Advocate Guide to Public Housing

From the National Low Income Housing Coalition

The Department of Housing and Urban Development's (HUD) Public Housing program is administered by the Office of Public and Indian Housing. Public housing was created in the 1937 Housing Act, one of the landmark legislative victories of the New Deal. Public housing is owned and operated by public housing authorities (PHAs) that are chartered by the states in which they operate and are governed by locally-appointed or elected Boards of Commissioners. There are nearly 14,000 public housing developments operated by 3,050 PHAs containing more than 1.2 million units.

PHAs have historically not received adequate annual appropriations from Congress to operate (through the public housing operating subsidy) and sustain (through the public housing capital fund) the public housing stock. When the public housing stock deteriorates, it can become a candidate for demolition. When public housing units are demolished, they are often not replaced at the same rate. There is a direct connection between adequate annual appropriations for public housing and the long-term efficacy of these units.

Program History - Established by the 1937 Housing Act, a moratorium on public housing was declared in 1974. At that point, housing policy shifted to subsidize the private sector's involvement in affordable housing through the Section 8 program. Federal funds specifically for adding to the public housing stock were last appropriated in 1994, but little public housing has been built since the early 1980s. Federal law capped the number of public housing units at the number each PHA operated on October 1, 1999.

Program Beneficiaries - Public housing is home to several million people. About 43% are families with children, 19% are elderly households without children and the rest are households headed by people with disabilities or those without children. More than half of these households are headed by people of color and 38% of these households are headed by women. The demand for public housing far exceeds the supply. In many large cities, where affordable housing needs are most severe, waiting list times can be up to 10 years.

Access to public housing is means-tested. Low income (households earning 80% or less of the area median) is the threshold for eligibility. However, the income categories of those eligible to live in public housing are quite complex. Federal preferences that allowed those with the most serious housing problems, i.e., the lowest income, to go to the top of the public housing waiting list were repealed in the mid-1990s. The assessment was that very poor people were concentrated in public housing, and with them, a host of social problems. Today, PHAs can limit the number of extremely low income households (earning 30% or less of area median) to 40% of new admissions. They also can establish preferences for admission that will favor more prosperous members of the eligible population or favor other specific populations (such as the elderly, full-time workers, domestic violence victims and people who are homeless or who are at risk of becoming homeless).

Structure - Like other federal housing assistance programs, residents of public housing pay the highest of: (1) 30% of their monthly adjusted income; (2) 10% of their monthly gross income; (3) their welfare shelter allowance; or (4) a PHA-established minimum rent of up to $50.
Most PHAs are required to complete annual and five-year plans detailing many aspects of their housing programs, who is assisted and how the programs will be administered. These plans are submitted to HUD. The five-year plan must include the PHA's mission and a statement of goals and objectives to meet its mission. The annual plans must be developed in consultation with a Resident Advisory Board (RAB) (see Resident Participation chapter) and be consistent with the applicable Consolidated Plan. Notice of plan development and a public hearing are required before a plan can be submitted to HUD.

Funding - Public housing agencies receive two annual grants from HUD - the Operating Fund and the Capital Fund. The Operating Fund pays for operating costs that exceed the rent payments collected from residents. Major operating costs include building maintenance, utilities, services for residents and PHA employee salaries and benefits. The FY06 Operating Fund appropriation was $3.6 billion. The FY06 appropriated level only funds PHAs at 85.5% of their actual operating needs. The amount the President has requested for FY07 would only fund PHAs at 75%-79% of operating fund needs.

The Operating Fund is in the midst of a major change. As a result of the 1998 Quality Housing and Work Responsibility Act, HUD published a final new operating subsidy formula in September 2005. The new formula was to become operational in October 2006. But, because HUD delayed issuing guidance on the new formula, and because there was considerable disagreement over HUD's final Operating Fund rule, HUD announced in 2006 that implementation would be delayed at least until April 2007. The Senate FY07 HUD funding bill would have delayed implementation until October 2007. It is unclear if a delay in implementation will be addressed in the FY07 joint funding resolution (see section on FY07 joint funding resolution).

The new operating formula will base an agency's operating subsidy on a property-by-property basis, rather than the current PHA-by-PHA basis. If, compared to the current formula, a PHA gains operating subsidy with the new formula, the addition will be phased in over two years. Conversely, if a PHA loses subsidy under the new formula compared to the old, then the loss can only be tempered (and potentially arrested) by that PHA's conversion to asset-based management. After a gradual implementation of losses, all will be imposed by October 1, 2011.

