HCDA -- S. Rep. 102-332 (7/23/92)


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                =================================

                                                 CALENDAR NO. 558

102d Congress                 SENATE              REPORT
2d Session                                        102-332

                NATIONAL AFFORDABLE HOUSING ACT
                      AMENDMENTS OF 1992

                          R E P O R T
                             of the
        COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                      UNITED STATE SENATE

                          TO ACCOMPANY
                            S. 3031
                         together with
                        ADDITIONAL VIEWS

              July 23, 1992.-Ordered to be printed

                   --------------------------

                 U.S. GOVERNMENT PRINTING OFFICE

57-474                  WASHINGTON: 1992

             =======================================

        COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

           DONALD W. RIEGLE, Jr., Michigan, Chairman

ALAN CRANSTON, California
PAUL S. SARBANES, Maryland
CHRISTOPHER J. DODD, Connecticut
ALAN J. DIXON, Illinois
JIM SASSER, Tennessee
TERRY SANFORD, North Carolina
RICHARD C. SHELBY, Alabama
BOB GRAHAM, Florida
TIMOTHY E. WIRTH, Colorado
JOHN F. KERRY, Massachusetts
RICHARD H. BRYAN, Nevada

JAKE GARN, Utah
ALFONSE M. D'AMATO, New York
PHIL GRAMM, Texas
CHRISTOPHER S. BOND, Missouri
CONNIE MACK, Florida
WILLIAM V. ROTH, Jr., Delaware
PETE V. DOMENICI, New Mexico
NANCY LANDON KASSEBAUM, Kansas
ARLEN SPECTER, Pennsylvania

       Steven B. Harris, Staff Director and Chief Counsel
      Lamar Smith, Republican Staff Director and Economist
          Jeannine Jacokes, Professional Staff Member
                     Matt Roberts, Counsel
                     Kevin Chavers, Counsel
                    Edward M. Malan, Editor

                --------------------------------

SUBCOMMITTEE ON HOUSING AND URBAN AFFAIRS

              ALAN CRANSTON, California, Chairman

JIM SASSER, Tennessee
TERRY STANFORD, North Carolina
BOB GRAHAM, Florida
JOHN F. KERRY, Massachusetts
RICHARD H. BRYAN, Nevada
PAUL S. SARBANES, Maryland
CHRISTOPHER J. DODD, Connecticut
RICHARD C. SHELBY, Alabama

ALFONSE M. D'AMATO, New York
PHIL GRAMM, Texas
CHRISTOPHER S. BOND, Missouri
CONNIE MACK, Florida
WILLIAM V. ROTH, Jr., Delaware
PETE V. DOMENICI, New Mexico
NANCY LANDON KASSEBAUM, Kansas
ARLEN SPECTER, Pennsylvania

                 Bruce J. Katz, Staff Director
          Eileen Gallagher, Professional Staff Member
                      Nancy Smith, Counsel

                      Cheryl Fox, Counsel
            Chandra Williams, Legislative Assistant
                  Kris Warren, Office Manager
           Garth B. Rieman, Republican Staff Director
           Kristen Siglin, Professional Staff Member
           Fallie E. Bolen, Professional Staff Member

                              (II)

                        C O N T E N T S

                                        Page Number

Legislative history of the act               1

The affordable housing crisis                4

Summary of the committee bill                8

Explanation of the legislation               10

Title I-General Provisions and policies      10

Title II-Investment in affordable housing    15

Title III:

     Subtitle A. Homeownership initiatives   27

     Subtitle B. FHA and
          secondary mortgage market          29

Title IV-HOPE                                41

Title V-Housing assistance                   45

     Subtitle A. Public and Indian housing   45

     Subtitle B. Low-income rental assistance 58

     Subtitle C. General provisions and
          other assistance programs          65

Title VI-Preservation                        66

     Subtitle A. Prepayment of mortgage
          insured under the
          National Housing Act               66

     Subtitle B. RESTORE for
          troubled multifamily housing       74
Title VII-Rural housing                      76

Title VIII-Housing for persons with
     special needs                           84

     Subtitle A. Supportive housing
          for the elderly                    84

     Subtitle B. Supportive housing
          for persons with disabilities      84

     Subtitle C. Supportive housing
          for the homeless                   85

     Subtitle D. Housing opportunities
          for persons with AIDS              87

Title IX-Community development and
     miscellaneous programs                  88

     Subtitle A. Community and neighborhood
          development and preservation       88

     Subtitle B. Regulatory programs         94

     Subtitle C. Miscellaneous programs      94

Title X-Residential lead-based
     paint hazard reduction                  107

     Subtitle A. Lead-based paint
          hazard reduction                   115

     Subtitle B. Evaluation and
          reduction infrastructure           121

     Subtitle C. Public information in
          the private real estate transaction 122

     Subtitle D. and E. Research
          and development and reports        123

                       SECTION-BY-SECTION

             TITLE I-GENERAL PROVISIONS AND POLICIES

Sec. 101. Comprehensive housing affordability strategy
refinements 124

Sec. 102. Performance goals 124

Sec. 103. Subsidy layering review 124
Sec. 104. Capacity study 124

Sec. 105. Salaries and expenses 125

Sec. 106. Regulation of consultants 125

            TITLE II-INVESTMENT IN AFFORDABLE HOUSING

Sec. 201. HOME authorization 125

Sec. 202. New construction 125

Sec. 203. Administrative costs 125

Sec. 204. Tenant-based rental assistance 126

Sec. 205. Maximum subsidy limitations 126

Sec. 206. Rent calculations 126

Sec. 207. Homeownership resale restrictions 126

Sec. 208. Rental housing production set-aside 126

Sec. 209. Matching requirements 127

Sec. 210. Community housing production set-aside 127

Sec. 211. Redevelopment of blighted urban areas model program 127

Sec. 212. Transitional housing opportunities 128

                     TITLE III-HOMEOWNERSHIP

              Subtitle A-Homeownership Initiatives

Sec. 301. National homeownership trust authorization 128

Sec. 302. Enterprise zone homeownership opportunity grants 128

          Subtitle B-FHA and Secondary Mortgage Market

Sec. 311. National Interagency Task Force on Multifamily Housing
130

Sec. 312. Multifamily finance demonstration 131

Sec. 313. Expenditures to correct defects 133

Sec. 314. Repeal of warranty requirement 133

                          TITLE IV-HOPE
Sec. 401. Authorization 133

Sec. 402. HOPE amendments 134

Sec. 403. HOPE for Youth: Youthbuild 134

                   TITLE V-HOUSING ASSISTANCE

              Subtitle A-Public and Indian Housing

Sec. 501. Authorizations 139

Sec. 502. Reform of public housing management 140

Sec. 503. Revitalization of severely distressed public housing
141

Sec. 504. Choice in Management Act of 1992 154

Sec. 505. Directive to relieve regulatory burden 159

Sec. 506. Celing rents 159

Sec. 507. Replacement housing 159

Sec. 508. Income eligibility 160

Sec. 509. Applicability of definitions to Indian housing 160

Sec. 510. Preference rules 160

             Subtitle B-Low-Income Rental Assistance

Sec. 521. Voucher and certificate homeownership 160

Sec. 522. Moving to opportunity for fair housing 162

Sec. 523. Family unification assistance 164

Sec. 524. Housing assistance in Jefferson County, Texas 164

Sec. 525. Applicability of amendment to McKinney Act 164

   Subtitle C-General Provisions and Other Assistance Programs

Sec. 531. Low-income housing authorization 164

Sec. 532. Housing counseling 165

Sec. 533. Public and assisted housing drug elimination 165

                      TITLE VI-PRESERVATION
           Subtitle A-Prepayment of Mortgages Insured
                   Under National Housing Act

Sec. 601. Authorization 166

Sec. 602. Prepayment amendments 166

            Subtitle B-Other Preservation Provisions

Sec. 611. RESTORE for troubled mutifamily housing 170

                     TITLE VII-RURAL HOUSING

Sec. 701. Program authorizations 172

Sec. 702. Deferred mortgage demonstration 172

Sec. 703. Set-aside for underserved areas and colonias 173

Sec. 704. Permanent authority for section 523 173

Sec. 705. Nonprofit set-aside 173

Sec. 706. Housing preservation grants 173

Sec. 707. Use of FMHA inventory for transitional housing for
homeless persons and for turnkey housing 173

Sec. 708. Preservation 174

Sec. 709. Disaster assistance 174

Sec. 710. Administrative appeals process 174

Sec. 711. Prohibition on transfer of rural housing programs 174

Sec. 712. FMHA reform provisions 174

Sec. 713. Rural voucher program 175

Sec. 714. Site acquisition and development 175

Sec. 715. Subdivision approval 175

        TITLE VIII-HOUSING FOR PERSONS WITH SPECIAL NEEDS

         Subtitle A-Supportive Housing for the Elderly

Sec. 801. Authorization 176

Sec. 802. Supportive housing for the elderly 176

   Subtitle B-Supportive Housing for Persons With Disabilities

Sec. 811. Authorization 176

         Subtitle C-Supportive Housing for the Homeless

Sec. 821. Authorization 176

Sec. 822. Safe Havens for the homeless 177

Sec. 823. Applicability of Shelter Plus Care 180

     Subtitle D-Housing Opportunities for Persons With AIDS

Sec. 831. Authorization 180

Sec. 832. Program amendments 180

Sec. 833. Housing opportunities for persons with AIDS 180

    TITLE IX-COMMUNITY DEVELOPMENT AND MISCELLANEOUS PROGRAMS

       Subtitle A-Community and Neighborhood Development
                        and Preservation

