level of resources.  Specifically, the plans
    should clearly inform the Congress and the public of the annual
    performance goals for the agency's major programs and activities, the
    measures that will be used to gauge performance, and the procedures
    that will be used to verify and validate information on performance.

    \6 Many sites were already collecting their own data for evaluating
    community and support services.  For example, the housing authority
    in Milwaukee was collecting and reporting demographic information,
    such as crime statistics and changes in residents' incomes, and
    planning to collect activity data, such as the number of residents
    obtaining services like day care and health care.

       PROGRESS AT SITES HAS VARIED
       FOR SEVERAL REASONS
    ------------------------------------------------------------ Letter :4

    Progress at HOPE VI sites has varied for interrelated reasons
    associated with conditions at the selected sites, the origin of the
    program, the types of capital improvements selected, and the types of
    funding used.  These sites have to overcome complex structural,
    social, and management challenges that require time to resolve.
    Legal issues and legislative and administrative changes to the
    program's requirements have also added time to developments.  In
    general, rehabilitation has taken less time than demolition and new
    construction, especially when new construction has reduced a
    development's density and entailed permanent relocation for some
    residents.  The use of leveraged financing has also introduced
    time-consuming requirements for coordinating the different funding
    sources' procedures and schedules.  These factors have sometimes
    acted in combination to delay HOPE VI developments.

          CONDITIONS AT SITES HAVE
          AFFECTED PROGRESS
    ---------------------------------------------------------- Letter :4.1

    HOPE VI sites generally pose extraordinary physical and social
    challenges.  The selected sites exhibit conditions that the HOPE VI
    program was designed to reverse, including physical deterioration,
    uninhabitable living conditions, high rates of crime and
    unemployment, and isolation from the surrounding community.  For
    example, New York's Far Rockaway neighborhood, containing both the
    Arverne and the Edgemere sites, has been a candidate for major urban
    renewal funding for over 20 years.  However, the city has not
    committed funding to make major investments in such an isolated
    location, according to housing authority officials.  The $25 million
    HOPE VI grant at Robert Taylor Homes B in Chicago is for demolishing
    the first 5 of 16 high-rise buildings and purchasing or building a
    limited number of replacement units in the surrounding neighborhood.
    The Chicago Housing Authority estimates that it will take 10 years to
    vacate the Robert Taylor development, where the unemployment rate is
    over 90 percent, and bring back an economically viable neighborhood.
    At Los Angeles' Pico Aliso site, relocation took longer than planned,
    since many residents could not be moved as anticipated because the
    areas were controlled by gangs.

    Despite the physical and social challenges they pose, many HOPE VI
    sites are located close to city centers, making them attractive to
    investors.  At the same time, residents at some sites have viewed
    investors' interest with suspicion, fearing that they will lose their
    homes to upscale development.  In some instances, housing authorities
    have been able to allay residents' concerns and proceed with capital
    improvements; in other instances, the residents' concerns have
    delayed redevelopment.

      -- Atlanta's Centennial Place, conveniently located within walking
         distance of downtown Atlanta, attracted funds from the city,
         private lenders, and community service providers, all of whom
         considered the site a desirable investment.  However, residents
         fearing displacement initially opposed the housing authority's
         revitalization plan, which called for reducing the development's
         density and replacing only one in three public housing units.
         Eventually, the residents agreed to the plan when the executive
         director promised to allow those who remained in good standing
         (i.e., paid their rent and respected the housing authority's
         rules) to return to the site.

      -- Both Mission Main in Boston and Cabrini Homes Extension in
         Chicago are desirably situated near city centers and have
         attracted private development funds, but residents' concerns
         about the motives of the housing authorities and of the
         developers have, in both cases, delayed development.  At Cabrini
         Homes Extension, where many residents see a leveraging plan as
         an attempted land grab by developers, the residents are suing
         the Chicago Housing Authority to ensure their right to return to
         the site after the capital improvements have been completed.

    HOPE VI sites also pose exceptional management challenges.  Under the
    selection criteria that the Congress established for the program's
    first 3 years, the housing authorities applying for funding had to be
    (1) located in the 40 most populous U.S.  cities, as defined on the
    basis of data from the 1990 census, or (2) included on HUD's list of
    troubled housing authorities as of March 31, 1992.\7 Of the 24
    housing authorities included on that list, 17 received at least one
    HOPE VI implementation grant during the program's first 3 years.  In
    total, these 17 housing authorities received 21 (55 percent) of the
    grants awarded to 39 sites from fiscal year 1993 through fiscal year
    1995.  Furthermore, at over half of these 39 sites, major changes in
    senior management occurred after the grant was awarded.  Management
    turnover limits progress because time is needed to replace and
    reorganize staff and allow staff to learn their new duties and build
    relationships and trust with the community.

    At 16 of the HOPE VI sites, either HUD or the courts have intervened
    in the housing authority's management.  According to HUD officials,
    the primary reason for intervention was the inability of housing
    authorities to manage and implement the program.  Management problems
    were particularly acute at the Washington, D.C., and Chicago housing
    authorities.  In Washington, D.C., the housing authority was so
    troubled that HUD made its grant award contingent upon the
    appointment of an alternative administrator.  This appointment took
    about 6 months from the time the grant was awarded, and submitting a
    revised revitalization plan to HUD took another 5 months.  In
    Chicago, where HUD took over the housing authority's operation after
    the housing board resigned, more than 2-1/2 years elapsed before the
    revitalization plan for Cabrini Homes Extension was revised and HUD's
    approval of the plan was obtained.

    --------------------
    \7 Thirteen of 23 troubled housing authorities were located in
    qualifying cities.

          PROGRAM'S ORIGIN HAS CREATED
          LEGAL CHALLENGES AND
          ENCOURAGED CHANGES
    ---------------------------------------------------------- Letter :4.2

    The HOPE VI program's origin has created legal challenges and
    encouraged legislative and administrative changes that have further
    delayed sites' progress.  The program's origin has also influenced
    HUD's assessment of the program's priorities and staffing needs.

    Unlike most public housing programs, which are authorized under the
    U.S.  Housing Act of 1937, as amended, and operate under nationally
    applicable implementing regulations, the HOPE VI program was created
    and has been modified through appropriations legislation.  Rather
    than develop implementing regulations that would be difficult to
    modify with each legislative change, HUD has incorporated the
    program's legislative requirements into periodic notices of funding
    availability and into the grant agreements that it signs with
    individual housing authorities.  The evolution of the HOPE VI
    program's requirements is summarized in figure 7.

       Figure 7:  Changes to the HOPE
       VI Program Over Time

       (See figure in printed
       edition.)

    The HOPE VI program's establishment through the appropriations
    process raised legal issues that had to be resolved before HUD could
    fully implement the program.  In the absence of regulations, the
    grant agreements serve as contracts between HUD and the housing
    authorities overseeing the HOPE VI sites.  According to a HUD
    official, HUD took 8 months after sending out the letters announcing
    the fiscal year 1993 awards to finalize the first grant agreements,
    primarily because it was creating regulatory documents, not merely
    specifying the grants' conditions.  Other legal issues arose in 1995,
    when HUD began encouraging the housing authorities to use their
    federal grants to leverage private funds for redevelopment.  HUD took
    8 months to develop new regulations on the use of both public and
    private funds to finance public housing sites.\8

    Annual legislation has affected the HOPE VI program, and HUD has
    amended the grant agreements and the program's guidance to reflect
    its interpretation of these changes.  For example, until the
    Rescissions Act was passed in July 1995, HOPE VI sites were subject
    to a rule requiring the replacement of every unit removed from
    service.  Although demolition was an option, housing authorities
    rarely availed themselves of it when every unit that they tore down
    had to be replaced.  After the Rescissions Act suspended the
    one-for-one replacement rule, HUD began encouraging housing
    authorities to consider demolition as a way of reducing a site's
    density.  HUD also interpreted the 1996 appropriations legislation as
    adding demolition to HUD's funding criteria.  HUD, therefore,
    required each housing authority to demolish at least one building.
    Eventually, HUD concluded that demolition was not always required.

    These legislative and administrative changes and HUD's interpretation
    of them affected progress at the sites we visited.  For example, the
    Los Angeles housing authority welcomed the suspension of the
    one-for-one replacement rule and took advantage of it to revise its
    plan for the Pico Aliso site to include demolition and new
    construction.  This revision, however, added about 15 months to the
    process, according to Los Angeles officials.  In New York City,
    issues raised by HUD's interpretation of the 1996 appropriations
    legislation as requiring demolition added months to the planning
    phase at the Arverne and Edgemere sites, where residents opposed the
    housing authority's plan to satisfy the demolition requirement by
    removing the top four floors of three buildings at the site, thereby
    removing the equivalent of an entire building.

    --------------------
    \8 Subpart F of the public housing development regulations.

          TYPES OF CAPITAL
          IMPROVEMENTS INFLUENCE
          PROGRESS
    ---------------------------------------------------------- Letter :4.3

    The types of capital improvements selected have influenced the pace
    of development.  Rehabilitation, which requires less change than
    demolition and new construction, has generally proved less
    controversial and taken less time.  Plans to build off-site, reduce a
    development's density, and/or permanently relocate residents have
    encountered more opposition from residents.  For example, in
    Milwaukee, existing units were, for the most part, rehabilitated at
    Hillside Terrace.  Although residents were required to move while the
    work was going on, most will be able to return when it is completed.
    Capital improvements at the site have encountered little opposition
    and are progressing on schedule.  Conversely, Boston's Mission Main
    planned to exchange some of its land for adjacent land owned by a
    local university in order to build a portion of the rental and
    homeownership units on the new site, but it could not reach agreement
    with the university.  After a year of unsuccessful negotiations, the
    mayor vetoed the deal in March 1998 to preclude further delays.

          LEVERAGING ADDS TIME
    ---------------------------------------------------------- Letter :4.4

    Using grant funds to leverage other public and/or private financing
    for development is more complex than relying on grant funds alone and
    may take longer.  Combining funds from different sources requires
    adhering to and coordinating the different sources' procedures and
    schedules, sometimes causing delays.  In addition, many housing
    authorities lack the experience necessary to negotiate leveraged
    financing arrangements.  However, as discussed in the next section of
    this report, leveraging has many benefits.

    The steps involved in using one other funding source--low-income
    housing tax credits--illustrate the complexity of leveraged
    financing.  To obtain tax credits, which attract private equity for
    development, a housing authority must submit an application to the
    state and compete with other developers for the credits.  The
    application must identify all of the proposed sources and uses of
    funds and undergo a subsidy-layering review to ensure that no more
    federal assistance is being provided than is necessary to make the
    development financially feasible.  If tax credits are awarded for the
    development, the housing authority must then recruit investors who
    are willing to provide equity in exchange for tax credits.  The
    process of obtaining tax credits can add several months to a project.

       FINANCIAL LEVERAGING IS
       EXPECTED TO INCREASE
    ------------------------------------------------------------ Letter :5

    Even though leveraging is more complex than relying on grant funds
    alone, according to HUD's data, the majority of the 81 HOPE VI sites
    funded to date are planning to mix public and private financing,
    primarily by combining low-income housing tax credits or loans from
    private lenders with the HOPE VI grants.  At 30 of the sites, the
    combined funds from public and/or private sources exceed the HOPE VI
    grant.  Most of the 23 sites selected in the 1997 funding round
    reflect the program's new emphasis on forging partnerships and
    leveraging outside resources.

    The use of leveraged financing may enable sites to stretch limited
    federal dollars, create opportunities for mixed-income developments,
    and attract nonprofit and for-profit partners with experience in
    leveraged financing.  For example, at Centennial Place in Atlanta,
    the housing authority combined low-income housing tax credits and
    private funding with the HOPE VI grant to create a mixed-income
    community.  The grant funds provided public housing units for
    residents with very low incomes, the tax credits financed units for
    residents with low to moderate incomes, and the private funding paid
    for the development of market-rate units for residents with moderate
    to high incomes.