The Capital Fund is also appropriated annually by Congress and is distributed by HUD to PHAs based on a formula. The Capital Fund can be used for modernization, including developing, rehabilitating and demolishing units, replacement housing and management improvements. The Capital Fund was funded at $2.4 billion in FY06 and the President only requested $2.1 billion for FY07. There is a more than $20 billion backlog for Capital Fund repairs in public housing. Funding for public housing in FY07 will be determined by the FY07 joint funding resolution (see section on FY07 joint funding resolution).

Since FY01, funding for public housing has decreased by more than $1 billion. This includes cuts to operating, capital and HOPE VI funds and the elimination of the drug elimination program.
Issues - HUD's recent proposals to redefine public housing have largely failed. In the 109th Congress, HUD's State and Local Housing Flexibility Acts (H.R. 1999 and S. 771), which would have given most housing agencies the ability to change rent policies away from income-based rents, alter income targeting away from the lowest income households, and impose time limits on assistance and other reforms under the guise of "deregulation" proved to be a non-starter in Congress.

In 2006, a bipartisan group of House Financial Services Committee members introduced H.R. 5443 as an antidote to H.R. 1999. H.R. 5443, the Section 8 Voucher Reform Act of 2006 (SEVRA), provides some reforms to the public housing and voucher programs without exposing the programs to widespread deregulation.

For public housing, SEVRA proposes the following changes:

Rent Simplification. While keeping rents tied to incomes and retaining the "Brooke Amendment," which caps rents of public and assisted-housing residents at generally 30% of adjusted gross income, SEVRA seeks to simplify the rent-setting process for both residents and PHA staff. For example, recertification of incomes would only be required at least every three years, instead of the current annual recertification, for elderly and disabled families on fixed incomes (at least 90% of their incomes from Social Security, SSI or some similar source). Interim income recertifications would be required for income decreases of $1,500; interim income recertifications for earnings increases would not be required. The bill would also increase the standard deduction for elderly and disabled households to $750 from the current $400, while narrowing individual medical deductions to those expenses exceeding 10% of income, up from the current 3% of income. The bill would also allow 10% of all employment earnings to be deducted from income.

Moving to Work. The bill would increase, from the current 30 total PHAs to 40 PHAs at any given time that are eligible to participate in the public housing Moving to Work (MTW) program. (The current MTW demonstration would become permanently authorized by SEVRA). Under MTW, a PHA may combine its public housing operating, capital and voucher funds to assist substantially the same total number of families as otherwise would have been served. MTW allows PHAs to change rent policies (for example, rents may no longer be income based but must merely be "reasonable"), impose time limits and remove current income-targeting standards. Under SEVRA's MTW proposal, up to 90% of assistance could go to households with incomes up to 60% of area median. Because many of the original 30 MTW demonstration sites are still running their initial demonstrations, adequate evaluation of the MTW has not occurred and, critically, the potential for harm to residents and the long-term health of the PHAs is at stake. Therefore, NLIHC believes the MTW program is not ready for expansion or permanent authorization.

A revised form of SEVRA is expected to be introduced in 2007.

Capital Fund. To raise the revenue to address the backlog, the Administration continues to urge PHAs to use the Capital Fund to leverage private investment dollars. Advocates remain concerned that, with the limited amount of resources made available to PHAs, PHAs may have difficulty repaying debt accrued from private financing, which could lead to the threat of foreclosure. Congress must also appropriate sufficient capital funding.

Operating Fund. The new Operating Fund subsidy formula must be implemented cautiously and with adequate consultation with residents and PHAs. While some PHAs will gain operating subsidy, those that are in a position to lose must be given every reasonable opportunity to comply with the new framework. Congress must also appropriate sufficient operating funding.

What Advocates Can Do

Advocates should partner with public housing residents and PHAs to promote the benefits and positive aspects of public housing to convince policy makers and the public that public housing is worth the investment needed to preserve and improve it. Public housing should be funded at the level necessary to do so.

Advocates should also:

Support adequate funding for public housing operating and capital funds.

Oppose expansion of the Moving to Work program.

Participate in the development of your PHA's annual and five-year plans and support the participation of PHA residents in these plans.

Oppose efforts to diminish the numbers of PHAs that must complete annual and five-year PHA plans.

Question proposals to demolish public housing without replacing it or considering rehabilitation.

Demand assurances that residents of demolished units will be guaranteed suitable, affordable housing.

Determine the what impact the new operating formula will have on their local PHA and work to ensure any losses do not jeopardize the public housing units and that any subsidy gains positively impact the housing options of the lowest income people.

For More Information : National Low Income Housing Coalition • 202-662-1530 • www.nlihc.org
National Housing Law Project • 510-251-9400 • www.nhlp.org

ENPHRONT (Everywhere and Now Public Housing Residents Organizing Nationally Together) • 917-577-1368 • www.enphront.com