Sec. 901. Community development authorizations 180

Sec. 902. Homeownership assistance under CDBG

180

Sec. 903. State set-aside for technical assistance 180

Sec. 904. Elimination of nonhousing community development plan
181

Sec. 905. Loans of CDBG funds 181

Sec. 906. CDBG code enforcement 181

Sec. 907. CDBG set-aside for colonias 181

Sec. 908. Approval of multijurisdictional agreements 181

Sec. 909. Neighborhood-based nonprofit organizations 181

Sec. 910. Economic development 181

Sec. 911. Neighborhood development program 182

Sec. 912. Neighborhood Reinvestment Corporation Act 183

                 Subtitle B-Regulatory Programs

Sec. 921. National commissions 183

               Subtitle C-Miscellaneous Programs

Sec. 931. HUD research and development 183

Sec. 932. Fair housing initiatives program 183

Sec. 933. Economic opportunities for low- and very low-income
persons 185

Sec. 934. Study of section 3 of the Housing and Urban Development
Act of 1968 187

Sec. 935. Study on the housing impact of military base expansion
187

Sec. 936. Nehemiah housing opportunity grants 188

Sec. 937. Sense of the Senate 188

Sec. 938. Improved coordination of urban policy 188

Sec. 939. Community Outreach Act 188

Sec. 940. Report on community development lending 189

Sec. 941. Report on community development banking 189

Sec. 942. Flood control restoration zone 190

Sec. 943. Energy efficient mortgages pilot program 190

Sec. 944. Prohibition of lump-sum payments 190

Sec. 945. Smoke detectors 190

Sec. 946. The National Cities in Schools Community Development
Program 191

Sec. 947. Economic independence 191

TITLE X-RESIDENTIAL LEAD-BASED PAINT HAZARD REDUCTION ACT OF 1992

Sec. 1001. Short title 191

Sec. 1002. Findings 191

Sec. 1003. Purposes 192

Sec. 1004. Definitions 192

          Subtitle A-Lead-Based Paint Hazard Reduction

Sec. 1011. Grants for lead-based paint hazard reduction in target
housing 192

Sec. 1012. Evaluation and reduction of lead-based hazards in
federally assisted housing 194

Sec. 1013. Disposition of federally owned housing 195

Sec. 1014. Comprehensive housing affordability strategy 195

Sec. 1015. Private sector task force on lead-based paint hazard
reduction and financing 196

Sec. 1016. National consultation on lead-based paint hazard
reduction 196

       Subtitle B-Evaluation and Reduction Infrastructure

Sec. 1021. Contractor training and certification 196

Sec. 1022. Certification of laboratories 197

Sec. 1023. Guidelines for lead-based paint hazard evaluation and
reduction activities 197

Sec. 1024. Contractor quality control 197

Sec. 1025. National clearinghouse on residential lead poisoning
197

     Subtitle C-Public Information and Technical Assistance

Sec. 1031. Disclosure of information concerning lead upon
transfer of residential property 198

Sec. 1032. Public awareness 200

Sec. 1033. Relationship to other laws 200

              Subtitle D-Research and Development

Part 1-HUD Research

Sec. 1051. Research on lead exposure from other sources 200

Sec. 1052. Testing technologies 201

Sec. 1053. Authorization 201
Part 2-GAO Report

Sec. 1056. Federal implementation and insurance study 201

                       Subtitle E-Reports

Sec. 1061. Reports of the Secretary of Housing and Urban
Development 201

Regulatory impact statement 202

Changes in existing law 202

Cost estimate 202

Additional views of Senator Mack 203

Additional views of Senator D'Amato 204

Additional views of Senators Garn, D'Amato and Mack 205

S. 3031 213

                                                 Calendar No. 558

102D CONGRESS                 SENATE                   REPORT
2d Session                                             102-332

       NATIONAL AFFORDABLE HOUSING ACT AMENDMENTS OF 1992

                   --------------------------

              July 23, 1992.--Ordered to be printed

                    ------------------------

  Mr. Riegle, from the Committee on Banking, Housing, and Urban
                 Affairs, submitted the following

                             REPORT

                          together with

                        ADDITIONAL VIEWS

                      To accompany S. 3301

The Committee on Banking, Housing, and Urban Affairs, having
considered the same, reports favorably a Committee bill to
reauthorize, revise and extend federal housing and community
development programs.

                 LEGISLATIVE HISTORY OF THE ACT

The Committee on Banking, Housing and Urban Affairs has reported
favorably the National Affordable Housing Act Amendments of 1992.
The full Committee met on June 18, 1992, to mark up the
legislation and ordered the bill favorably reported by a voice
vote with one opposed.

The legislation would reauthorize existing federal housing
programs and community development programs at $22.7 billion in
fiscal year 1993 and $23.4 billion in fiscal year 1994 for an
increase of $5.9 billion above current baseline levels over the
next two years. The bill would accomplish three key objectives:
to reauthorize and revise federal housing and development
programs; to incorporate key Administration proposals; and to
include several far reaching initiatives sponsored by Committee
Members.

The Committee bill reflects suggestions from a nationwide
cross-section of state and local officials, nonprofit housing
organizations, private developers, experts in housing finance,
housing managers, tenant representatives, low-income housing
advocates, housing researchers, and other community based groups.
The Committee heard from many of these organizations that
refinements to the Cranston-Gonzalez National Affordable Housing
Act of 1990 were necessary and timely.

In January, Senator Cranston and D'Amato invited a wide variety
of housing groups to submit recommendations for the
reauthorization of the National Affordable Housing Act of 1990.
The response was overwhelming and many of the recommendations are
reflected in the bill. The recommendations were published in
April 1992 as the ``Recommendations for the Reauthorization of
the Cranston-Gonzalez National Affordable Housing Act'' (S. Print
102-93).

On March 6, 1992, the Subcommittee held a kick-off hearing on the
housing reauthorization bill. The hearing focused on the state of
the nation's affordable housing. Witnesses included: the
Honorable Kurt Schmoke, Mayor of Baltimore; Lawrence B. Simons,
Powell Goldstein; Eli Broad; and James Rouse, Chairman of the
Enterprise Foundation. Jim Rouse poignantly and prophetically
illustrated the desperate living and economic situations of
millions of Americans:

 We read the dismal figures, see pictures of dilapidated housing
in derelict neighborhoods; but most of us have not walked those
streets, stepped inside those houses; have not seen good people
with clean, decent families huddled in miserable housing, paying
outrageous rents; have not looked into the saddened sullen faces;
felt the hopelessness, the distrust, suspicion, and separation
that provides their lives all around them.

 These are the breeding grounds for a new America that we do not
want to face-an impoverished, suffering, hopeless, hostile people
living in violence and in fear. Millions of Americans are being
left behind, forgotten in the persistent spread of poverty and
the physical and social deterioration that is moving through our
cities and threatening our stability as a nation.

On March 11, 1992, Senator Cranston introduced S. 2341, the
Resident Lead-Based Paint Hazardous Reduction Act with five
original cosponsors including Senators Akaka, D'Amato, Kerry,
Lieberman, and Sarbanes. The bill was developed to create a
cost-effective, workable system for reducing lead poisoning risks
in housing. And, it was designed to target scarce federal
resources and expertise to protect those most at risk-young
children from low income families.

The Subcommittee followed-up the introduction of the bill with a
roundtable hearing on March 19, 1992. The hearing included
witnesses from a wide variety of interest groups as well as the
Burke family. At the hearing, Mrs. Burke powerfully explained the
need for legislation that would provide greater disclosure to
potential homebuyers and renters.

A prior Subcommittee hearing on lead-based paint was held on
October 17, 1991. This hearing brought attention to the fact that
three quarters of all American housing contains lead-based
paint-57 million homes. And, some 3.8 million of those homes are
occupied by young children and have peeling paint, excessive
amounts of lead dust, or both.

The Subcommittee held a hearing focusing on severely distressed
public housing on March 25, 1992. Witnesses included: author Nick
Lemann, Congressman Bill Green of New York, resident groups,
Public Housing Authority directors, researchers, neighborhood
associations and HUD's Assistant Secretary for Public and Indian
Housing.

On April 3, 1992, the Subcommittee held a hearing focusing on the
Federal Housing Administration's single and multi-family mortgage
insurance programs. The Subcommittee held an earlier hearing on
October 29, 1991, that focused on the problems with multi-family
financing. These problems again were illustrated at the April 3rd
hearing. Witness after witness testified that the multi-family
financing system has essentially collapsed, contributing to the
continued loss of rental housing that is affordable to low-and
moderate-income families.

Senator Bob Graham held a Subcommittee field hearing in St.
Petersburg, Florida on March 14, 1992. The hearing explored the
availability of financing for affordable housing construction in
Florida. Witnesses included the Mayor of St. Petersburg and
various representatives of public and private organizations
involved in housing. Senators Sasser, Sanford and Bryan (among
others) also held key meetings in their state.

In addition to the hearings, the Subcommittee held a series of
staff symposia designed to explore and discuss specific issues in
more detail. These issues included: the HOME program, economic
development and the CDBG program, the mixing of elderly and
disabled populations, the preservation of the older assisted
inventory, and rural housing.