    At Kennedy Brothers Memorial in El Paso, the housing authority is
    combining private funds with the HOPE VI grant to produce both public
    housing units and identical or similar units that will be available
    to home buyers.  At Ellen Wilson in Washington, D.C., the income mix
    will be completed by offering, at full market prices, fee simple
    units that are identical or similar to the neighboring limited-equity
    cooperative units.  These units will be purchased using private
    mortgages, and the profits from their sale will establish an
    endowment for ongoing neighborhood community and support services.
    However, other sites, such as Arverne and Edgemere in New York and
    Robert Taylor Homes B in Chicago, are physically isolated or suffer
    from extreme economic distress, making them unattractive to outside
    investors.  (Fig.  8 identifies the sources of funding for the 10
    sites we visited.)

       Figure 8:  Sources of Funding
       for 10 Selected Sites

       (See figure in printed
       edition.)

    Note:  The totals for the HOPE VI grants include any amounts for
    planning and supplemental awards.  Each grant is listed by the year
    in which the implementation grant was awarded.

    Sources:  HUD and KPMG Peat Marwick.

    Recent appropriations acts have encouraged leveraging by reducing the
    size of the HOPE VI grants.  On average, the size of the grants has
    declined from about $45 million during fiscal years 1993 and 1994 to
    about $21.6 million in fiscal year 1997 (see fig.  9).  To some
    extent, this decline is consistent with a change in the 1996
    appropriations legislation that eased the program's eligibility
    requirements.  As a result of this change, some of the more recently
    selected sites are smaller and have greater potential for leveraging
    than the original sites.

       Figure 9:  Average HOPE VI
       Funding, by Fiscal Year

       (See figure in printed
       edition.)

    Sources:  HUD and KPMG Peat Marwick.

    HUD anticipates further increases in the use of leveraging after it
    implements a new total development cost (TDC) policy, expected to go
    into effect with the fiscal year 1998 grants.  Under HUD's former TDC
    policy, the per-unit costs of development were capped.  These
    costs--including the costs of land acquisition, building acquisition
    or construction, builders' overhead and profit, and financing--were
    not to exceed the housing industry's standards for multifamily
    properties in a given area.  While HOPE VI sites have always been
    subject to TDC caps, they have typically received exceptions because
    of the extraordinary demolition, remediation, and other costs
    involved in urban revitalization.  Under the new policy, applicable
    to developments financed with grants awarded in fiscal year 1998 and
    beyond, items paid for with HUD funds, including public housing,
    HOME, and Community Development Block Grant (CDBG) funds, will not be
    eligible for exceptions.  However, items paid for with
    non-public-housing funds controlled by a locality, state, or private
    sector, including low-income housing tax credits, will not be subject
    to the TDC caps.\9 Consequently, HUD officials believe that housing
    authorities will be forced to rely on non-HOPE VI funds to a greater
    extent.

    --------------------
    \9 Developments financed with (1) grants awarded in fiscal years 1993
    through 1996 will still be eligible for exceptions and (2) grants
    awarded in fiscal year 1997 will receive a 10-percent variance for
    demolition and other extraordinary site costs.

       HUD'S CAPACITY FOR OVERSIGHT IS
       LIMITED
    ------------------------------------------------------------ Letter :6

    During the past 2 to 3 years, staffing cuts in headquarters and the
    field have diminished HUD's capacity to oversee the HOPE VI program.
    Although HUD has hired contractors to provide some additional
    oversight and recently decided to add 11 positions, the new staff
    will need time to become familiar with the program.

    In June 1997, HUD issued its 2020 Management Reform Plan, which calls
    for reorganizing and downsizing the agency.  Under this plan, HUD
    will cut its staff from 10,500 to 9,000 by the year 2000.  The HOPE
    VI program was not exempted from staff cuts.  From March 1995 through
    March 1998, the number of grant managers responsible for overseeing
    HOPE VI grants dropped from six to two, while the number of HOPE VI
    grants more than tripled.  Similarly, from August 1996 (when the
    Office of Public Housing Partnerships was established) through March
    1998, the number of experts in leveraged financing decreased from
    five to two.  During this period, complex leveraged financing
    proposals became the norm for HOPE VI sites.

    In 1997, efforts to streamline HUD's field structure left few
    employees in the field with knowledge of HOPE VI issues.  In some
    instances, field offices with HOPE VI responsibilities were closed,
    and in other instances, key staff moved to other locations or new
    assignments.  For example, the division director and the site manager
    of the Milwaukee field office, who had worked closely with the
    Milwaukee housing authority, accepted positions in other field
    offices.  According to officials from the Milwaukee housing
    authority, their close working relationship with the HUD field office
    staff contributed to the success of the city's HOPE VI redevelopment.

    In 1997, HUD hired outside contractors to help develop management
    systems and oversee the HOPE VI program.  This action responded, in
    part, to an increasing number of reports issued by HUD's Inspector
    General documenting improper expenditures and management deficiencies
    at individual HOPE VI sites.  In 1997, HUD also began hiring private
    "expediters" to help housing authorities move through the HOPE VI
    process.  But even with these additional resources, program officials
    have expressed concerns about not having enough staff to develop and
    implement programs for improving the management of HOPE VI sites.
    Program officials were also concerned that housing authorities were
    not as responsive to the consultants as they would have been to HUD
    staff.

    In March 1998 testimony before the Subcommittee on VA, HUD, and
    Independent Agencies, House Committee on Appropriations, we
    questioned whether HUD has the capacity to properly manage the HOPE
    VI program.  In April 1998, HUD reevaluated its HOPE VI staffing and
    decided to add new positions.  HOPE VI program directors believed the
    new positions would help them catch up with the growing workload but
    noted that they had lost expertise through the earlier staff cuts.
    For example, the Director of Public Housing Partnership programs said
    that it takes a number of months to train a new professional in the
    details of underwriting HOPE VI sites.

       CONCLUSIONS
    ------------------------------------------------------------ Letter :7

    After 5 years, the federal government's investment in HOPE VI grants
    is beginning to produce visible results in the form of capital
    improvements at some sites.  These improvements are helping to break
    down the barriers isolating the HOPE VI sites from neighboring areas.
    HUD has developed some outcome-based measures for capital
    improvements, as the Government Performance and Results Act requires,
    and is collecting and reporting data on rehabilitation, demolition,
    and new construction at the sites.

    Although HUD has encouraged grantees to develop performance
    indicators for community and support services, it has not established
    such indicators itself.  It has, however, hired a contractor to begin
    collecting the data needed to establish a baseline for charting the
    incremental results of these services across sites.  HUD could use
    the data to develop consistent national, outcome-based measures for
    community and support services at HOPE VI sites.  Such measures are
    important to comply with the Government Performance and Results Act
    and to ensure that federal expenditures are producing the intended
    results.

    As the HOPE VI program has evolved, its focus has shifted from
    revitalizing the most severely distressed public housing sites to
    transforming distressed sites with the capacity to leverage outside
    resources into mixed-income communities.  This shift has led to
    positive results at sites in economically viable locations, such as
    Centennial Place in Atlanta and Ellen Wilson in Washington, D.C.
    However, some severely distressed properties in severely distressed
    neighborhoods, such as Robert Taylor Homes B in Chicago and Arverne
    and Edgemere in New York City, may not be able to attract investment
    partners or leverage the funds needed to transform neighborhoods.
    Thus, the current HOPE VI funding model may not be adequate to
    revitalize some of the nation's most severely distressed sites.

       RECOMMENDATION
    ------------------------------------------------------------ Letter :8

    We recommend that the Secretary of Housing and Urban Development use
    the baseline data that the Department collects to develop consistent
    national, outcome-based measures for community and support services
    at HOPE VI sites.

       AGENCY COMMENTS
    ------------------------------------------------------------ Letter :9

    We provided copies of a draft of this report to HUD for its review
    and comment.  HUD commented that the report was fair and objective
    but expressed some concern with our characterization of the more
    recently selected sites as less severely distressed than the sites
    selected in the program's early years.  We agree that the more
    recently selected sites are suffering from structural and social
    distress and are likely to be among the most distressed sites in the
    cities that received the recent grants.  But unlike some of the early
    sites, whose location in isolated or severely economically distressed
    neighborhoods has prevented them from finding leveraging partners,
    the sites chosen since 1996 have typically been smaller and located
    in areas where private interests have been more willing to invest
    funds.  We revised our report to clarify this point.

    HUD also expressed some concern with our recommendation, stating that
    because the different sites are expected to tailor their plans to
    address the specific needs of their communities and residents, it may
    not be possible to establish HOPE VI-wide measures that would be
    applicable to all programs.  We agree that the HOPE VI sites are
    unique and that the program should not be constrained in ways that
    would inhibit creativity.  Yet even though the needs of the
    communities and residents may vary by site, the types of community
    and support service programs offered at the sites we visited (e.g.,
    day care, after-school care, equivalency degree, job training, and
    job placement programs) were consistent enough to allow the
    collection of national data on the outcomes of these programs.
    Accordingly, we have retained our recommendation to this effect.
    HUD's complete written comments and our responses appear in appendix
    IV.

    ---------------------------------------------------------- Letter :9.1

    We will send copies of this report to the appropriate Senate and
    House committees; the Secretary of HUD; and the Director, Office of
    Management and Budget.  We will make copies available to others upon
    request.

    We conducted our work from August 1997 through June 1998 in
    accordance with generally accepted government auditing standards.
    Major contributors to this report include Gwenetta Blackwell, Linda
    Choy, Elizabeth Eisenstadt, Andy Finkel, Rich LaMore, Karin Lennon,
    and Paul Schmidt.

    Judy A.  England-Joseph
    Director, Housing and Community
     Development Issue Area

    OBJECTIVES, SCOPE, AND METHODOLOGY
    =========================================================== Appendix I

    The House Report (105-175) and the Senate Report (105-53)
    accompanying the fiscal year 1998 appropriations act for the
    departments of Veterans Affairs and Housing and Urban Development,
    and independent agencies (P.L.  105-65) included requests for GAO to
    study the status of the HOPE VI program to determine why grantees had
    not acted more expeditiously.  As requested, we reviewed (1) the
    progress in completing capital improvements and implementing
    community and support services at HOPE VI sites, (2) the primary
    reasons why progress at some HOPE VI sites has been slow, (3) the
    extent to which leveraging is planned to be used at HOPE VI sites,
    and (4) HUD's capacity to oversee the program.

    To assist us in responding to these objectives, we used data
    developed by HUD and HUD's contractor on the 81 sites that had
    received awards through 1997, and we visited 10 sites in eight
    cities.  We selected these sites because they were geographically
    diverse, had received grants during different fiscal years, and were
    at various stages of progress, especially in those cities that had
    received grants for two separate developments.

    To respond to the first objective, we reviewed the information
    developed by HUD's contractor on the 81 sites.  The data included
    each grantee's current expenditures for capital improvements; the
    number of units demolished, rehabilitated, or scheduled for
    demolition or other revitalization activities; and the grantee's
    community and support services.  Furthermore, during our site visits,
    we gathered additional information on capital improvements and
    community and support services.  In several locations, we observed
    specific community and support service programs that were in
    operation and obtained information on any results to date.

    To assess why progress has been slow at many HOPE VI sites, we
    evaluated the impact of the legislative and administrative changes
    that have occurred since the program's inception.  Because
    appropriations legislation included changes to the program nearly
    every year, we assessed the impact of these changes by discussing
    them with HUD and housing authority officials, as well as by
    reviewing the notices of funding availability that HUD prepared.
    These notices generally reflected the legislative changes.  In
    addition, at sites we visited where significant delays had occurred,
    we reviewed HUD's files and discussed the delays with HUD
    headquarters and field officials.  We also met with housing authority
    officials, reviewed their program files, and obtained their views on
    how soon they expected revitalization efforts to be completed.
    Finally, we met with representatives of tenant organizations at some
    of the sites to obtain their views on what factors contributed to the
    delays, what has been done to overcome the delays, and how they think
    HUD and housing authority officials have addressed their concerns.