Over the course of the year, the Subcommittee built a careful
record on the problems that need to be addressed-and the gaps
that need to be filled-in federal housing programs.

On the basis of testimony and other avenues of input, the
Subcommittee began drafting and refining legislative proposals.
On April 13, 1992, the Housing Subcommittee issued a preliminary
outline of the National Affordable Housing Act Amendments of
1992. The Housing Subcommittee issued its draft bill on April 30,
1992.

On April 29, 1992 the Rodney King verdict was announced, inciting
America's worst urban riots in the past two decades. On May 14,
1992, the full Committee held a hearing on the nation's urban
problems. The Committee heard pleas from many voices, including
Housing Secretary Jack Kemp, to develop meaningful legislative
solutions-solutions that would directly improve the social and
economic conditions fueling the anger and disaffection in our
cities.

It became increasingly clear that affordable housing for all
Americans is an integral part of the solution to the nation's
urban crisis. The Chairman of the Enterprise Foundation, Jim
Rouse, testified that,

 When targeted to meet the needs of low-income people, housing
inherently adds value to the public investment being made and
ripples through our economy. Beyond the immediate jobs created, a
social purpose is accomplished. Workers and their families who
have safe and decent housing have a stable living environment.
Societal costs are avoided, such as homelessness, health problems
from living in overcrowded or unsafe conditions, and poor
nutrition from feeding a family on a budget stretched to pay too
much for housing. In a stable home, children have a place to do
their homework and learn the value of family life. Parents have
an opportunity to better their skills and chances of advancement
in the workplace. What greater return on investment could be
achieved?

The Los Angeles riots provided an added impetus for the passage
of housing reauthorization legislation. The Housing Subcommittee
issued a revised staff discussion draft on May 29th and a
Committee Print on June 15th. The legislation was revised to
reflect changes proposed by Committee Members and the
Administration. An intensive series of meetings were held with
OMB and HUD officials during the week of June 8th.

The Senate Committee on Banking, Housing and Urban Affairs held
the mark-up of the bill on June 18, 1992. The Committee adopted
by voice vote a package amendment incorporating in original or
revised form a substantial number of the 96 amendments filed. The
package included amendments suggested by Senators as well as the
Administration. An amendment naming the Neighborhood Development
Program after the late Senator John Heinz was also adopted by
voice vote. The Committee then ordered the bill favorably
reported by voice vote with only one Senator opposed.

                  THE AFFORDABLE HOUSING CRISIS

The Committee believes that the events in Los Angeles have
brought us to a crossroads in the nation's response to the urban
crisis. Issues that have been shunted aside for years-urban
poverty, pervasive discrimination, lack of affordable housing,
the future of inner city youth-have now moved to the frontburner
of the domestic agenda.

Report after report-as outlined below-document a sobering account
of housing need and human despair. The nation's affordable
housing crisis-despite the best efforts of thousands of committed
individuals throughout the country-continues to worsen.

Rental housing.-Since the 1970's, there has been a substantial
reduction in the number of low rent units in the housing stock
and a sharp increase in the number of poor families. The result
is a classic mismatch between supply and demand, leading to
higher rents, higher rent burdens, increased overcrowding,
increased evictions and increased homelessness.

Specifically, the supply of housing renting at $250 or
less-affordable to a family earning $10,000 per year-fell by 2.6
million units from 1974 to 1989. The loss of affordable rental
housing is principally attributable to simple economics: rent
payments of $250 are insufficient to cover the basic costs of
maintaining and operating housing. The failure to break even
leads owners to disinvest which causes units to deteriorate and
which eventually results in units being lost from the housing
stock.

The loss of affordable housing also results from the impact of
gentrification: condominium conversions, conversion to
non-residential use, upgrading of units to attract high-income
renters. Of the 7.9 million units costing less than $250 in 1985,
804,000 were vacant because of natural turnover in rental
housing, structural deficiencies, and uninhabitable locations.
Less than half of renter households with incomes below $10,000
lived in the occupied units.

And, the number of low-income renters is growing. In 1974, 9
million households had incomes that fell below official poverty
thresholds. By 1989, 12.3% (11.5 million) of the nation's
households lived in poverty. Between 1974 and 1989, the number of
poverty-level households with heads aged 18-64 had jumped 42% to
8.8 million. Most of these poor households-6.2 million-were
renters, an increase of 62% from 1974.

Disturbingly, the income gap between the rich and the poor has
continued to widen. During the 1980s, the top 1 percent of
American households experienced an income increase of 122 percent
after taxes, but incomes fell by 10 percent for the bottom fifth
of America's households.

With the decline in affordable housing and the explosive growth
in the low-income population, a mismatch has emerged between
supply and demand. The shortfall between affordable housing units
(renting for less than $250) and the number of needy low income
families was 4.1 million units in 1989. The number of affordable
housing units (renting for $250 or less) fell steadily from over
8.6 million in 1974 to only 6.0 million in 1989. Of the 2.6
million units vacant in 1989, only one third (987,000) would have
rented at levels affordable to poor renters.

While the number of families with children living in poverty has
grown dramatically-one-fifth of all children live in households
with less than a poverty-level income-only 20% of the vacant
units available in 1989 were large enough the families.

In addition, the number of ``worst case'' renter households is
growing rapidly. 5.1 million very low-income renter households
are considered ``worst-case'' housing needs-paying 50% or more of
their incomes for rent, living in substandard housing, or both.
In 1974, the number of ``worst case'' households was 2.5 million.

The shortfall in affordable housing has caused low-income renters
to pay high proportions of their income for rent. In 1989,
two-thirds of all poor renter households remained outside the
housing assistance network and, 77% of these unassisted poor
households paid more than 50% of their income for housing. The
growth of poor households has outstripped the increase in housing
assistance resources, boosting the population unassisted poor
renters from 4.2 million in 1974 to 5.5 million in 1985. The cost
of renting a one-bedroom unit is beyond the reach of at least
one-third of renter households in every single state.

The shortfall in affordable housing has also contributed to the
homeless problem. The National Alliance to End Homelessness
estimates that as many as 736,000 persons may be homeless on a
given night and between 1.3 million and 2 million persons may
experience homelessness at some point during the year. Countless
others may be teetering near the brink of homelessness-one missed
paycheck or personal crisis away.

A U.S. Conference of Mayors survey of 27 large cities found that
over one-third of the homeless are families with children.
100,000 children may be homeless on any give night. Children
under the age of 18 are the fastest growing group among the
homeless population.

The number of families on public housing waiting lists is almost
as high as the number of existing public housing units-over 1
million eligible low-income Americans are currently on waiting
lists. More than two-thirds of large American cities have closed
their lists because the wait was already so long. This means that
many families needing housing are not even included in this one
million figure. Mayor Dinkins noted that there are 200,000
families on public housing waiting lists in New York City alone.

Furthermore, multifamily starts fell 56% between 1985 and 1990 to
only 297,000 units.

Homeownership.-At the same time the nation is experiencing a
rental housing crisis, there has been a steady decline in the
nation's homeownership rate. The national homeownership rate
declined throughout the 1980's-from 65.6% in 1980 to 64.1% in
1990. This was the first time the homeownership rate had dropped
since the beginning of World War II. While the percentage of
decline may appear small, it means that nearly 2 million fewer
families own homes today.

The decline was particularly severe for young, first time
homebuyers. For example, in households under age 25, the
homeownership rate fell from 21.3% to 15.3% and in households
aged 30-34, the homeownership rate fell from 61.1% to 51.5%. In
back households, the homeownership rate fell from 43.8% to 42.4%.

The failure of incomes to keep pace with escalating housing costs
over the past two decades has put homeownership beyond the reach
of many young, middle class families. Between 1970 and 1990, the
average purchase price for a starter home rose 21% in real terms
while the average income among potential first-time homebuyers
declined 7% in real terms. Experts estimate that only 17% of
renters (and only 4% of black renters) have the income and
downpayment resources to qualify for a mortgage on a typical
starter home, even with an array of downpayment options.

Despite depressed home purchase prices in some markets and low
interest rates, the gap between income and price remains
difficult to bridge. Housing prices have outpaced income growth
throughout the nation. From 1974 to 1990, real house prices
soared 127.4% in Los Angeles while real incomes rose only 5.3%.
In Boston, house prices jumped 81.1% while incomes edged up only
3.2%. Even in metropolitan areas like Cleveland, Detroit, and
Pittsburgh, where inflation-adjusted house prices have fallen
over the last 16 years, incomes have declined even more.

Poor families who are able to become homeowners face significant
burdens. Nearly one-third of all poor homeowners-31 percent-paid
at least 70 percent of their incomes for housing in 1985. Nearly
half paid at least 50 percent of their incomes on housing, while
73 percent paid at least 30 percent of their income on housing.
Poor homeowners faced high costs for housing expenses other than
just their mortgage payments. The typical poor homeowner
household paid 35 percent of its income for fuels, other
utilities, real estate and insurance.

This has led to poverty, substandard living, and a greater
increase in renter households. Between 1978 and 1985, the number
of poor households grew from 10.5 million to 13.3 million. Nearly
1.3 million poor homeowners (31%) paid at least 70% of their
income for housing. And, 54.4% of poor homeowners paid more than
half their income for housing. 18.7% of poor homeowners failed to
meet minimum standards for structurally sound units.

The response.-The housing crisis has been exacerbated by a decade
of federal inaction and, more recently, by the economic
recession. The Congressional Budget Office has extensively
documented the sharp reduction in new federal housing assistance
during the 1980's. In 1980, $26.7 billion (in budget authority)
was appropriated for low-income housing assistance. If these
funding levels had been maintained during the past decade, $44.4
billion would have been provided in 1991. Yet, in that year, only
$8.5 billion was appropriated, a cut of 82% in real terms.

Even this substantially reduced level of federal funding had to
be redirected in the past decade away from serving new families
to maintaining the existing inventory. As the Senate
Appropriations Committee noted last year:

 Unfortunately, from fiscal year 1980 through fiscal year 1992,
the growth in the funds directed to nonincremental activities,
whose sole purpose is to maintain the existing stock of assisted
housing, privately and publicly owned, has grown from less than
20 percent of the annual assisted housing budget appropriated
each year, to almost 80 percent of the annual appropriation. (S.
Rept. 102-107)

Because of these budget cuts and the redirection of federal
funding, the number of new families assisted each year declined
steadily throughout the 1980's. In 1977, the number of families
receiving assistance for the first time was more than 350,000,
through HUD programs alone. By 1990, that number had dropped to
68,700. If housing funding has been sustained at the 1980 level,
1.2 million more families would have been served through HUD and
almost 700,000 additional families would have been assisted under
rural housing programs. These statistics illustrate a fundamental
truth: the federal commitment to serve the housing needs of new
low-income families was severely diminished during the same
period the number and needs of those families substantially
expanded.

It is true, of course, that the total number of families
assisted-and the federal housing outlays supporting that
assistance-continued to grow during the past decade, even as
budget authority for new assistance was slashed. In 1990, direct
federal outlays on low-income housing assistance programs totaled
$16.6 billion out of total federal outlays of $1.3 trillion, only
slightly more than one percent of the federal budget. Even this
growth was largely attributable to housing projects originally
funded during the Ford and Carter Administrations (which did not
become available for occupancy until the early 1980's). And other
factors-deeper targeting of federal housing assistance, the rapid
rise of rents-also contributed to the outlay surge.

The Committee strongly believes that the number of new families
assisted is a more accurate measure of the federal government's
commitment to affordable housing than the growth in federal
outlays. By that measure, the 1980's was a time of major
retrenchment and retreat, particularly troubling given the larger
affordable housing trends discussed above. Incredibly, it would
take another 63 years to meet the nation's ``worst case'' housing
needs at the current levels of funding.

The recession has also compounded the affordable housing crisis.
States, in the face of further revenue shortfalls, have enacted
the most severe cutbacks in social service programs since the
early 1980s. The 30 state-funded general assistance programs were
hit harder than any other set of low-income programs. Fourteen
states cut their programs, often deeply-five by more than 30
percent and nine by at least 12 percent. For example, Michigan
terminated its program, ending all cash monthly assistance to
82,000 people. Ohio slashed its program in half, while
Massachusetts, Illinois and Minnesota enacted reductions which
could affect close to 100,000 people.

Of the 29 states with emergency housing programs, for the
homeless, 10 pared back these programs, while five states cut
these programs by more than 30 percent. The reductions in
affordable housing programs totaled $246 million nationally,
shrinking these programs by one-fifth.

                  SUMMARY OF THE COMMITTEE BILL

The National Affordable Housing Amendments of 1992 would
reauthorize and revise federal programs that enable states and
localities (in partnership with the private sector) to expand the
supply of affordable housing and carry out community and economic
development activities. The Committee bill would also contain
several Administration proposals as well as other key initiatives
sponsored by Senate Members. The Committee bill would, therefore,
attempt to marry different philosophies and views on how to best
improve the housing conditions of millions of Americans.

Reauthorization of major federal housing programs.-The Committee
bill would reauthorize existing federal housing/development
programs at $22.7 billion in fiscal year 1993 and $23.4 billion
in fiscal year 1994 for an increase of $5.9 billion above current
baseline levels over the next two years.

Most importantly, the bill would reauthorize the two major
federal programs-HOME and CDBG-at increased levels with revisions
to make the programs more effective.

 HOME-the key program for expanding the supply of affordable
housing-would be authorized at $2.1 billion in FY93, an increase
of $600 million over the appropriated level. Regulatory
restrictions that have inhibited the implementation of the
program-new construction limitations, subsidy limitations-would
be eased.

 CDBG-the most important federal tool for community
development-would be authorized at $3.9 billion in FY93, an
increase of $500 million over the appropriated level. The program
would be revised to enable states and localities to carry out
economic development activities with less regulatory
interference.

Inclusion of Administration's agenda.-Secretary Kemp's HOPE
program-also created by the National Affordable Housing Act-would
be reauthorized. The HOPE program is intended to expand the
homeownership and economic opportunities of public and assisted
housing tenants by helping them to purchase their housing units.
The program was funded at $351 million in FY92 and would be
reauthorized at approximately $900 million in FY93 and FY94.

The Committee bill would also incorporate the following new
Administration initiatives:
 Choice in Management, designed to test the effectiveness of
giving residents of housing administered by troubled PHAs the
ability to choose alternative management;

 Take the Boards Off, designed to transfer substantially vacant
developments, currently owned by troubled public housing
agencies, to nonprofits and other specified entities in order to
return this housing to productive use;

 Moving to Opportunity, designed to help families with children
move out of areas with high concentrations of persons living in
poverty;

 Vouchers for Homeownership, designed to permit recipients of
vouchers or certificates who are first-time homebuyers to use
their rental assistance towards mortgage payments; and

 Safe Havens for the Homeless, designed to provide small
residential facilities for seriously mentally ill homeless
persons.

Inclusion of Senate initiatives.-The Committee bill would contain
a series of new initiatives that would respond directly to the
social and economic conditions fueling unrest in urban
communities. Major initiatives would include:

 Youthbuild, designed to help capable nonprofits train, educate
and employ low-income youth in the construction and
rehabilitation of affordable housing;

 Other Employment initiatives, designed to use housing
development to create jobs for low income residents, particularly
young people;

 Distressed Public Housing, designed to revitalize the most
distressed public housing developments by involving residents and
community groups in comprehensive planning, major reconstruction,
supportive service and management reform initiatives;

 Lead-Based Paint Hazard Reduction, designed to prevent childhood
lead poisoning by expanding the federal government's commitment
to the assessment and reduction of lead paint hazards in private,
public and assisted housing;

 Fair Housing Enforcement, designed to expand and revise the Fair
Housing Initiatives Program-the backbone of federal efforts to
weed out discriminatory behavior in the marketplace and expand
the housing options of minorities; and

 FHA Multi-Family Finance Demonstration, designed to expand and
preserve the supply of affordable rental housing-the primary
source of affordable housing for low income families-by enabling
FHA to tap the resources and expertise of state housing finance
agencies, federal government sponsored enterprises and other
market participants.

                 EXPLANATION OF THE LEGISLATION

TITLE I-GENERAL PROVISIONS AND POLICIES

Comprehensive housing strategies

The National Affordable Housing Act created a new planning
document-the comprehensive housing affordability strategy
(CHAS)-that state and local governments must submit in order to
be eligible for most federal housing assistance. This document
forces state and local governments, with significant community
involvement, to look ahead for five years, assess housing needs,
and plan allocation of resources. In many states and communities,
the CHAS process has provided a serious forum in which to
identify housing needs, propose strategies and solutions and
evaluate the results of ongoing action. Housing advocates have
welcomed this opportunity to participate and influence planning
and spending decisions at the state and local level. In many
states, this process has been used successfully to galvanize
support for the commitment of additional resources to affordable
housing.

The CHAS process has been underway now for two years. While the
initial results have been largely positive, a consistent weakness
identified by housing advocates is the absence of a mechanism to
ensure that resources are utilized in accordance with the CHAS.
The CHAS requires an extensive identification of housing needs,
but no adequate mechanism to ensure that communities respond to
those needs in the ``action plan''. The Committee bill would
amend the CHAS to foster better linkage between a community's
identified housing needs and its actual spending decisions. A
jurisdiction would be required to describe how its resource
allocations will meet the identified housing needs, describe
reasons for its allocation priorities and identify any obstacles
to addressing underserved needs.

In addition, homeless advocates indicate that, despite an
increasing incidence of homelessness in rural America, this
population often goes unnoticed and unserved by housing programs.
The Committee bill would, therefore, expand the requirement, in
existing law, to identify the incidence of homelessness in the
CHAS to specifically include rural homelessness.

Performance goals

A recommendation of the HUD/Mod Rehab Investigation Subcommittee
of the Banking Committee was the establishment of goals and
performance measures for federal programs so that Congress, the
Administration and the public could evaluate the success of
program design and implementation.

The Committee bill would require the Secretaries of the
Department of Housing and Urban Development and the Department of
Agriculture to establish performance goals for the major programs
of HUD and FmHA. Each year, the Secretary would be required to
report to Congress on the progress made in attaining the
performance goals for each program, citing the actual results
achieved in each program, explaining why any goals were not met,
and requesting any legislative or regulatory changes necessary to
achieve the goals.

Subsidy layering review

Section 102(d) of the HUD Reform Act of 1989 requires HUD to
certify that assistance to any housing project is not more than
is necessary to provide affordable housing. Section 42 of the
Internal Revenue Code requires state housing credit agencies to
conduct a similar process for projects receiving low income
housing tax credits.