    To assess the extent to which leveraging had been used or is planned
    to be used, we reviewed the data collected by HUD's consultants on
    each grantee.  We also obtained information on leveraging by speaking
    with housing authority officials during out site visits and by
    reviewing individual sites' revitalization plans.

    To assess HUD's capacity to oversee the program, we interviewed HUD
    officials at headquarters and at the field offices near our selected
    sites, and we reviewed HUD's program guidelines, project files, and
    status reports.  In addition, we reviewed the correspondence and
    required quarterly reports sent by the housing authorities at our
    selected sites to HUD.  We also assessed HUD's program staffing
    history, current staffing outlook, and use of a contractor hired in
    1997 to develop management systems for overseeing the program.
    Finally, we considered what impact HUD's 2020 Management Reform Plan
    may have on the HOPE VI program.

    We conducted our work from August 1997 through June 1998 in
    accordance with generally accepted government auditing standards.

    CASE STUDIES
    ========================================================== Appendix II

       CENTENNIAL PLACE
       ATLANTA, GEORGIA
    -------------------------------------------------------- Appendix II:1

    As figure I.1 shows, the Atlanta Housing Authority was notified of
    its implementation award in 1993, and the revitalization of the
    Techwood/Clark Howell Homes site has moved forward expeditiously
    since, with extensive demolition and new construction.  Centennial
    Place, a new mixed-income community, was created on the site.

       Figure I.1:  Time Line for
       Centennial Place

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:1.1

    Centennial Place is the first mixed-income community being developed
    with HOPE VI and private funds.  The former Techwood/Clark Howell
    public housing site is being transformed as part of a larger effort,
    the Olympic Legacy Program, which will revitalize 2,935 units of
    public housing and build a new school, YMCA, and hotel with private,
    federal, state, and local funds totaling more than $350 million.  The
    housing portion of Centennial Place will cost about $84
    million--$42.6 million from the HOPE VI grant and the remainder from
    low-income housing tax credits and private, state, and local funding.
    Consisting of 900 garden apartment and town house rental units,
    Centennial Place is being leased to residents at three income levels:
    40 percent of the households are eligible for public housing, 20
    percent qualify for low-income housing tax credit support; and 40
    percent pay market rates.

          FACTORS CONTRIBUTING TO
          SUCCESS
    ------------------------------------------------------ Appendix II:1.2

    The prime location of Centennial Place is a key ingredient in its
    success.  The Atlanta Housing Authority and its private-sector
    partner, the Integral Partnership of Atlanta (a joint venture of The
    Integral Group and McCormack Baron), have marketed the location's
    proximity to two major universities (Georgia Tech and Georgia State),
    the headquarters for Coca Cola, the downtown area, and Interstates 85
    and 75.

    Local support has also benefited Centennial Place.  Relationships
    with the city of Atlanta, Fulton County, the United Way, the YMCA,
    the Atlanta Public Schools, the Department of Family and Children's
    Services, Georgia Tech, Georgia State University, and other state and
    local agencies, businesses, and academic institutions will, according
    to housing authority officials, facilitate leveraging.

    Careful efforts to relocate all public housing residents through a
    choice-based relocation program have forestalled residents'
    opposition to the redevelopment of Techwood.  The Atlanta Housing
    Authority has just received an award from the National Association of
    Housing Redevelopment Organizations for its relocation program.  The
    relocation staff usually meet several times with the families
    affected by the relocation plan--first in a large group, then with a
    few (e.g., five) families, and finally with just one family.
    Two-thirds of the former Techwood residents chose Section 8
    certificates, and 95 percent of these families found apartments.  A
    former resident sued the housing authority, claiming that it changed
    the reoccupancy rules after Centennial Place was completed.  The case
    has been settled, and the resident is moving into Centennial Place.

    Now that the development's structures have been revitalized, the
    housing authority has shifted its focus to jobs, job training, and
    education.  Social services and case management (i.e., identifying
    internal and external resources and making referrals to service
    providers) will be provided to the public housing residents in a YMCA
    located on the property at Centennial Place, as well as in the
    historic community center renovated with HOPE VI funds.  Under the
    HOPE VI program, residents will be able to participate in a variety
    of activities that require training in special skills, necessitating
    the establishment of a job and skills bank and various support
    service programs.  The educational, training, and self-improvement
    programs that were designed under the HOPE VI program are aimed at
    helping the residents realize their personal goals.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:1.3

    Centennial Place is being developed in five phases.  Phases I and II
    are complete, and all units have been leased or have residents
    approved for leasing.  Phase III is scheduled for completion in
    December 1998.  Phase IV is scheduled for completion by the year
    2000, and Phase V is scheduled for completion early in 2001.  Of the
    144 units reserved for public housing residents, 96 are currently
    occupied by former Techwood/Clark Howell residents.

       Figure II.2:  Centennial Place

       (See figure in printed
       edition.)

       MISSION MAIN
       BOSTON, MASSACHUSETTS
    -------------------------------------------------------- Appendix II:2

    As figure II.3 shows, Mission Main was notified of its grant award of
    about $50 million in November 1993.  However, the site's
    revitalization has been at a virtual standstill since then.

       Figure II.3:  Time Line for
       Mission Main

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:2.1

    Built in 1940, Mission Main originally comprised 1,023 units, but
    conversions and reprogramming for nonresidential use reduced that
    number to 822.  According to one evaluation, the site is badly
    deteriorated, and the physical layout of the site and buildings has
    facilitated criminal behavior.  According to 1995 information from
    the Boston Housing Authority, 74 percent of the applicants for public
    housing who were offered units in Mission Main rejected those units
    because of the development's poor physical condition and high crime
    rates.\1 Approximately 500 units were occupied in December 1995, when
    the housing authority applied to HUD for permission to demolish the
    existing units.

    --------------------
    \1 According to a consultant's study, in 1993 violent crime
    rates--including those for murder, rape, and robbery--were almost
    three times higher for Mission Main than for the city of Boston.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:2.2

    Selected in fiscal year 1993 to receive one of the first HOPE VI
    implementation grants, Mission Main was the type of distressed site
    that, according to a HUD official, the Congress wanted to revitalize
    when it established the HOPE VI program.  HUD selected it not only
    because its distress was well documented but also because its
    solutions were well thought out.  HUD believed that its proximity to
    one of Boston's major medical communities, several colleges, and
    important cultural institutions would facilitate its integration with
    the community.

    The original revitalization plan called for rehabilitating the
    existing units, but the revised plan proposed to demolish and replace
    them with newly constructed town house units.  The revised plan is
    expected to cost over $100 million.  Primary funding sources include
    about $100 million in federal funds ($39 million from the HOPE VI
    grant, $40 million in equity generated through the sale of low-income
    housing tax credits, and $21 million from HUD's Comprehensive Grant
    Program\2 ) and about $6 million in local funds for infrastructure
    work.

    Making Mission Main safe is the first of the development's six
    revitalization goals.  The remaining goals include making the housing
    sound and attractive, improving the housing authority's
    responsiveness, rewarding personal responsibility, integrating the
    development into the neighborhood, and reinforcing the community.

    The Boston Housing Authority has planned a community and support
    service program for both Mission Main and Orchard Park, another HOPE
    VI project located less than 2 miles from Mission Main.  The goal of
    this program is to integrate the developments' residents into the
    surrounding area's mainstream service network.  According to the
    housing authority's plan, HOPE VI funds will be used to fund gaps in
    services, not to duplicate existing services.  The program will
    address the long-standing issues of poverty, joblessness, and
    isolation affecting Mission Main's residents.

    The Boston Housing Authority has not entered into any contracts for
    community and support services.  It has begun to identify partners in
    the community and is planning to hire an independent contractor to
    measure the effectiveness of its plan for community and support
    services.

    --------------------
    \2 The Comprehensive Grant Program was implemented in fiscal year
    1992 and is intended to provide housing authorities with reliable and
    predictable funding for capital improvements and modernization.

          FACTORS CONTRIBUTING TO
          DELAYS
    ------------------------------------------------------ Appendix II:2.3

    Several factors have slowed Mission Main's progress, including
    changes in the development's plans and management and opposition from
    tenants.  After the site's original HOPE VI director resigned in
    March 1995, the new director, hired in May 1995, began to recognize,
    with other city officials, that the plan for rehabilitation would
    have little impact on revitalizing a significantly distressed
    property.  Changing the plan to include demolition and tax credit
    leveraging with private developers took several months.  Opposition
    from residents distrustful of the housing authority and of these
    changes also slowed activity at the site.  According to housing
    authority officials, the residents considered the changes too
    dramatic and believed they were occurring too fast.  The residents
    feared that the housing authority would demolish their homes and not
    allow them to return after the renovation.

    When the Boston Housing Authority hired a developer in May 1996, the
    residents sided with the developer against the authority.  According
    to a housing authority official, the developer told the residents
    that they would be equal partners and that the housing authority
    would have no role.  As a result of these divisions, the project was
    stalled.  In April 1997, HUD issued a default letter to the housing
    authority, threatening to remove the grant if the parties did not
    move forward.  HUD issued the letter, in part, because the housing
    authority had failed to resolve the impasse with the developer and
    submit a mixed-income proposal in accordance with its revised
    revitalization plan.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:2.4

    HUD has appointed an expediter to provide expert advice to both the
    housing authority and the developer, as well as to keep HUD apprised
    of Mission Main's progress and any problems.  Although the original
    developer agreed to step aside when the housing authority requested
    permission from HUD to become the developer, the situation has since
    changed.  The original developer, according to a HUD official, is
    expected to assume responsibility for the development once its
    implementation plan is approved.

    HUD's contract auditors recently reviewed the housing authority's and
    the developer's expenditures to ensure their legitimacy.  Financial
    differences between the housing authority and the developer have been
    resolved, HUD has approved funding to pay the outstanding bills, and
    the development is expected to go forward.  HUD, however, is still
    questioning some of the housing authority's prior expenditures,
    especially about $738,000 for support service contracts that were
    used to provide services for persons who were not Mission Main
    residents.  HUD has asked the housing authority to install the proper
    controls in its accounting system.  According to a housing authority
    official, only a portion of the amount is in question--the portion
    that was used to provide services to tenants in a development
    associated with Mission Main.  This official also noted that HUD is
    currently awaiting a revised implementation plan from the development
    team.

       Figure II.4:  Mission Main
       Units Awaiting Demolition

       (See figure in printed
       edition.)

       PICO ALISO
       LOS ANGELES, CALIFORNIA
    -------------------------------------------------------- Appendix II:3

    As figure II.5 shows, Pico Aliso was awarded an implementation grant
    in the fall of 1995, but the revitalization effort did not move
    forward for some time, primarily because the housing authority
    decided to revise the revitalization plan after the Congress
    suspended the one-for-one replacement rule.  In July 1997, the
    housing authority submitted a plan for accelerating the development,
    and the revitalization effort has since proceeded expeditiously.  New
    construction began in March 1998.

       Figure II.5:  Time Line for
       Pico Aliso

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:3.1

    Together, the twin housing developments of Pico Gardens and Aliso
    Village form the largest public housing complex west of the
    Mississippi.  All 577 units at Pico Aliso, built in the 1940s and
    1950s, will be demolished, and 421 new units will take their place.
    These will include 280 rental units and 7 units for sale at Pico
    Gardens and 74 detached courtyard homes and 60 apartments for senior
    citizens in Aliso Extension.  New administrative offices and a child
    care center will also be built.