State housing credit agencies are responsible for ensuring that
low income housing tax credits awarded to a project do not exceed
the amount necessary for the financial feasibility of the project
and its viability as a qualified low-income housing project
throughout the credit period. In making this determination, the
credit agency must consider all sources and uses of funds for the
project including expected federal, state or local subsidies and
any proceeds generated by the tax benefits. This determination
must be made at the time of application for the credits, at
allocation of the credit, and when the building is placed into
service. State housing credit agencies have been implementing
this provision since January, 1990.

Administrative guidelines to implement section 102(d) were
published by HUD in April, 1991. The Committee has heard from
virtually all sectors of the housing industry-for-profit
developers, non-profits, housing finance agencies-criticizing the
HUD review process as time-consuming, duplicative and
unreasonably restrictive.

The Committee is deeply concerned that HUD's current
implementation of section 102(d) has led to unnecessary project
delays and has discouraged developers from undertaking the more
difficult projects which need additional federal subsidies-such
as homeless projects, small scattered site developments and those
in inner cities.

HUD's current guidelines have established strict limits on
development fees, syndication expenses, investor returns and
project reserves that do not recognize variations among projects.
As the report of the Banking Committee's HUD Investigations
Subcommittee noted, ``it would be inappropriate and perhaps
impossible for HUD or Congress to determine a reasonable rate of
return or profit level for developers.'' The report further
recommended that flexibility and negotiation were essential in
determining appropriate subsidy amounts for each unique project.
Contrary to these recommendations, HUD has established formulaic
subsidy calculations and limits on developer and builder profit
and investor rate of return below those commonly accepted in the
current market. Most state credit agencies provide a development
fee allowance in the range of 10-20%, with 15% the average for
both HUD-assisted and unassisted projects. HUD's guidelines would
limit development fees to 10%. While the risk associated with a
project certainly affects the expected profit margin, HUD's
inflexible standard do not take account of such variables as
project size, type, location, terms of affordability or rent
levels. For example, a small family project sponsored by a
non-profit community group in an inner city with 50 year
low-income use restrictions would command a much different market
response than a large elderly project in a suburban community
with only 20 year use restrictions. A small, difficult deal in an
inner city area could be expected to be much riskier and have
higher project costs and fees than a large, easy deal in the
suburbs.

Another major concern regarding HUD's implementation of section
102(d) are the inordinate time delays associated with the
reviews. Anecdotal evidence indicates that the HUD review
process, alone, can take anywhere from 8 weeks to over 12
months-in addition to normal development timetables. These added
project delays contribute to increased construction costs and
possible lower equity contributions. For projects with
complicated financing, these extra delays may cause the deal to
collapse.

HUD has also refused to coordinate its review process with the
review process conducted by the state credit agencies under the
low income housing tax credit program. This has created a
``chicken and egg'' problem between the two processes-both
responsible for assessing and refining subsidy amounts. HUD
delays have created considerable problems for credit agencies who
must meet statutorily mandated timetables under the tax credit
program. In some cases, the tax credits have expired while
awaiting HUD project approval.

While the Committee has every interest in limiting excess
subsidy, the HUD reform provisions must not become an excuse to
shut down future, responsible development by making the subsidy
review process so cumbersome that developers simply walk away.
The culture of risk avoidance overcoming HUD has slowed down
housing production-particularly housing for low income families
most in need of federal assistance. As Thorne Aucter-a HUD hired
consultant-noted in his September 1991 report to the Federal
Housing Commissioner on HUD's subsidy layering guidelines:
`` t he Department needs to reconcile the objectives of section
102 with National Housing Goals enunciated in legislation
spanning more than four decades''.

The Committee is encouraged by recent progress in negotiations
between low income housing providers and HUD. The Committee bill
would codify the substance of these preliminary agreements to
ensure that progress continues.

The Committee bill would ensure that project reviews could be
completed in a timely manner while subsidies would be limited to
only reasonable and necessary amounts. To accomplish this, the
Committee bill would require HUD to establish guidelines for
state housing credit agencies to implement the requirements of
section 102(d) of the HUD Reform Act of 1989 for projects
receiving assistance under both the low income housing tax credit
and HUD programs.

The Committee expects that the guidelines would specify minimum
standards that state housing credit agencies would use in their
review process-similar to those which state credit agencies
currently apply in conducting their reviews required under the
low income housing tax credit program (section 42 of the Internal
Revenue Code). Credit agencies would, of course, continue to be
required to consider all sources of project financing, including
expected federal, state or local subsidies, and tax benefits.
Credit agencies would be required to ensure that net equity
contributions and a project's costs, including developer fees, be
within a reasonable range, taking into account the project's
size, characteristics, location and risk factors. This reasonable
range should be flexible enough to accommodate variations for the
development of difficult projects, such as those with deep
targeting, those located in poor, inner city neighborhoods or
remote rural areas, those sponsored by non-profit community
housing development organization, those serving populations with
special service needs or those with long-term use restrictions
that exceed federal requirements. Prudent project reserves could
be allowable project costs as long as appropriately restricted.

Credit agencies would not be expected to use an internal rate of
return (IRR) process to limit the amount of tax credit allocated
to a project. Instead, the customary practice among state credit
agencies of measuring the net equity-the amount of equity capital
contributed by investors to a project partnership per tax credit
dollar-would be used to ensure that levels are reasonable given
current market conditions and specific project characteristics.
Project sponsors are naturally motivated to seek out investors
willing to pay the highest possible net equity per tax credit
dollar and the public sector should harness this market incentive
to maximize the level of investment that goes into housing. For
projects assisted with HUD funds, the Committee expects that
states would give a priority in the allocation of credits to
projects with lower syndication costs and higher levels of net
equity invested into the project per credit dollar.

The Committee intends that HUD act expeditiously to establish
guidelines for state credit agencies. The Committee understands
that HUD is already in the process of developing such guidelines.
After January 1, 1993, a housing credit agency would be delegated
the responsibility for carrying out section 102(d) of the HUD
Reform Act if appropriate certifications are provided that HUD's
guidelines are being properly implemented. Since work is already
underway and since HUD has been reviewing this issue, with the
assistance of numerous consultants, for nearly three years, the
Committee believes that January 1, 1993 is a reasonable date by
which to begin the delegation of responsibility for subsidy
review.

Elimination of duplicative aspects of subsidy layering review
would expedite the development of low income housing and free up
staff time to focus on other pressing issues before the
Department.

Capacity study and salaries and expenses

The Committee Bill would amend the existing requirement that HUD
report annually on its staffing capacity and resources to include
an assessment of the Department's ability to respond to areas
identified as ``material weaknesses''.

The Committee Bill would also authorize salaries and expenses for
HUD and would set aside a portion of such authorization
exclusively to provide ongoing training and capacity building for
Department personnel.

These provisions reflect the Committee's increasing concern about
the capacity of the Department to carry out its mission and
responsibilities.

Section 110 of the National Affordable Housing Act requires the
HUD Secretary to report to the Congress annually on the adequacy
of the staff and resources of the Department to carry out its
mission and responsibilities. In 1990, the Final Report of the
HUD/Mod Rehab Investigation Subcommittee recommended that HUD
undertake a comprehensive evaluation of its staffing capacity.
The provision included in the National Affordable Housing Act
reflects the HUD/Mod Rehab Investigation Subcommittee's
recommendation. Report language accompanying the National
Affordable Housing Act spelled out congressional intent regarding
the analysis and report in some detail.

Despite these specific directives to the Department, the
Committee notes with grave dismay the Department's failure to
submit a substantive report which responds to the statutory
requirements. The most recent report submitted to the Congress by
the Secretary, three pages in length, was woefully inadequate.

At the same time, however, evidence continues to mount regarding
the Department's complete and total inability to carry out its
responsibilities efficiently and effectively.

At a Subcommittee oversight hearing on June 30, 1992, the HUD
Inspector General reported on the severe staffing shortages
within the Department, noting that HUD staffing levels have
dropped from about 17,000 in 1982 to just over 13,000 in 1992.
The IG also noted that:

existing staffing levels are inadequate to effectively monitor
HUD's wide range of complex programs . . .  and that  HUD's
methods of determining needs and allocating
Congressionally-appropriated resources do not assure their most
efficient and effective use. Consequently, program results are
not maximized and program risk and susceptibility to fraud,
waste, and abuse remain at high levels.

The IG also raised concerns about the Department's inability to
conduct an analysis of its capacity, noting that:

 HUD management promised and attempted to analyze capacity issues
in the past several years but nothing substantive was completed.
For example, HUD told Congress in January 1991 that it would
conduct a capacity study to determine its multifamily housing
program staffing needs. We were informed that HUD was not able to
deliver on that promise due to resource constraints.

The inability of the Department to assess its capacity needs or
to match program needs with existing resources could pose very
severe consequences of financial risk to the agency and to the
federal government.

Recent audit reports by the HUD IG of the Multifamily Divisions
of the Grand Rapids, Michigan and Detroit, Michigan field offices
underscored the very real dangers posed by the Department's
inattention to staffing capacity. HUD currently faces a very real
risk of widespread defaults of existing federally insured
multifamily loans primarily because the capacity of HUD to
monitor loan performance, provide loan servicing or take
appropriate actions to prevent project defaults is seriously
deficient:

 The Grand Rapids IG report pointed out that HUD staffing was so
inadequate ``the Office did not take adequate steps to protect
HUD's interest as the insurer or holder of the projects'
mortgages.''

The Committee once again notes its very serious concerns
regarding the capacity of HUD and the lack of effort by the
Secretary to address these concerns. The Committee fully expects
that future capacity reports submitted by the Secretary will
reflect a more substantive and comprehensive analysis by the
Department.

Registration of consultants

The Committee bill would exempt state and local government and
housing authority employees engaged in official business from the
registration requirements of the HUD Reform Act. This provision
is necessary to clarify confusion resulting from existing law and
HUD regulations that require some state and local government
employees to comply with burdensome registration and reporting
requirements intended primarily for private lobbyists and those
with a personal financial interest in a HUD project. HUD has
already recognized this problem by exempting from the reporting
and registration requirements many state and local officials who
routinely contact HUD and special assistants who work for these
exempted officials. However, other full-time state and local
government employees are required to file registration statements
within 10 days after contacting HUD for routine business dealings
for each HUD-assisted project. Other employees must file annual
compensation reports as well as the periodic registration forms.
This crazy-quilt set of requirements is confusing for many state
and local government housing agencies and authorities and is
inhibiting normal and routine communications with HUD. The
proposed amendment is carefully drawn to remove the confusion but
to make it clear that the exception only applies when state or
local government officials are acting within the scope of their
employment on official business. Any state or local employee who
contacts HUD on a matter where the employee has a personal
interest would be subject to the full range of lobby registration
and reporting requirements that apply to other individuals.

TITLE II-INVESTMENT IN AFFORDABLE HOUSING

Authorization/overview

The HOME Investment Partnerships program was created in 1990 to
expand the supply of affordable housing through partnerships
between Federal, State and local governments, non-profits and the
private sector. The HOME program-based upon the recommendations
of the Rouse-Maxwell National Housing Task Force Report entitled
``A Decent Place to Live''-was developed and refined with
bipartisan support over three years. HOME replaced several
``cookie-cutter'' categorical programs which dictated housing
solutions from the federal level. Under HOME, responsibility was
devolved to the state and local level where community needs are
better reflected. State and local governments prepare affordable
housing strategies tailored to their own markets and design and
implement housing programs consistent with those strategies.

State and local governments, non-profits, and community groups
report, however, that statutory and regulatory restrictions have
undermined the envisioned design and spirit of the HOME program
and, in some cases, made it virtually unworkable.

The Committee bill would reauthorize and revise the HOME program
to ensure that federal restrictions do not inhibit the ability of
state and local governments and non-profit housing providers to
respond to the housing needs of their communities. The HOME
program would be authorized at approximately $2.1 billion for
FY93 and $2.2 billion for FY94. Set-asides of $14 million each
year for certain community housing partnership activities and $11
million each year for efforts in support of state and local
housing strategies would also be authorized.

New construction limitations

The HOME program, as originally conceived, provided jurisdictions
with a great deal of latitude in the design of their affordable
housing strategies.Eligible activities under the original
legislation included new construction, rehabilitation,
acquisition, etc. with a preference for rehabilitation. The
program underwent several major revisions during Senate floor
debate to gain the support of the Administration. Thus, the final
Act only allows new construction with HOME funds in communities
that: (1) are designated by HUD as having an inadequate supply of
rental housing; (2) certify that new construction is needed to
facilitate a ``neighborhood revitalization program''; or (3)
certify that new construction is needed to address the shortage
of ``special needs housing'' such as single room occupancy units
(SROs), housing for large families, housing for persons with
disabilities, and housing for other persons with special needs.

The Committee received extensive comments from state and local
governments, non-profit housing providers and housing advocates
on the new construction limitations. The limitations have been
heavily criticized as too restrictive and directly counter to the
program's philosophy that state and local jurisdictions should
decide what housing solutions are best suited to their needs.

The Committee bill would retain the overall structure of the 1990
Act-limiting new construction to areas that HUD designates as
eligible. Instead, the bill would make the exceptions, in current
law, more workable and ensure that communities that must
undertake new construction are not unduly burdened with a higher
matching share. Other refinements would be made to ensure that
new construction-eligible communities are appropriately
identified.

New construction eligibility.-Under current law, HUD must
designate at least 30% of participating jurisdictions as eligible
to use HOME funds for new construction. HUD has chosen to
interpret this 30% minimum as a ``ceiling'' rather than a
``floor''.

HUD's new construction designations are based upon low vacancy
rates, low turnover of units, high proportion of substandard
housing, high fair market rent, and high population growth. The
use of substandard housing as a factor has been criticized as
unfairly, and perhaps illogically, skewing new construction
eligibility toward older cities (which may be unable to find or
afford land to build on) and away from suburban areas (which may
be rapidly growing and in need of additional housing stock). The
Committee bill would, therefore, eliminate the incidence of
substandard housing as a formula factor for determining new
construction eligibility. The Committee expects that several
communities, previously ineligible for new construction, would
now be able to qualify.

Communities that are not initially designated by HUD for new
construction eligibility may petition the Secretary of HUD for a
waiver to become eligible. A jurisdiction must petition HUD each
year even if the objective data that was used to grant a waiver
has not significantly changed. The Committee bill would modify
the Secretary's waiver authority to permit the waiver to apply
for more than one year. The Committee intends that the Secretary
make use of this authority to avoid annual justifications by
jurisdictions that would clearly be in need of new construction
eligibility for several years.

New construction exception for rural areas.-HUD regulations
specifically exclude rural areas with populations less than
25,000 from HUD's new construction eligibility list. Since the
new construction exception for neighborhood revitalization is
meaningless in rural areas, these areas are essentially
ineligible for new construction.

Rural areas often need new construction most. New construction is
often more cost effective than repair for the severely
substandard housing common in rural areas. According to the
Congressional Research Service, there are over 7 million housing
units in non-metro areas that are inadequate, overcrowded or
unaffordable. CRS further estimates that demand exceeds
production in rural areas by more than 75,000 units per year.

The Committee bill would make rural areas eligible for new
construction if they certify that this is an identified priority
need of the community and there is not an adequate supply of
existing housing that can be economically rehabilitated to meet
this need. A jurisdiction would have to certify that a market
need exists before undertaking new construction.

New construction as neighborhood revitalization effort.-Under
current law, communities not included on HUD's new construction
eligibility list may use HOME funds for new construction as part
of a neighborhood revitalization program that emphasizes
rehabilitation. Congress believed that new construction can
provide a strong stimulus for revitalization of deteriorated
neighborhoods when carried out as part of a comprehensive
revitalization program. HUD's regulations have implemented this
neighborhood revitalization exception very narrowly, making it
virtually useless. On the one hand, a jurisdiction may only
qualify for the exception if: ``rehabilitation is not the most
cost-effective way to meet the participating jurisdiction's need
to expand the supply of affordable housing within the
neighborhood and the participating jurisdiction's housing needs
within the neighborhood cannot be met through rehabilitation of
the available housing stock''.

On the other hand, the jurisdiction must then demonstrate that
the revitalization program emphasizes rehabilitation with
quantitative evidence such as the expenditure of at least 51% of
neighborhood program funds on such rehabilitation activities.
This requirement thus forces the jurisdiction to undertake what
it has just certified is not cost-effective or feasible in order
to qualify for new construction eligibility.

The Committee bill would override HUD's restrictive regulatory
interpretation to conform the provision with original
congressional intent. A neighborhood revitalization program would
have to include some rehabilitation but would not be required to
emphasize rehabilitation. This refinement would not make the
exception too broad. As under current law, a jurisdiction must
still certify that: (1) the housing in located in a low or
moderate income neighborhood, (2) the housing is to be produced
by a community based non-profit or public agency, (3) that one of
the following four factors be met: (i) no more than 20% of the
HOME-funded units in the neighborhood revitalization program are
newly constructed; (ii) the housing is to be located in a
severely depressed areas with large tracts of vacant land and
abandoned buildings; (iii) the housing is to be located in an
area with an inadequate supply of existing housing that can be
economically rehabilitated to meet identified housing needs; or
(iv) the new construction is required to accomplish the
neighborhood revitalization program.

Administrative costs

Under current law, HOME funds may not be used to pay for
administrative costs, but up to 7% of the local match may be
derived from administrative costs funded from local sources or
CDBG.

Many state and local governments have reported to the Committee
on the hardships created by the lack of administrative funds. The
numerous legislative compromises made with the Administration in
1990 greatly increased the complexity of the HOME program. HOME
is no longer the simple program originally envisioned when no
administrative funds were contemplated. HOME replaced several
smaller housing programs such as rental rehabilitation which
provided funds (up to 10%) for effective program administration.
States and localities were left with a more complicated program
but fewer administrative resources.

The Committee bill would allow 7% of HOME funds to be used
directly for administrative costs instead of the current 7% match
credit. Jurisdictions in fiscal distress (as defined below) could
use up to 10% of their HOME allocation for administrative costs.
The Committee bill would also eliminate the provisions that allow
up to 7% of administrative expenses funded from local sources or
CDBG to count towards the local matching contribution.

Tenant-based rental assistance

Under current law, rental assistance provided with HOME funds may
only be used for tenants drawn from the public housing authority
waiting lists. Some program users have requested that greater
flexibility be permitted in selecting tenants. In some cases,
rental assistance could most effectively be used in concert with
a transitional housing, job-training or other program where some
selectivity may be beneficial. Rural areas might be precluded
from using HOME for tenant assistance because there may not be a
public housing authority serving the area.