    According to statistics compiled by the Los Angeles Police
    Department, the crime rates at Pico Aliso are among the city's
    highest, in large part because at least seven gangs operate in the
    area.  The site was redesigned with safety and security in mind.
    Flat roofs, which gang members had used as shooting platforms, were
    eliminated, as were blind entryways.  Parking lots and open areas
    that had previously led to turf wars were also reconfigured.  New
    units have been designed with private backyards and individual
    entrances.  Community and support service programs are being designed
    to foster a cooperative and nurturing spirit among residents.

    The housing authority is working with the city of Los Angeles to
    prepare an economic development plan.  The authority also solicited
    the participation of the city's community redevelopment agency
    because the Pico Aliso site is adjacent to a proposed redevelopment
    area.  In addition, the site is located within the East Side Economic
    and Employment Incentive Zone, which offers several incentives to
    businesses.  Finally, the authority is in partnership with the Los
    Angeles Community Development Bank.

    Several entities are working with the housing authority to provide
    job opportunities for Pico Aliso residents, such as Homeboy
    Industries, Jobs for the Future, the East Los Angeles Skill Center,
    and the Los Angeles Conservation Corps.  In addition, two labor
    unions--the Laborers International Union of America and the United
    Brotherhood of Painters--have established a $500,000 grant to place
    22 residents in a 24-month apprenticeship demonstration program.

    Community services provided by the HOPE VI grant include youth
    apprenticeship, public safety, and economic development programs;
    support services include job training, gang prevention, after-school
    tutoring, and a primary health clinic.  In addition, the city of Los
    Angeles has made $2 million in federal Community Development Block
    Grant (CDBG) funds available for a multipurpose recreational center
    at the site.  The Los Angeles Department of Recreation and Parks will
    maintain the facility, and other staff for the center will be funded
    by a nonprofit organization, the Aliso Pico Business Community,
    Incorporated.  Overall, the city has provided $494,730, or about 17
    percent of the site's funding, for support services.

    About 250 households opted for Section 8 housing during construction,
    and 176 have the option to return to the site.  An additional 30
    purchased homes.

          FACTORS CONTRIBUTING TO
          DELAYS
    ------------------------------------------------------ Appendix II:3.2

    The major cause of delay in starting construction at the Pico Aliso
    site was the housing authority's decision to revise the site's
    revitalization plan.  The housing authority incurred the delay to
    take advantage of the Congress's July 1995 suspension of the
    one-for-one replacement rule by reducing the site's density.  The
    revision added 15 months to the planning process--3 months to
    redesign the architecture, 9 months to revise the plan with the
    community, and 3 months to respond to HUD's requests for changes and
    to obtain HUD's approval.

    The housing authority also took time to respond to residents who
    objected to relocation plans proposing to place them outside the
    complex.  Because 99 percent of the development's units are occupied,
    there is little room to move residents within the complex.  Gang
    territories further complicated the relocation process.  The
    revitalization plan states that there are at least 3 major gang
    "turfs" within the development and at least 15 others in the
    neighborhood.  With the assistance of the League of Women Voters, the
    housing authority held an election in which 95 percent of the
    households in the development voted.  A new resident advisory
    committee was elected and supported the housing authority.  In total,
    it took about 3 years for the housing authority to obtain the
    residents' trust and persuade the residents to relocate.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:3.3

    Demolition has been completed at Pico Gardens and Aliso Extension.
    Construction began for 148 units at Pico Gardens on March 3, 1998,
    and for 42 units at Aliso Extension in May.

       Figure II.6:  Pico Aliso

       (See figure in printed
       edition.)

       HILLSIDE TERRACE MILWAUKEE,
       WISCONSIN
    -------------------------------------------------------- Appendix II:4

    As figure II.7 shows, the Housing Authority of the City of Milwaukee
    was awarded a HOPE VI demonstration grant for Hillside Terrace in
    1993, and the development is near completion.

       Figure II.7:  Time Line for
       Hillside Terrace

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:4.1

    Hillside Terrace is the highest-density public housing development in
    Milwaukee.  It consists of 540 family units, including two- and
    three-story walkups and row houses, built on about 24 acres in 1948
    and 1950.  On the one hand, the site is surrounded by a light
    industrial and commercial district and is isolated from other
    immediate residential areas; on the other hand, it is located just a
    few blocks from downtown Milwaukee.  The vacancy rates at Hillside
    Terrace, ranging from 6 to 10 percent, were higher than at any of the
    housing authority's other sites.

    Streets within the development terminated at its boundaries,
    isolating it from the surrounding area.  Without through streets,
    residents had limited access to buildings; emergency responders, such
    as firefighters and police, were delayed; curbside garbage collection
    was nearly impossible; and quiet areas sheltered drug activity.
    Although the buildings were structurally sound, some of their boilers
    and heating systems were wearing out, parking facilities and public
    lighting were inadequate, and the property was severely eroded.  The
    physical conditions discouraged outdoor play or family activities.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:4.2

    The housing authority received a $40 million HOPE VI implementation
    grant in fiscal year 1993, plus two subsequent amendment grants in
    fiscal year 1995 totaling an additional $5.7 million to revitalize
    496 of the 540 units at Hillside Terrace.  The goals for the HOPE VI
    development were to (1) enhance the marketability of the family units
    by reducing their density, (2) reduce the physical isolation of the
    site by creating through streets, and (3) encourage economic
    self-sufficiency among the residents.  To accomplish these goals, the
    housing authority planned to demolish 119 dwelling units in 15
    buildings, thereby making way for through streets.  The units were to
    be replaced by 79 units at scattered sites outside the development
    and 39 Section 8 certificates.  The 377 remaining units were to be
    substantially rehabilitated and modernized.  The housing authority
    also planned to expand community and support services, aiming
    primarily to help residents become permanently self-sufficient.

          FACTORS CONTRIBUTING TO
          DELAYS AND SUCCESS
    ------------------------------------------------------ Appendix II:4.3

    Because the capital improvements at Hillside Terrace consisted
    primarily of rehabilitation, few residents were displaced, and
    because the rehabilitation was largely funded through the HOPE VI
    grant, the financing was straightforward.  Without the complications
    associated with permanent relocation and leveraging, the HOPE VI
    development moved forward on schedule.  Some delays took place during
    demolition, however, because of underground oil tanks, unmarked
    utility lines, and an undocumented brewery tunnel, and another delay
    occurred when a contractor filed bankruptcy.

    Housing authority officials ascribed the success of the development
    to several factors, including the low rate of turnover in the
    authority's management staff; the experience of staff at the housing
    authority and the HUD field office; good working relationships with
    the residents, the HUD field office, the city, and state agencies;
    and a good state economy.  In addition, the public, the media, the
    mayor and alderwoman, and the resident council have generally
    supported the improvements at Hillside Terrace.  There have been no
    lawsuits or organized opposition to the development.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:4.4

    The majority of Hillside Terrace's HOPE VI grant has been disbursed,
    and the development has progressed on schedule.  The site's physical
    improvements are scheduled to be completed by July 1, 1998.  The two
    through streets, whose construction required the demolition of 15
    buildings, is complete.  As a result, the site is no longer
    physically isolated, and it has more green space, playscapes, and
    parking.  Street lights and walkways were installed to match those of
    other residential areas in the city.  According to residents,
    gang-related drug traffic and crime have significantly decreased.
    The three-story walk-ups were rehabilitated to include rear
    stairwells and individual entrances, creating defensible space.  The
    interiors of all units were substantially upgraded.  The existing
    community center was expanded to house current and future support
    service agencies, a day care center, and a clinic.

    Relocation was completed while rehabilitation was in progress, and,
    according to the housing authority, most residents that chose to
    return and met screening requirements have moved back, now that the
    work is almost complete.  The demolished units were replaced with new
    units completed and under construction on scattered sites, and the
    remaining units were replaced with Section 8 certificates or
    vouchers.  According to a housing authority report, two Hillside
    Terrace residents have purchased new replacement units, and another
    is working on financing options.  According to the housing authority,
    336 of 355 rehabilitated units are occupied and 22 units are
    currently being rehabilitated.  The residents are required to sign an
    addendum to their lease in which they agree to undergo an
    employability assessment, participate in the resident council and
    block watch program, and volunteer 4 hours a month by, for example,
    cleaning up litter at the site.

    Community and support services are ongoing and include a neighborhood
    mentoring program, a scholarship fund, job training programs, a
    resident-owned business program, day care services, preventive health
    care services, and educational extension programs available through
    the local university.  The housing authority has also provided
    training and employment opportunities to residents as construction
    inspectors.  Housing authority officials do not believe that they
    will spend all of the funds budgeted for community and support
    services because many of these programs existed before the HOPE VI
    grant was awarded and are self-sustaining programs.  According to an
    April 1998 HUD report, the housing authority had spent about 30
    percent of the $4.3 million budgeted for community and support
    services and management improvements.

    The housing authority has collected and reported demographic
    information at Hillside Terrace, such as changes in residents'
    incomes and crime statistics.  For example, the authority reported
    that the percentage of families living below the poverty level
    dropped from 83 percent in 1993 to 63 percent in 1997, and the number
    of working families increased from 17 percent in 1993 to 55 percent
    in 1997.  Housing authority officials also plan to collect data on
    the numbers of residents obtaining services such as day care and
    health care.

    During the past 3 years, the housing authority has applied for HOPE
    VI grants for two additional developments, but these applications
    were not selected.

       Figure II.8:  Hillside Terrace

       (See figure in printed
       edition.)

       ELLEN WILSON DWELLINGS
       WASHINGTON, D.C.
    -------------------------------------------------------- Appendix II:5

    As figure II.9 shows, Ellen Wilson Dwellings was awarded its
    implementation grant in late 1993.  Although the grant took some time
    to implement, construction at the development is progressing well.

       Figure II.9:  Time Line for
       Ellen Wilson Dwellings

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:5.1

    Built in 1941, Ellen Wilson Dwellings had 134 units, which were
    demolished in 1996.  The deteriorated site had been vacant since 1988
    when, according to a District of Columbia Housing Authority official,
    the authority first planned a significant rehabilitation effort.
    However, the authority found that the costs of the proposed
    rehabilitation exceeded the available HUD modernization funds, and
    continuous changes in the housing authority's leadership precluded
    further progress.  Because Ellen Wilson is located within the
    boundaries of the Capitol Hill historic district, a community group
    concerned about developing the site formed a community development
    corporation in 1991 called the Ellen Wilson Neighborhood
    Redevelopment Corporation.

    The community development corporation's goal was to redevelop the
    location, although not necessarily as a public housing site.  The
    corporation formed a partnership with two companies experienced in
    community development to develop a proposal for revitalizing the
    area, possibly with the use of Section 8 funding.  However, the HOPE
    VI legislation created a more viable source of funding for a
    comprehensive revitalization effort.  After the HOPE VI Urban
    Revitalization Demonstration Program was established in October 1992,
    the housing authority selected the community development
    corporation's developer in a competitive process to develop a plan
    for mixed-income housing on the Ellen Wilson site.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:5.2

    Although Ellen Wilson received a $15.7 million implementation grant
    in fiscal year 1993, the first year in which grants were awarded, HUD
    later made the award contingent on the appointment of an alternative
    administrator.  According to a housing authority official, even
    though the firm to serve as alternative administrator was identified
    in the HOPE VI grant application, the appointment did not occur until
    March 1995.  In June 1995, HUD amended the award, providing an
    additional $9.4 million to cover increased costs, including those for
    infrastructure and environmental remediation.  The additional funding
    also allowed the development to be set up as a cooperative--an
    arrangement under which the development will not receive any
    operating subsidies from HUD.

    According to a housing authority official, the community development
    corporation and the housing authority are beginning to establish a
    community and support service program at Ellen Wilson.  A step-up
    apprenticeship construction program has been established for public
    housing residents in the Ellen Wilson neighborhood to work on
    construction of the Ellen Wilson site.  Furthermore, a modified
    self-sufficiency program is being established to help individuals,
    especially former Ellen Wilson residents, develop a dependable source
    of income so that they can qualify to reside in the revised Ellen
    Wilson development.  Moreover, the housing authority and the
    community development corporation have been working for a year to
    identify and develop contacts with all social service providers and
    support groups, such as churches and nonprofit organizations, in the
    Ellen Wilson neighborhood.  They are also developing a health care
    compact under which the residents of Ellen Wilson and surrounding
    public housing developments would all be served by one health
    maintenance organization.