The Committee bill would provide communities with more
flexibility by conforming tenant selection policies for rental
assistance with those for project-based assistance. HOME
recipients would be allowed, but no longer required, to draw
tenants from the local PHA's waiting lists. Rental assistance
would, however, have to be provided in accordance with written
tenant selection policies and criteria that are consistent with
the purpose of providing housing to very low and low income
persons and are reasonably related to federal and local PHA
preference rules.

Maximum subsidy limits

The National Affordable Housing Act requires that only a
reasonable amount of HOME subsidy be invested in a unit and
directed that subsidy limits operate effectively in all
jurisdictions and reflect actual development costs. HUD's
regulations have defined this amount as 67% of the FHA Section
221(d)(3) per-unit mortgage limits for multi-family projects. The
67% is based on the expected federal share of project investment.
The remainder is expected to be made up by the state or local
match and/or other private financing. The maximum HOME subsidy
amount is also discounted by tax credit net equity proceeds if
low income housing tax credits are used in the project.

In countless comments received by the Committee, HUD's regulatory
subsidy limits have been criticized as unreasonably low. These
limits make new construction or substantial rehabilitation
virtually impossible in high cost areas and therefore fail to
fulfill Congressional intent that the subsidy limits operate
effectively in all jurisdictions. Through the 33% reduction from
the 221(d)(3) mortgage limits, HUD has essentially required a
per-unit match even though the match was waived for FY92 and the
match is supposed to be on a program-wide basis. HUD's dollar for
dollar deduction of tax credit proceeds from the subsidy limits
essentially preclude the use of the low income housing tax credit
with the HOME program-cutting out a significant source of housing
investment and thwarting Congressional intent that HOME foster
public/private partnerships by attracting investment based on the
tax credit and other sources.

The Administration contends that use of HOME with the tax credit
results in excessive subsidies and the assistance of fewer
affordable housing units. This argument fails to take into
consideration that a smaller amount of HOME funds would be needed
if a larger share of the project subsidy is derived from tax
credit equity. Those HOME funds could then be used to assist
additional housing units. The combination of the two funding
sources thus only provides more flexibility at the local level,
not less housing. Moreover, the need to combine sources is
greatest when the intent is to serve the lowest-income residents.

The Committee believes that protections against oversubsidy
already exist. State credit agencies limit the amount of tax
credit subsidy to only the amount necessary. If anything, HUD's
restrictively low subsidy limits force localities to patch
together multiple finding sources and ``layer'' subsidies, making
the project financing more complicated and inefficient.

The Committee bill would override HUD's restrictive regulations
to ensure that the program is carried out consistent with
Congressional intent. As Section 212(d)(1) of the National
Affordable Housing Act clearly states, HUD's cost limits:

 * * * shall reflect the actual cost of new construction,
reconstruction or rehabilitation of housing that meets applicable
State and local housing and building codes and the cost of land,
including necessary site improvements.

The Committee bill would clarify that HUD could not deduct tax
credit proceeds or other expected federal subsidies from the cost
limits. As conceived, the HOME program was expected to be used as
gap financing, in combination with other assistance.
Congressional intent was clearly to allow HOME and the low income
housing tax credit to be used together when necessary. The
Committee bill would also prohibit HUD from requiring
jurisdictions to contribute their match on a per unit basis. Such
restrictions provide no benefit and simply limit a jurisdiction's
flexibility in program design.

The Committee has also received testimony criticizing the section
221(d)(3) mortgage limits as too low and in need of an adjustment
to account for inflation since they were last updated. These
limits have not been adjusted since 1987. Since then, the
Commerce Department has estimated that construction costs have
increased by approximately 15%. Moreover, HUD generally caps the
market adjustment factor so that the section 221(d)(3) limits
substantially underestimate costs in high cost areas. The
Committee will continue to review this issue to determine if
further action is necessary.

Rent calculations

The Committee bill would make two amendments to the rent
calculations for rental housing assisted under the HOME program.
The first revision would bring the provision in conformity with
the low income housing tax credit and provide project sponsors
with more predictability in the estimation of project operating
revenues. Under current law, the maximum rent that may be charged
for a HOME assisted unit is the lesser of section 8 fair market
rent or a rent that does not exceed 30% of the adjusted income of
a family earning 65% of the area median income, with adjustment
for smaller and larger families. The Committee bill would adjust
the maximum rent levels by the number of bedrooms in a unit
rather than by the household size of prospective tenants. This
method captures the same objective as the original language but
would provide more predictability in calculating project revenue
and debt-service potential and conform with the low income
housing tax credit program.

The second revision to rent calculations under the HOME program
would eliminate a statutory conflict that could prevent HOME
funds being used in combination with the low income housing tax
credit program. A tenant living in a HOME unit whose income rises
above 80% of median income must pay 30% of his or her income for
rent. Under the low income housing tax credit program, the
maximum rent a tenant may be charged is established at 30% of 60%
or 50% of the area median income-even if the tenant's income
rises. Because a project using both HOME funds and the low income
housing tax credit would lose tax credit eligibility and trigger
a recapture on any unit where the tenant is forced to pay above
the tax credit rents because of an increase in income, the
provision effectively discourages private investor participation
through the low income housing tax credit in HOME projects. The
Committee bill would eliminate the requirement that tenants be
charged at least 30% of their income for rent if their income
rises above 80% of median income for projects allocated a low
income housing tax credit or in communities that have state or
local rent control laws.

Homeownership resale restrictions

The HOME homeownership resale restrictions require that the
original HOME-assisted owner receive a fair return on investment
but that the housing remain affordable to a reasonable range of
low income buyers. Under HUD regulations, the resale restrictions
remain in force for 15-20 years. Affordability for this purpose
is defined as monthly principal, interest, taxes and insurance
(piti) payments of not more than 30% of 75% of the area median
income. This long term affordability requirement applies to the
specific unit originally assisted.

It has been pointed out to the Committee that this approach could
be problematic in housing markets where the value of the home has
significantly appreciated. The jurisdiction would have to provide
a significant amount of subsidy to a subsequent low income
purchaser to be able to afford the home.

The Committee bill would amend the homeownership resale
restrictions in existing law to permit a jurisdiction to either
require a specific HOME assisted unit to remain affordable to
other low income purchasers or recapture the HOME subsidy
provided to the unit for use by other eligible HOME recipients.
This approach would allow a homeowner to receive a fair return on
investment and allow the jurisdiction to recapture subsidy to
assist another low income homebuyer obtain housing.

The Committee intends that participating jurisdictions have
sufficient discretion to tailor recapture terms to local
conditions. In a low-income neighborhood where development costs
often exceed re-sale market values, recapture must be structured
in a way attractive to first mortgage lenders and prospective
homebuyers. For example, resale proceeds (net of senior mortgage
repayments) might be shared between the seller and the
participating jurisdictions even though full recapture might not
be possible if re-sale prices are insufficient.

Rental housing production set-aside

The HOME program provides for a production set-aside within (not
in addition to) the basic HOME allocations for jurisdictions
which are new construction eligible. The set-aside was intended
to ensure that new rental housing could and would be built
despite general construction limitations, burdensome matching
shares and possible HUD intransigence. The amount of the
set-aside nationally is equal to 15 percent of HOME funds. The
amount of the set-aside for an individual jurisdiction is
determined on the basis of a formula; for each of the new
construction eligible jurisdictions, the rental housing
production formula determines how much new construction or
substantial rehab the jurisdiction must do. After two years, if
the set-aside funds are not yet used, they then may be spent on
any HOME eligible activity.

The Committee has heard from jurisdictions complaining that the
rental housing production set-aside forces them to undertake
activities potentially contrary to the priorities identified in
their CHAS. In Newton, Massachusetts, for example, over 60
percent of its HOME allocation was designated for rental housing
production. The community had identified other housing priorities
in its CHAS; new construction was not a top priority because of
the high construction costs, lack of available land, and higher
local matching share. Earlier this year, legislation was enacted
to eliminate the set-aside for FY1992 HOME funds. The Committee
bill would eliminate the rental housing production set-aside
completely and restore some local flexibility to the program.

Matching provisions

The HOME program is based upon a partnership approach in which
participating jurisdictions must match HOME funds with local
contributions based on the amount of HOME funds drawn in a given
fiscal year.

Uniform match. The HOME program currently has a tiered match to
encourage localities to undertake light rehabilitation and tenant
based assistance instead of new construction. The local match is
50% for new construction, 33% for substantial rehabilitation and
25% for moderate rehab or tenant based assistance. This variable
match was added at the Administration's insistence to further
deter States and localities from carrying out new construction
activities. The Committee bill would replace the tiered match
with a single uniform match of 25%.

The HOME program was predicated on the assumption that
jurisdictions know local housing markets and local housing needs
better than the federal government. HOME was intended to be a
flexible program to allow states and localities to outline their
housing needs in the CHAS and devise housing solutions
accordingly. The Committee is concerned that the fundamental
purpose of the HOME program-to expand the supply of affordable
housing-may become lost as federal biases, such as the tiered
match, create incentives for communities to undertake activities
such as rehabilitation assistance for existing homeowners instead
of increasing housing opportunities for families without decent,
affordable shelter.

The Committee is also concerned that the tiered match unfairly
penalizes growing communities and communities that simply do not
have an adequate stock of housing to rehabilitate. Communities
throughout states such as California, Florida, and Nevada, faced
with a continuing growth in population, need to build more
housing. The Committee believes that communities that must
undertake new construction to meet their housing needs should not
be penalized by doubling their match burden.