    According to a housing authority official, future funding for
    community and support services will come from an endowment that will
    be generated from the expected market-rate sales of 20 homes at Ellen
    Wilson built with a market-rate loan of HOPE VI funds.  When these
    homes are sold, the construction loans will be repaid.  The profit
    from the sales and the repayment of the construction loan will be
    invested to establish an endowment to fund ongoing community and
    support services.

          FACTORS CONTRIBUTING TO
          DELAYS
    ------------------------------------------------------ Appendix II:5.3

    Several factors have slowed revitalization at Ellen Wilson, including
    problems with the housing authority's management, the neighborhood's
    opposition to a public housing development, environmental issues, and
    delays in obtaining HUD's approval of the cooperative arrangement and
    development costs.  As noted, HUD responded to the site's management
    problems by making the initial grant agreement contingent on the
    appointment of an alternative administrator.  Subsequently, a
    Superior Court judge appointed a receiver for the housing authority,
    and a private firm was designated by HUD and the housing authority to
    administer the grant.  Once these management issues were resolved,
    the project started moving.

    Satisfying the concerns of the neighborhood's residents also took
    time.  According to a housing authority official, the residents who
    did not want any public housing built were very vigilant about the
    proposed development.  These residents raised questions and concerns
    with the zoning board, which took time to clear.  In addition, the
    housing authority had to replace contaminated soil at the site and
    install a holding tank to handle runoff from rain.

    According to a HUD official, the proposed cooperative arrangement and
    total development costs took time to approve.  The proposal to
    establish a cooperative was the first of its kind at a HOPE VI site.
    Unlike other sites, Ellen Wilson was not requesting any future
    operating subsidies from HUD and was not receiving any low-income
    housing tax credit funding, and each resident would have an equity
    interest in the development.

    According to a HUD official, the total development costs were higher
    at Ellen Wilson than at most other HOPE VI sites.  A HUD official
    also noted that the need to conform to Capitol Hill's architectural
    guidelines--which require such amenities as exterior staircases, tile
    and brick fronts, and elevated front yards--and to resolve
    environmental problems contributed to these high costs.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:5.4

    Development at Ellen Wilson is currently on schedule.  The first
    units are to be available in September 1998, and the development is
    to be completed by the summer of 1999.  When completed, it will have
    134 limited-equity cooperative units and 20 units available for sale
    at prevailing markets rates.  All residents will be considered
    owners, including those in the 67 units that will be set aside for
    households earning 50 percent or less of the area's median income.
    The down payment for each household will be based on 5 percent of its
    annual income at the middle of its income band, subject to market
    conditions (e.g., 5 percent of the middle of the band covering 0 to
    25 percent of the area's median income).  A community development
    corporation official noted that a person earning $6 per hour could
    qualify for a unit in the lowest income range.

       Figure II.10:  New Construction
       at Ellen Wilson

       (See figure in printed
       edition.)

       CABRINI HOMES EXTENSION
       CHICAGO, ILLINOIS
    -------------------------------------------------------- Appendix II:6

    As figure II.11 shows, the Chicago Housing Authority was awarded a
    $50 million HOPE VI implementation grant in fiscal year 1994, but HUD
    did not approve a revised revitalization plan, which stemmed from
    management changes in 1995, until September 1997.

       Figure II.11:  Time Line for
       Cabrini Homes Extension

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:6.1

    Cabrini Homes Extension is the largest of three developments that
    make up Cabrini-Green, known in Chicago and nationwide as one of the
    country's most distressed public housing sites.  It is located on
    Chicago's near north side, adjacent to a high-rent neighborhood and
    theater district that is undergoing a boom in the construction of new
    single-family homes, row houses, condominiums, and town houses.  In
    addition, some of Chicago's most desirable real estate, located on
    Michigan Avenue and commonly known as the Magnificent Mile, is just a
    few blocks away.  Cabrini-Green is a 70-acre site with 3,606 family
    units in 86 residential buildings belonging to three separate
    developments--Frances Cabrini Homes (55 row house buildings), Cabrini
    Homes Extension (23 high-rise buildings) and William Green Homes (8
    high-rise buildings).  Only the row houses meet HUD's minimum housing
    quality standards.

    Cabrini Homes Extension, built in 1958, consisted of 1,921 units with
    3,695 residents as of 1993.  The 36-acre site also included a
    management office, a central heating plant, and a community center.
    About 32 percent of the units at Cabrini Homes Extension were
    occupied.  According to the housing authority's reports, the property
    is severely distressed, the buildings' design is defective, and the
    buildings' systems are deficient and deteriorated.  Because the
    site's design included no through streets, the streets create a maze
    of dead ends conducive to criminal activity.  Stairwells also shelter
    drug deals and physical assaults.  According to the housing
    authority, the available resources are not adequate to meet the
    site's extensive capital and modernization needs.

    HUD has listed the Chicago Housing Authority as troubled since 1979.
    According to the housing authority itself, it was plagued by
    mismanagement and negative opinion, held by the public and residents
    alike.  The housing authority's board resigned in May 1995, and HUD
    assumed control.  The authority is run by a former HUD assistant
    secretary and a five-member executive advisory committee appointed by
    HUD.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:6.2

    The housing authority received a $50 million HOPE VI implementation
    grant in fiscal year 1994 for Cabrini Homes Extension.  The HOPE VI
    funds, along with $19 million in public housing development funds,
    are to construct or acquire 493 replacement units for families that
    are eligible for public housing and to demolish eight distressed
    high-rise buildings containing 1,324 deteriorated units at Cabrini
    Homes Extension.  The public housing replacement units, representing
    about 30 percent of the planned new units, are to be interspersed
    with market-rate units.  Of the remaining units, 20 percent are to be
    reserved for moderate-income families and 50 percent for households
    paying market rates.  The housing authority plans to acquire
    approximately 250 replacement units on four new development sites.

    Over $8 million of the site's HOPE VI grant is designated for
    community and support services.  The services are designed to promote
    self-sufficiency and economic independence.  The services range from
    education, to substance abuse intervention, to a variety of economic
    development initiatives.  For example, Cabrini Textiles is a silk
    screening company training residents and providing work experience in
    a productive environment.

    The housing authority has used the HOPE VI funds to leverage
    resources from the city and the private sector.  The HOPE VI
    development at Cabrini Homes Extension has served as a catalyst for
    the city's Near North Side Neighborhood Revitalization Initiative,
    which represents a total estimated commitment of $315 million in
    public and private funds to transform Cabrini-Green and the
    surrounding community.  The initiative will include the construction
    of 2,000 new mixed-income housing units (row houses, duplexes, and
    mid-rise buildings), a new town center, a commercial district with a
    grocery store and shopping facilities, a district police station, new
    schools, a library, and a community center.

          FACTORS CONTRIBUTING TO
          DELAYS
    ------------------------------------------------------ Appendix II:6.3

    Management turnover at the Chicago Housing Authority and changes to
    the HOPE VI program led to delays in developing the site's
    revitalization plan.  After HUD rejected an application for a HOPE VI
    grant for Cabrini Homes Extension in fiscal year 1993, it funded an
    application the next year, in accordance with a requirement in the
    appropriations act that it fund without further competition housing
    authorities that applied in fiscal year 1993.  According to the
    housing authority's executive director, a significantly flawed
    proposal was funded and set up to fail.  The director at that time
    pursued the proposal, submitted a revitalization plan to HUD in March
    1995, and resigned 2 months later.  Then, as noted, the housing
    authority's board resigned, and HUD took over the authority's
    management, changing and expanding the scope of the original plan for
    the site.  After taking time to reorganize and try to restore
    relationships with the community, the new leadership submitted the
    revised revitalization plan to HUD in June 1997, and HUD approved the
    plan in September.

    Residents' concerns and legal actions have also contributed to delays
    in the site's development.  Both HUD and housing authority officials
    told us that because promises made to residents by the housing
    authority's former management have not been kept and because
    residents view the revised revitalization proposal as a land grab by
    the housing authority, the city, and the developers, the residents do
    not trust the responsible parties.  For example, the housing
    authority's former chairman promised residents that no relocation and
    no demolition would take place at two of the buildings until
    replacement housing had been built on land currently belonging to the
    housing authority.  However, under the revised plan, additional
    buildings are to be demolished and residents are to be relocated to
    surrounding neighborhoods.  As a result, in October 1996, the local
    advisory council at Cabrini-Green entered a lawsuit against the
    housing authority and the city.  First, the council claimed that
    residents had not been adequately consulted on the development of the
    new plan, which increased the number of units to be demolished;
    second, it asked that relocation be halted in accordance with
    commitments made by the housing authority's former chairman; and
    third, it asked that demolition be halted.  According to the housing
    authority, the court has ruled that relocation may proceed because
    the existing buildings are in such poor condition, and a trial is
    scheduled for June 1998.  In addition, the housing authority spent
    several months obtaining approval from a federal judge to acquire
    approximately 250 replacement units at other sites.

    Finally, because of their complexity, the development proposals and
    land transfer agreements have taken time, both for the stakeholders
    to submit and develop and for HUD to review and approve.  For
    example, the housing authority is finalizing land transfer agreements
    with the Chicago Board of Education and the Chicago Park District.
    It has procured surveys and appraisals and has submitted a
    disposition application to HUD for approval.  According to the
    housing authority, because of their complexity and ambitiousness, the
    HOPE VI development and the Near North Side Neighborhood
    Revitalization Initiative will take a long time to implement.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:6.4

    Four buildings at Cabrini Homes Extension, formerly containing 398
    units, have been demolished, and three additional buildings with 327
    units have been vacated.  HUD has approved the housing authority's
    application to demolish two of the vacated buildings and is reviewing
    the other application.  The housing authority has relocated 230
    families.  Private developments are under construction and some units
    are completed on adjacent property.  The housing authority has
    purchased two town house units at one of the developments and has
    relocated two Cabrini families in this replacement housing.  The
    housing authority has also finished screening Cabrini families
    eligible to occupy 16 units at another development.

    Community and support service programs are ongoing, and the housing
    authority is tracking training and employment statistics for
    residents.  For example, the authority reported that, as of October
    1997, over 250 Cabrini residents had been placed in jobs through its
    programs.

    The housing authority has continued to negotiate with the local
    advisory council.

       Figure II.12:  High-Rise
       Buildings Awaiting Demolition
       at Cabrini Homes Extension

       (See figure in printed
       edition.)

       ORCHARD PARK
       BOSTON, MASSACHUSETTS
    -------------------------------------------------------- Appendix II:7

    As figure II.13 shows, Orchard Park received notification in 1995 of
    its implementation award.  The revitalization effort has since moved
    expeditiously, with extensive demolition and new construction under
    way.

       Figure II.13:  Time Line for
       Orchard Park

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:7.1

    Built in 1942, Orchard Park originally contained 711 units.  Its
    public housing structure kept its residents physically, socially, and
    economically isolated, effectively preventing them from moving out of
    the area, and discouraging businesses, investors, and service
    providers from moving in.  When planning for the site's
    revitalization began, 36 percent of the development's units were
    vacant, and 86 percent of the applicants for public housing in Boston
    were rejecting Orchard Park because of its poor physical condition
    and reputation for severe crime.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:7.2

    HUD awarded the Boston Housing Authority a planning grant for Orchard
    Park in May 1995.  Four months later, the housing authority received
    an implementation grant based on the feasibility, sustainability, and
    probability of the site's advancing steadily through all of the
    planned phases.  According to a study by a consultant, Orchard Park
    was selected for its innovative plan to integrate the development
    with the neighborhood through the use of off-site development, fill
    vacant lots with privately owned housing, and leverage the HOPE VI
    grant with low-income housing tax credits.  The study also noted that
    the plan has established a way of doing business that could be
    applied to other HOPE VI projects.

    The Orchard Park development is scheduled to take place in five
    phases.  During Phase I, families were temporarily relocated while
    126 units were rehabilitated.  At the beginning of Phase II, eight
    buildings, containing 246 units, were demolished, and 90 new duplex
    and town house units are being built.  The first units were to be
    available for occupancy in June 1998, and the remaining units are
    expected to be completed by December 1998.  Eight more buildings,
    containing 220 units, will be demolished during Phase III, and up to
    130 new town house units are to be constructed, starting in 1999 and
    finishing by the end of 2000.  A public elementary school will also
    be built as part of this phase.  The school will include community
    space to serve Orchard Park.  During Phase IV, up to 140 rental units
    will be constructed, starting in July 1998, bringing the total number
    of rental units--whether rehabilitated or newly constructed--to about
    486.  Finally, during Phase V, up to 50 new homes will be built.
    Phases IV and V are both off-site, that is, on scattered sites in the
    immediate vicinity of the development.  The off-site construction is
    expected to be completed by December 2000.  The primary sources of
    funding for these revitalization efforts are as follows:  $20.4
    million from the HOPE VI grant, about $24 million from the
    Comprehensive Improvements Assistance Program,\3 $36.7 million from
    low-income housing tax credits, $9 million from the Comprehensive
    Grant Program, and $2.2 million in infrastructure work from the city
    of Boston.

    The Boston Housing Authority has planned a community and support
    service program for both Orchard Park and Mission Main, another HOPE
    VI project located less than 2 miles from Orchard Park.  The goal of
    this program is to integrate the developments' residents into the
    surrounding area's mainstream service network.  According to the
    housing authority's plan, HOPE VI funds will be used to fund gaps in
    services, not to duplicate existing services.  The program will
    address the long-standing issues of poverty, joblessness, and
    isolation affecting the residents of Orchard Park and Mission Main.

    The Boston Housing Authority has not entered into any contracts for
    community and support services.  It has begun to identify partners in
    the community and is planning to hire an independent contractor to
    measure the effectiveness of its plan for community and support
    services.  According to a housing authority official, the housing
    authority is currently responding to comments that it received from
    HUD on a 6-month plan for increasing residents' self-sufficiency.

    --------------------
    \3 The Comprehensive Improvements Assistance Program was enacted in
    1980 to make substantive modernization funding available to housing
    authorities through competition to address needs at individual
    developments.

          FACTORS CONTRIBUTING TO
          SUCCESS
    ------------------------------------------------------ Appendix II:7.3

    Orchard Park's success reflects close collaboration from the
    beginning among the residents, housing authority, developers, and
    city of Boston.  Housing authority staff developed a close working
    relationship with the residents during Phase I of the development,
    when, starting in January 1995, 126 units were rehabilitated,
    primarily with funds from the Comprehensive Improvement Assistance
    Program.

    When the housing authority followed up on HUD's suggestion that the
    HOPE VI revitalization plan for Orchard Park include demolition and
    leveraging with private developers, the residents were willing to
    listen.  Housing authority officials believe the goodwill created
    with the success of the earlier rehabilitation was the reason for the
    positive working relations.  Housing authority staff spent
    considerable time with the residents and encouraged their comments at
    each stage of the development.  The residents understood, however,
    that the housing authority had the final say in all matters.
    Although some tenants used Section 8 certificates to relocate, many
    moved to vacant units within the Orchard Park complex.  Units were
    available because the Boston Housing Authority had closed the waiting
    list at the complex well before rehabilitation was to start.  All
    residents, including those who relocated, may return to the site when
    construction has been completed.

          CURRENT STATUS
    ------------------------------------------------------ Appendix II:7.4

    Orchard Park's development is proceeding on schedule.  Construction
    of the 90 town houses in Phase II is well under way.

       Figure II.14:  Orchard Park

       (See figure in printed
       edition.)

       KENNEDY BROTHERS MEMORIAL
       APARTMENTS
       EL PASO, TEXAS
    -------------------------------------------------------- Appendix II:8

    As figure II.15 shows, the revitalization of Kennedy Brothers
    Memorial Apartments began with a planning grant in 1994 and has since
    progressed through extensive demolition, rehabilitation, and new
    construction.  The revitalization includes plans to construct homes
    for sale on newly purchased property adjoining the original site.

       Figure II.15:  Time Line for
       Kennedy Brothers Memorial
       Apartments

       (See figure in printed
       edition.)

          BACKGROUND
    ------------------------------------------------------ Appendix II:8.1

    Kennedy Brothers Memorial was built in 1973 and contained 364 units
    before the revitalization effort started.  When chosen for HOPE VI,
    the complex had been voted the "worst" of 30 distressed public
    housing sites in El Paso by public housing residents citywide.  Major
    problems identified at the site were crime, drugs, and gangs.  The
    complex was in a residential neighborhood but was isolated by a stone
    wall that encircled it and cut off access to neighboring streets.
    The site was very crowded, and the street patterns and wall attracted
    drug smugglers entering the country at a Mexican border crossing a
    quarter of a mile away.

          HOPE VI SELECTION
    ------------------------------------------------------ Appendix II:8.2

    The Housing Authority of the City of El Paso received a $500,000
    planning grant in November 1993.  Its revitalization plan was
    developed through an inclusionary planning process that brought
    together residents, neighbors from the surrounding community, service
    providers, and community businesses.  Preliminary architectural
    studies were performed and a series of planning meetings were held to
    evaluate options and develop the final physical revitalization plan.

    The housing authority was selected to receive a $36.2 million
    implementation grant in 1995, after the Congress directed HUD to
    award implementation grants to all jurisdictions that had received
    planning grants in 1993 or 1994.

          FACTORS CONTRIBUTING TO
          SUCCESS
    ------------------------------------------------------ Appendix II:8.3

    Housing authority officials believe that starting with a planning
    grant was a key factor in their ability to proceed at a rapid rate.
    Early agreement on the site plan by all the parties involved, the
    residents' trust of housing authority officials, and the desire of
    residents to qualify for homeownership have also contributed to the
    successes to date.

    The parties to the planning process agreed that a reconfiguration of
    the site, coupled with demolition to reduce density, was needed to
    improve security and stop gang-related activities.  The development's
    main thoroughfare was cut into two streets that ended in cul-de-sacs
    on either side of a central community park to discourage the
    thoroughfare's use as an escape route for drug smugglers.  The 8- to
    10-foot stone wall was also scheduled for demolition so that the
    development could be integrated with the neighborhood.  Fenced
    backyards were planned for each unit, and a community center was
    designed as the site's focal point, providing residents with day
    care, job and computer literacy training, and economic development
    programs.

    According to a 1995 HUD-contracted study, the early success at
    Kennedy Brothers Memorial was owing, in large part, to the housing
    authority's decision to contract with a project manager who focuses
    exclusively on HOPE VI developments.  The excellent rapport that the
    project manager and the housing authority's executive director,
    management director, and site manager developed with the residents at
    the beginning of the planning process also promoted agreement on key
    issues.

    At Kennedy Brothers Memorial, residents' attitudes appear to have
    changed with the revitalization.  According to housing authority and
    resident council officials, the residents are taking pride in the
    revitalized site, keeping it virtually graffiti-free.  These
    officials also acknowledge that HUD's "one strike and you're out"
    policy, in place since 1996, has also deterred vandalism.  During our
    visit, we talked with residents excited about the new training and
    staff development programs and, in particular, about the possibility
    of qualifying to purchase one of the 50 homes in the homeownership
    program.

          STATUS
    ------------------------------------------------------ Appendix II:8.4

    Capital improvements are progressing on schedule.  Recently, 240
    units were rehabilitated, and many of the former residents have moved
    into the revitalized units.  Contractors are now being selected to
    construct 124 replacement housing units and to construct the 50 homes
    included in the development, scheduled for completion in the first
    half of 1999.  The community center is under construction and is
    scheduled for completion in July 1998.

       Figure II.16:  Children's
       Computer Laboratory, Kennedy
       Brothers Memorial Apartments

       (See figure in printed
       edition.)

       ROBERT TAYLOR
       HOMES B
       CHICAGO, ILLINOIS
    -------------------------------------------------------- Appendix II:9

    As figure II.17 shows, the Chicago Housing Authority was awarded a
    $25 million HOPE VI implementation grant in fiscal year 1996 for
    Robert Taylor Homes B.  The housing authority submitted its
    revitalization plan for the site in January 1998 and is awaiting
    HUD's approval.  Demolition started in May 1998, and the project's
    completion is expected in 2006.

       Figure II.17:  Time Line for
       Robert Taylor Homes B

       (See figure in printed
       edition.)

    Background

    Chicago's State Street Corridor, a 4-mile stretch of public housing,
    is the nation's largest, most densely populated public housing
    enclave, consisting of 8,215 units concentrated in five developments.
    Robert Taylor Homes is one of the developments; it is divided into
    two subdevelopments, A and B, which together contain over 4,300 units
    in 28 detached, 16-story buildings.  Robert Taylor Homes B is a
    mile-long, 74-acre site, built between 1959 and 1963 and consisting
    of 2,400 units in 16 high-rise buildings.  The development contains
    some of the poorest census tracts in America.  The community
    surrounding Robert Taylor has lost more than half of its population
    since the development was built, reportedly because former residents
    were afraid of living near the crime-plagued Robert Taylor Homes and
    other public housing in the State Street Corridor.

    The property's buildings are poorly designed, building systems are
    severely deteriorated, and major building systems chronically fail.
    Inadequate security systems and open-air galleries on each floor
    enhance opportunities for crime.  Obsolete heating and electrical
    systems, weather-damaged elevator equipment, deteriorated hot water
    tanks, and inadequate sanitary waste lines regularly fail, exposing
    the housing authority to extraordinary costs to restore and maintain
    buildings that do not meet minimal standards of habitability.
    Vacancy rates averaged 33 percent in the buildings.  The development
    is known not only for its concentrated poverty but also for
    gang-related criminal activities.  According to the revitalization
    plan, before community escorts began to walk children from the
    development to school, parents kept the children at home for fear
    that they would be shot in the cross fire of gang warfare.

    HOPE VI Selection

    The Chicago Housing Authority received a $25 million implementation
    grant in fiscal year 1996 for Robert Taylor Homes B.  The plan is to
    vacate and demolish five buildings (761 units) and purchase or build
    251 replacement units off-site in the surrounding community.  These
    replacement units are to be dispersed among and indistinguishable
    from market-rate housing in the community.  The housing authority
    plans to, first, acquire existing units; second, rehabilitate
    existing units; and third, if necessary, construct new replacement
    units.

    The housing authority has also earmarked HOPE VI funds to provide
    community and support services to residents relocated from Robert
    Taylor Homes B.  Such services include family transition assistance,
    job and computer training, social services, and other assistance as
    needed to help integrate the residents with their new surroundings.

    The HOPE VI grant is the first phase of a long-term revitalization
    plan that the Chicago Housing Authority is developing in conjunction
    with the city of Chicago.  Ultimately, the housing authority intends
    to demolish the Robert Taylor high-rises and build a light industrial
    park on the vacated land.  The housing authority plans to apply for
    future HOPE VI grants and leverage funds from private developers.
    According to the housing authority's estimates, it will take 10 years
    to vacate Robert Taylor and even longer to revitalize the community.

    Factors Contributing to Success and Delays

    Progress in revitalizing Robert Taylor Homes B will be limited until
    HUD approves the housing authority's plan.  Moreover, according to
    the housing authority's executive director, implementation will take
    a long time, given the complexity of the redevelopment plan.  The
    housing authority is appealing a judgment order on its emergency
    motion to exempt HOPE VI projects from an earlier court ruling
    limiting its development efforts in census tracts with comparatively
    high percentages of minority residents.\4 Because the intent of the
    earlier ruling is to prevent the housing authority from concentrating
    low-income households in certain census tracts, the housing authority
    is basing its request for an exemption on the premise that the funds
    are to be used to redevelop troubled public housing sites and
    neighborhoods, not to increase the number of low-income households.
    According to the housing authority, if the appeal is not successful
    the schedule for redevelopment will be lengthened.

    Obstacles to relocating large numbers of families from Robert Taylor
    Homes B could also delay development.  For example, the
    revitalization plan states that the general community may oppose
    relocation because it perceives that residents of Robert Taylor are
    likely to be involved in gangs, violence, and drug trafficking.
    Problems with crossing gang lines could endanger families, especially
    those with teenage children, and could also present obstacles to
    relocation.

    One factor that may facilitate relocation is the housing authority's
    work with the local advisory council of residents at Robert Taylor
    Homes B.  For example, the housing authority involved the council in
    its planning process and gained the council's support for its
    revitalization plan.

    Current Status

    The housing authority has selected the first three of the five
    buildings that HUD has approved for demolition at Robert Taylor Homes
    B.  According to the revitalization plan, the housing authority is
    vacating the buildings and relocating the residents in the
    surrounding community.  As of January 1, 1998, approximately 25
    percent of the affected families (112 of 522) had been relocated to
    housing of their choice.  The majority of the residents have chosen
    Section 8 vouchers for relocation rather than moving to another
    Robert Taylor building.  A centrally located community center is
    being renovated with funds from the housing authority, the city, and
    local community groups.  The center, which is scheduled to open in
    the summer of 1998, will house community and support services for the
    residents of Robert Taylor Homes B and other public housing
    developments in the community.  On May 18, 1998, demolition began on
    the first building.

       Figure II.18:  Public Housing
       on the State Street Corridor

       (See figure in printed
       edition.)

    --------------------
    \4 Under a court-imposed order, the Chicago Housing Authority is not
    allowed to build in "impacted areas," defined as any census tract in
    which more than 30 percent of the residents are not white, unless it
    simultaneously builds in other areas.

       ARVERNE/EDGEMERE HOUSES
       FAR ROCKAWAY, NEW YORK
    ------------------------------------------------------- Appendix II:10

    As figure II.19 shows, progress at Arverne/Edgemere Houses has been
    slow because the HOPE VI implementation grant was originally awarded
    to another site--Beach 41st Street Houses.  All three sites are in
    Far Rockaway, a peninsula on the southern edge of Queens, south of
    Jamaica Bay and Kennedy Airport.  Some progress is now being made at
    the new site.

       Figure II.19:  Time Line for
       Arverne/Edgemere Houses

       (See figure in printed
       edition.)

          BACKGROUND
    ----------------------------------------------------- Appendix II:10.1

    The Arverne and Edgemere public housing sites are across the street
    from each other and less than a mile from the Beach 41st Street site.
    The developments are about a 1-hour commute from downtown Manhattan.
    The economically distressed area lacks the mix of neighborhood
    services and amenities needed for a thriving, vibrant community.  In
    addition, the high density and current configuration of the buildings
    have contributed to vandalism and other criminal activity.  According
    to a housing authority report, drive-by shootings and drug
    trafficking have exacerbated older residents' fears and distrust of
    the young people, especially the young men, living at the sites.

    The Beach 41st Street development was completed in 1970 and had 712
    units.  It was the first site selected by the New York City Housing
    Authority to receive a HOPE VI grant because it was among the most
    economically distressed sites in the city.  In addition, HUD
    officials hoped that the HOPE VI effort would push the city to
    implement a long-standing urban renewal plan to revitalize the Far
    Rockaway section.

    The Arverne site, with 418 units, was completed in 1951; the Edgemere
    site, with 1,395 units, was completed in 1961.  Both sites are
    physically isolated from viable community institutions and resources,
    such as retail outlets, banks, shopping markets, and churches.  Both
    jobs and public transportation are scarce in the area.

          HOPE VI SELECTION
    ----------------------------------------------------- Appendix II:10.2

    The Edgemere site received a $47.7 million HOPE VI implementation
    grant in December 1996.  The funding was transferred from Beach 41st
    Street Houses after an impasse over the residents' role in the
    planning process could not be overcome.  The Beach 41st Street
    residents believed they had veto power over the process.  Faced with
    the possibility of the funds being recaptured, the housing authority
    requested that HUD allow a transfer of funds to assist with the
    revitalization of 500 units at Edgemere.  The Arverne and Edgemere
    sites had previously received a $400,000 planning grant in fiscal
    year 1995.  In fiscal year 1996, the two sites received a $20 million
    implementation grant.

    Because the housing authority's revitalization plan considered the
    Arverne and Edgemere sites as part of the same HOPE VI development,
    HUD combined the HOPE VI grants for the two sites.  In addition to
    these funds, the revised implementation plan for the two sites
    assumes about $15.1 million in housing authority funds to cover
    additional development costs.  About $5 million in low-income housing
    tax credits will also be sought to help construct a separate 120-unit
    housing complex for the elderly on a nearby parcel of land donated by
    the city.  In addition, the plan assumes that the city will provide
    about $2.2 million to satisfy the 15-percent matching requirement for
    support services.

    The community and support services for Arverne and Edgemere are
    designed to provide education and social support for residents
    seeking employment--especially those who are in danger of losing
    their benefits through welfare reform.  The housing authority has
    identified numerous community and support service providers that it
    expects to contract with once funds become available.  For example,
    the Youth Policy Institute will help residents develop and implement
    plans for training, employment, and self-sufficiency.  Communities in
    Schools will coordinate educational programs for residents.

    Using funds from the HOPE VI grant and citywide programs, the housing
    authority has also developed a plan for creating resident-owned
    businesses, intended to make meaningful economic development
    opportunities available to HOPE VI residents.  Elements of the plan
    include providing access to entrepreneurial training and capacity
    building, providing access to the housing authority's citywide
    contractor training and Make Your Own Business programs, and offering
    ongoing technical assistance and support for residents who have
    completed the contractor training or business programs.

          FACTORS CONTRIBUTING TO
          DELAYS
    ----------------------------------------------------- Appendix II:10.3

    HUD's fiscal year 1996 decision to require demolition precipitated a
    series of events that significantly delayed progress.  To satisfy
    this requirement--that at least one building be removed from a
    site--the Beach 41st Street architect proposed removing several of
    the top floors from each of the four 13 story buildings.  The number
    of units removed would have been equal to the number in one whole
    building.  According to a housing authority official, this solution
    to the demolition requirement would have been more expensive than
    tearing down the buildings completely.  Furthermore, the concept of
    demolition was opposed by the Beach 41st Street site's resident
    council, which was concerned about who would be allowed to come back
    after the demolition.  Resident council members also viewed
    themselves as the housing authority's partner and believed that they
    should have veto power over decisions that were being made.

    Although HUD, the housing authority, and the residents negotiated for
    6 months, they could not reach agreement, and in December 1996, at
    the request of the housing authority, HUD transferred the HOPE VI
    funds to Edgemere.  The housing authority then included demolition in
    the plans for Edgemere's redevelopment, even though New York City's
    political officials were against the concept.  The housing authority
    determined that the best way to meet the demolition requirement would
    be to remove some top floors from each of three nine-story buildings,
    thereby eliminating about 100 units.  Subsequently, the housing
    authority withdrew this plan and proposed to convert dwelling units
    on the first floor to create space for commercial and community
    services.  This approach would also have removed about 100 units.
    The issue became moot when the Congress, in the fiscal year 1998
    appropriations act for the departments of Veterans Affairs and
    Housing and Urban Development and independent agencies, gave the New
    York City Housing Authority the option of not following any HOPE VI
    demolition requirements and the housing authority abandoned the plans
    for demolishing the 100 units.  Subsequently, the housing authority
    proposed removing 32 units from 8 buildings to make room for interior
    stairwells in order to meet the city's fire code.

          CURRENT STATUS
    ----------------------------------------------------- Appendix II:10.4

    In June 1997, the housing authority submitted its revitalization plan
    to HUD.  HUD returned the plan with comments for the housing
    authority to address.  In February 1998, the housing authority
    submitted a revised plan that HUD expects to approve.  Both housing
    authority and HUD officials believe that it will take at least 18
    months to hire an architect and a developer before any rehabilitation
    work can start.  The housing authority can begin to implement the
    community and support service plan after the revitalization plan
    receives HUD's final approval.  As of June 1998, HUD had not approved
    the plan.

       Figure II.20:  Arverne and
       Edgemere Sites

       (See figure in printed
       edition.)

    HOPE VI DEVELOPMENTS, FISCAL YEARS
    1993-97
    ========================================================= Appendix III

                                                                                      Number      Low-
                                                                          Demoliti        of    income                                  Number of   Total
                Name of                  Amount of              Demoliti        on    public   housing  HOME   No income   Number of  homeownersh  number
    HOPE VI     developmen       Award     HOPE VI       Total        on  complete   housing       tax  fund  restrictio      rental           ip      of
    city        t                 year       grant     funding   planned         d     units   credits     s          ns       units        units   units
    ----------  ----------  ----------  ----------  ----------  --------  --------  --------  --------  ----  ----------  ----------  -----------  ------
    Atlanta     Techwood/           93  $42,562,63  $84,162,84      1081       776       390       180     0         360         930            0     930
                 Clark                           5           7
    Baltimore   Lafayette           94  $49,663,60  $87,808,60       843       843       311         0     0           0         311           27     338
                 Courts                          0           0
    Baltimore   Lexington           95  $22,702,00  $70,782,59       677       677       303         0     0           0         303          100     403
                 Terrace                         0           6
    Boston      Mission             93  $49,992,35  $92,910,70       807       227       535         0     0           0         535            0     535
                 Main                            0           7
    Boston      Orchard             95  $30,400,00  $81,862,20       528       246       490         0     0           0         490           45     535
                 Park                            0           6
    Camden      McGuire             94  $42,177,22  $43,205,33       176         0       253         0     0           0         253            0     253
                 Gardens                         9           3
    Charlotte   Earle               93  $41,740,15  $58,289,97       386       280       294        50     0         100         444           40     484
                 Village                         5           1
    Chicago     Cabrini             94  $50,000,00  $73,600,00       725       398       493         0     0           0         493            0     493
                 Homes                           0           0
                 Extension
    Cleveland   Outhwaite           93  $50,000,00  $63,960,00         0         0       368         0     0           0         368            0     368
                 Homes/                          0           0
                 King
                 Kennedy
    Cleveland   Carver              95  $21,000,00  $74,430,82       445         0       322         0     0         220         542          200     742
                 Park                            0           8
    Columbus    Windsor             94  $42,053,40  $52,092,73       442       442       432         0     0           0         432            0     432
                 Terrace                         8           3
    Dallas      Lakewest            94  $26,600,00  $26,780,00         0         0       335         0     0           0         335            0     335
                                                 0           0
    Denver      Quigg               94  $26,489,28  $32,189,28        20         0       400         0     0           0         400            0     400
                 Newton                          8           8
    Detroit     Parkside            95  $47,620,22  $100,650,1       575       362       570         0     0           0         570          350     920
                 Homes                           7          51
    Detroit     Jefferies           94  $49,807,34  $96,962,47      1052       992       402         0     0           0         402            0     402
                 Homes                           2           0
    El Paso     Kennedy             95  $36,724,64  $39,584,64       124       124       364         0     0           0         364           50     414
                 Brothers                        4           4
    Houston     APV                 93  $36,602,76  $59,753,52       677       677       600         0     0           0         600            0     600
                                                 1           7
    Indianapol  Concord/            95  $29,999,01  $30,734,74       310       224       170        50     0           0         220            0     220
     is          Eagle                           0           4
    Kansas      Guinotte            93  $47,579,80  $51,317,26       418       262       384         0     0           0         384           28     412
     City        Manor                           0           0
    Los         Pico Aliso          93  $50,000,00  $51,747,34       577       243       414         0     0           0         414            7     421
     Angeles                                     0           9
    Memphis     LeMoyne             95  $47,762,18  $48,437,18       824         0       458         0     0           0         458            0     458
                 Gardens                         2           2
    Milwaukee   Hillside            93  $45,689,44  $47,389,44       119       119       456         0     0           0         456            0     456
                 Terrace                         6           6
    New Haven   Elm Haven           93  $45,331,59  $83,997,49       462        45       368         0     0          41         409           46     455
                                                 3           0
    New         Desire              94  $44,255,90  $131,337,9      1160       265       600         0     0         400       1,000            0   1,000
     Orleans                                     8          08
    Newark      Walsh               94  $49,996,00  $59,786,30       330       330       498         0     0           0         498            0     498
                 Homes                           0           0
    Oakland     Lockwood            94  $26,510,02  $27,660,02        16        16       438         0     0           0         438            0     438
                                                 0           0
    Philadelph  Richard             93  $50,000,00  $57,474,00       771       323       408         0     0           0         408            0     408
     ia          Allen                           0           0
    Pittsburgh  Allequippa          93  $39,704,19  $127,548,9      1647         0       500         0     0         300         800           52     852
                 Terrace                         0          43
    Pittsburgh  Manchester          95  $7,695,700  $21,601,67       104       104        45         0     0          22          67           51     118
                                                             6
    Puerto      Crisantemo          94  $50,000,00  $87,092,89       456       416       580         0     0           0         580          635   1,215
     Rico        s                               0           6
    San         Springview          94  $48,810,29  $51,475,71       421       421       421         0     0           0         421          110     531
     Antonio                                     4           1
    San         Mirasol             95  $48,285,50  $50,765,50       500         0       500         0     0           0         500            0     500
     Antonio                                     0           0
    San         Bernal/             93  $49,992,37  $61,162,89       484       484       353         0     0           0         353            0     353
     Francisco   Plaza                           7           1
    San         Hayes               95  $22,055,00  $38,291,50       294       294       117         0     0          77         194            0     194
     Francisco   Valley                          0           0
    Seattle     Holly Park          95  $48,616,50  $176,640,8       893       400       400       384     0          16         800          400   1,200
                                                 3          87
    Springfiel  John Jay            94  $19,775,00  $31,231,50       599       599       300         0     0           0         300          110     410
     d           Homes                           0           0
    St. Louis   Darst-              95  $47,271,00  $47,987,75       758         0       519         0     0           0         519            0     519
                 Webbe                           0           9
    Washington  Ellen               93  $25,075,95  $27,989,22       134       134       134         0     0          20         154            0     154
     , DC        Wilson                          6           0
    =====================================================================================================================================================
    Total       Total            93-95  $1,510,541  $2,450,696    19,835    10,723    14,925       664     0       1,556      17,145        2,251  19,396
                                              ,118        ,082
    Atlanta     Perry               96  $20,400,00  $41,865,28       944         0       418         0     0           0         418            0     418
                 Homes                           0           5
    Baltimore   Hollander           96  $20,700,00  $86,947,49      1000         0       265         0     0           0         265           50     315
                 Ridge                           0           0
    Charlotte   Dalton              96  $24,501,68  $41,898,47       246        83       186         0     0          52         238          131     369
                 Village                         4           6
    Chester     Lamokin             96  $15,349,55  $36,467,35       216         0       200         0     0           0         200           50     250
                 Village                         4           4
    Chicago     ABLA (Brks          96  $24,683,25  $30,011,27       450         0       226         0     0           0         226            0     226
                 Ext)                            0           5
    Chicago     Robert              96  $25,000,00  $29,982,28       787       157       251         0     0           0         251            0     251
                 Taylor                          0           0
                 Homes B
    Chicago     Henry               96  $18,635,30  $26,196,15       746         0       150         0     0           0         150            0     150
                 Horner                          0           1
    Cleveland   Riverview           96  $29,733,33  $29,733,33       117         0       155         0     0           0         155            0     155
                                                 4           4
    Detroit     Herman              96  $24,624,16  $32,612,16      1400       700       672         0     0           0         672            0     672
                 Gardens                         0           0
    Holyoke     Jackson             96  $15,000,00  $28,298,00       219         0       100         0     0          41         100          172     272
                 Parkwy                          0           0
    Jacksonvil  Durkeevill          96  $21,952,00  $36,372,00       280       280       101         0     0         100         201          258     459
     le          e                               0           0
    Kansas      T.B.                96  $13,000,00  $33,943,18        24         0       210         0     0           0         210            0     210
     City        Watkins                         0           3
    Louisville  Cotter and          96  $20,000,00  $130,300,0      1116      1066       569         0     0         231         800          450   1,250
                 Lang                            0          00
    New         St. Thomas          96  $25,000,00  $42,300,00       735         0       390         0   190         195         775            0     775
     Orleans                                     0           0
    New York    Arverne/            96  $68,600,95  $95,031,98         0         0     1,813        88     0           0       1,901            0   1,901
                 Edgemere                        2           1
    Pittsburgh  Bedford             96  $26,792,76  $74,879,76       460         0       260       160     0         240         660            0     660
                 Additions                       4           4
    San         North               96  $20,400,00  $20,400,00       229         0       229         0     0         126         355            0     355
     Francisco   Beach                           0           0
    Spartanbur  Tobe                96  $15,020,36  $26,975,89       266         0       118       100     0           0         218           50     268
     g           Hartell/                        9           9
                 Extension
    Tucson      Connie              96  $14,969,98  $23,269,98       200         0       190        20     0          40         250           60     310
                 Chambers                        0           0
    Wilmington  Robert S.           96  $11,620,65  $16,100,59       250       125       140         0     0          50         190            0     190
                 Jervay                          5           8
    =====================================================================================================================================================
    Total       Total            93-96  $1,966,525  $3,334,281    29,520    13,134    21,568     1,032   190       2,631      25,380        3,472  28,852
                                              ,120        ,292
    Allegheny   McKees              97  $15,847,16  $68,201,13       182         0        92        54     0          60         206            0     206
     County,     Rocks                           0           5
     PA          Terrace
    Baltimore   Murphy/             97  $31,325,39  $58,610,90       793         0        75               0           0          75          185     260
                 Julian                          5           1
    Buffalo     Lakeview            97  $28,015,03  $124,396,4       554         0       570         0     0           0         570           50     620
                 Homes                           8          60
    Chester     Oak Street          97  $16,434,20  $34,325,52       192         0       182         9     0           0         191           70     261
     County                                      0           0
    Elizabeth,  Pioneer/            97  $28,903,75  $91,874,72       655         0       328               0         380         708            0     708
     NJ          Migliore                        5           3
    Helena      Enterprise          97  $1,124,300  $1,306,300        14        14        14               0           0          14            0      14
                 Drive
    Houston     Allen               97  $21,286,47  $50,132,23         0         0       500               0           0         500            0     500
                 Parkway                         0           9
                 Village
    Jersey      Curries             97  $32,173,53  $105,983,8       621         0       582        24     0          24         630            0     630
     City        Woods                           2          56
    Kansas      Heritage            97  $6,570,500  $15,429,13        79         0        88               0          72         160            0     160
     City        House                                       7
    Knoxville   College             97  $22,064,12  $37,168,17       320         0       130               0           0         130           75     205
                 Homes                           5           5
    Nashville   Vine Hill           97  $13,563,87  $17,913,44       128         0       152               0         135         287            0     287
                 Homes                           6           2
    Orlando     Colonial            97  $6,800,000  $16,400,00         0         0        50               0          60         110           50     160
                 Park                                        0
    Paterson    Christophe          97  $21,662,34  $116,947,9       498         0       137               0         190         327            0     327
                 r                               4          32
                 Columbus
                 Homes
    Peoria      Col. John           97  $16,190,90  $24,850,56       321         0       203               0           0         203            0     203
                 Warner                          7           3
                 Homes
    Philadelph  Schuylkill          97  $26,400,95  $53,387,12                   0       150        25   115          10         300            0     300
     ia          Falls                           1           0
    Portsmouth  Ida                 97  $24,810,88  $78,097,83       663         0        35        70     0          12         117           81     198
                 Barbour                         3           6
    Richmond    Blackwell           97  $26,964,11  $98,031,90       440         0       185       155     0         246         586            0     586
                                                 8           5
    San         Valencia            97  $23,230,64  $23,230,64                   0       222               0           0         222           38     260
     Francisco   Gardens                         1           1
    St.         Jordan              97  $27,000,00  $67,043,18        59         0       400               0           0         400            0     400
     Petersburg  Park                            0           6
    Stamford,   Southfield          97  $26,446,06  $54,007,52       502         0       200               0         155         355           15     370
     CT          Village                         3           7
    Tampa       Ponce de            97  $32,500,00  $118,188,0      1300         0       900               0         307       1,207           50   1,257
                 Leon/                           0          88
                 College
    Washington  Valley              97  $20,300,00  $47,734,90       403         0       148               0         166         314            0     314
     , DC        Green/                          0           2
                 Skytower
    Winston-    Kimberly            97  $27,740,85  $42,805,62       205         0       615               0           0         615            0     615
     Salem, NC   Park                            0           4
                 Terrace
    =====================================================================================================================================================
    Total       Total            93-97  $2,463,880  $4,680,348    37,449    13,148    27,526     1,369   305       4,448      33,607        4,086  37,693
                                              ,228        ,504
    -----------------------------------------------------------------------------------------------------------------------------------------------------

    (See figure in printed edition.)Appendix IV
    COMMENTS FROM THE DEPARTMENT OF
    HOUSING AND URBAN DEVELOPMENT
    ========================================================= Appendix III

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    The following are GAO's comments on the Department of Housing and
    Urban Development's letter dated June 19, 1998.

       GAO COMMENTS
    ------------------------------------------------------- Appendix III:1

    1.  We revised our report accordingly.

    2.  We revised our report to indicate that 11 positions are being
    restored.  The HUD official quoted in our draft report told us that
    even if the Department hired highly experienced employees, it would
    take a number of months to train them in the details of underwriting
    HOPE VI sites.  This official and others we spoke with emphasized
    that regardless of the experience and competency of the individuals
    hired, it takes time to learn the policies and procedures involved in
    structuring public/private financing.  We removed the statement in
    the body of the draft report that gaining such expertise could take a
    year, but we continue to believe that it will take time.

    3.  We agree that the HOPE VI sites are unique and that the program
    should not be constrained in ways that would inhibit creativity.  Yet
    even though the needs of the communities and residents vary by site,
    the types of community and support service programs offered at the
    sites we visited (e.g., day care, after-school care, equivalency
    degree, job training, and job placement programs) were consistent
    enough to allow the collection of national data on the outcomes of
    these programs.  Accordingly, we have retained our recommendation to
    this effect.

    4.  No change required.

    5.  We revised our report to state that the more recently selected
    sites are smaller and have greater potential for leveraging than the
    original sites.  We agree that the recently selected sites are
    suffering from structural and social distress and are likely to be
    among the most distressed sites in the chosen cities.  But unlike
    some of the early sites, which have not been able to attract
    leveraging partners, the sites chosen since the criteria for
    participation in the program were expanded in 1996 typically have
    been smaller and have been located in areas where private interests
    are more willing to contribute funding.  We revised our report to
    clarify this point.

    6.  We were aware of the study conducted by HUD's Office of Policy
    Development and Research and summarized the results of its first
    phase in our February 1997 report.\1 We added information to this
    report on the results of the first phase of this study and noted that
    the second phase is expected to begin in the summer of 1998.

    --------------------
    \1 Public Housing:  Status of the HOPE VI Demonstration Program
    (GAO/RCED-97-44, Feb.  25, 1997).

    *** End of document. ***