The Administration's concerns that jurisdictions pursue the most
cost-effective housing solutions are addressed through several
means. It is in the clear interest of states and localities,
strapped by budgetary pressures, to maximize their resources in
meeting housing needs. The high construction costs provide a
disincentive to new construction where it is not needed. And
finally, only communities that have met HUD's eligibility
standards can build new housing with HOME dollars.

Eligible match.-The HOME statute specifies a number of
permissible sources of local matching funds including cash from
non-federal sources, deferred, foregone or abated taxes or fees,
the value of land or real property and administrative costs up to
7% of HOME funds. The HOME statute does not provide any guidance
on the eligibility of publicly issued debt as a match. HUD's
regulations allow loans used to finance a project to count as a
match if the repayments of both principal and interest are
reinvested in other HOME activities. The value of any mortgage
interest rate reduction provided by a jurisdiction is also
recognized. Accordingly, the face value of publicly issued bonds
that are repaid from project revenue are not an eligible form of
match.

The Committee has heard from state and local governments and
housing finance agencies requesting that the full face value of
such housing revenue bonds be recognized as a match. The 1986 Tax
Reform Act established caps on the volume of private activity
bonds issued within a state. Housing must compete with
transportation, education, hazardous waste removal, energy, and
industrial development needs for this limited resource. Many
argue that an allocation of bond volume to housing represents a
commitment of state and local resources and should be recognized
as a match. The liabilities and expenses incurred by
jurisdictions issuing bonds may also be considered a commitment
of resources for match purposes. HUD has already agreed to
provide match credit for the present value of state and local tax
exemption for housing bonds, and the value of any uninsured risk
that a jurisdiction assumes in connection with issuing bonds and
making mortgage loans.

The Committee has also heard testimony from housing advocates and
others who argue against the full recognition of debt financing.
A key element of the HOME program design was the participation of
state and local governments in a partnership with the federal
government to provide new resources for affordable housing. In
several states, the HOME program has been a successful rallying
point to gain support for new housing appropriations. In its
report to Congress entitled ``Housing Bonds and the Non-Federal
Matching Requirement in the HOME Program'', HUD noted that:

the volume of state and local housing bond activity is so much
larger than either federal HOME spending or the non-federal HOME
matching liability that indiscriminately counting all loans to
HOME activities from bond proceeds would make it far too easy for
participating jurisdictions to meet their matching requirements
without contributing new or redirected funds.

The contribution of ``hard'' dollars to the HOME project should
also enhance the state and local governments participation in
underwriting and oversight.

The Committee has attempted to strike a balance that recognizes
legitimate contributions to housing while ensuring that an
incentive to commit new resources to housing remains. The
Committee bill would give partial credit-up to 25%-to the value
of project-based debt issued to support HOME eligible rental
housing. Multi-family rental housing provides the predominate
source of affordable housing for low income families. The vast
majority of housing bond activity is issued to support
homeownership housing-often targeted to moderate income families.
Rental housing bonds are required to be deeply targeted to low
income families; project economics are often more difficult and
additional sources of subsidy are often necessary. The Committee
could limit match credit to these rental housing bonds in order
to encourage the development of deeply targeted housing and to
recognize the greater difficulty and risk associated with those
projects. The Committee has chosen a 25% credit as a proxy for
the value of this state or local contribution. This limitation to
rental housing bonds also avoids the potential-suggested by
HUD-for a jurisdiction's match to be fulfilled solely from bond
activity already being undertaken. As an additional protection,
only 25% of a jurisdiction's match could come from this source.
Sweat equity would also be added as an eligible match, as is
currently allowed under the HOPE program.

Match for fiscally distressed communities.-Under current law, HUD
can reduce a state or local government's required HOME match if
they are experiencing fiscal distress and would otherwise be
unable to participate in the program. Last year, because of the
impact of the recession on many state and local governments, the
HUD Appropriations Act waived the match completely for FY92.

The Committee believes that a match is integral to the program
design to leverage additional housing investment and ensure that
state and local housing dollars are not simply replaced with
federal funds. The Committee does recognize, however, that some
relief is necessary for communities that are unable to provide
matching funds. Since HOME funds are allocated partly on the
basis of poverty and housing need, communities that receive the
most HOME dollars and thus must raise the largest local match may
be just those communities least able to do so.

The country remains mired in the midst of the longest recession
since the Depression. States and local governments face fiscal
crises. Most have been forced to cut spending significantly or to
raise taxes, or both, to meet budget deficits. According to the
National Governor's Association (NGA), states have raised taxes
by $25 billion and cut spending by over $10.2 billion over the
last two years. An NGA survey predicts that states ``will
continue to face tough times ahead, even when the recession ends,
because economic growth will be slower than it was in the 1980s,
while needs are increasing.'' A survey conducted by the National
League of Cities indicated that more than half of the nation's
cities will run a deficit in 1992. Over 70% of cities large and
small have been forced to raise taxes or fees or establish new
taxes or fees within the past year.

Although the statute already contains a case-by-case match waiver
authority for distressed communities, a better objective test of
fiscal distress is necessary. The current waiver authority does
not respond to the chronic distress of very poor communities-only
to short-term cyclical distress. It may only provide a 75%
reduction of the match in the first year, a 50% reduction in the
second year and a 25% reduction in the third year. With more than
500 participating jurisdictions, HUD staff could be swamped with
waiver requests in times of major economic downturn, as the
country has recently been experiencing. Replacement of this
bureaucratic decision-making process would free staff time to
focus on more important administrative and oversight functions
within the Department and enable participating jurisdictions to
plan their programs with greater certainty of their matching
requirements.

The Committee is also concerned that HUD would not utilize its
waiver authority to provide relief to needy communities or that
waivers would only be provided to politically-connected
jurisdictions.

The Committee bill would replace the case-by-case waiver process
in current law with a streamlined process for reducing the match
burden to 15% for fiscally distressed jurisdictions, 5% for
severely distressed jurisdictions and 0% for extremely distressed
jurisdictions. For localities, the level of a jurisdiction's
distress would be measured by the degree to which a jurisdiction
exceeded threshold criteria for three factors: (1) households in
poverty, (2) average per capita income and (3) the growth lag in
the labor force. For states, distress would be measured using the
state fiscal capacity and expenditure needs data compiled by the
Advisory Commission on Intergovernmental Relations (ACIR). The
required match would be indexed according to the degree to which
a given state exceeded threshold criteria.

Community housing partnership set-aside

NAHA contains a strong community housing partnership component to
promote and facilitate the development of affordable housing by
community-based non-profit housing organizations. Each
participating jurisdiction is required to set-aside 15% of HOME
funds for investment in housing to be developed, sponsored or
owned by nonprofit community housing development organizations
(CHDOs). If the set-aside funds are not obligated to CHDOs within
an 18-month period, they will be recaptured and reallocated by
HUD to other PJs or intermediaries to assist CHDOs in the
jurisdiction or elsewhere.

For purposes of this set-aside, NAHA defines Community Housing
Development Organizations (CHDOs) as a special kind of non-profit
that:

has among its purposes the provision of decent housing that is
affordable to low and moderate income persons; maintains, through
significant representation on the board, accountability to
low-income community residents and low income beneficiaries with
regard to decisions on the design, siting, development and
management of affordable housing; has a demonstrated capacity for
carrying out these activities; and has a history of serving the
local community within which housing is to be assisted.

The regulations further stipulate that at least one-third of a
CHDO's board members must be residents of low income
neighborhoods, low income residents of the community, or elected
representatives of low income neighborhood organizations. A CHDO
may not be a public agency and no more than one-third of the
board may be appointed by the state or local government and no
more than one-third of the board may be public officials.

While generally supportive of the regulatory implementation of
CHDO composition, the Committee is concerned that the CHDO
definition is impractical in rural areas and may exclude
otherwise eligible and capable community-based non-profits. HUD
requires at least one low-income representative from each county
served by the non-profit be on the governing board. The Committee
directs HUD to provide flexibility in determining that a CHDO
maintains accountability to low-income community residents when
that community includes an expansive geographical area.

The Committee has heard from several state and local governments
that do not yet have sufficient number of qualified and capable
non-profits to fully utilize the 15% set-aside. To accommodate
the need to develop a sufficient capacity of CHDOs, the Committee
bill would make two changes. First, the time period for a
jurisdiction to identify CHDOs would be extended from 18 months,
the period in current law, to 24 months; the commitment period
would remain at 24 months. This refinement would provide
localities with an additional six months to identify CHDOs
without unduly delaying the obligation of funds. Second, a
jurisdiction would be permitted, in its first two years of
participation under HOME, to use up to 10% of its CHDO set-aside
for technical assistance and capacity building if necessary to
improve capability of existing non-profits or develop quality
organizations where they do not already exist.

Redevelopment of blighted urban areas

HUD is currently required to develop model programs for use under
HOME. These model programs are intended to avoid a central
dilemma: housing design is either so centralized that it cannot
take adequate account of differing local needs or so
decentralized that it cannot efficiently involve national
industries and financial institutions. They are also intended to
enable jurisdictions with limited experience in program design to
come up to speed. States and localities may adopt the model
programs, adapt them to their own circumstances, or develop their
own programs. Several model programs have been specified in law:
rental housing production, rehab loans, rental rehab and others.

The Committee bill would establish a new model program to
facilitate the redevelopment of severely blighted inner city
areas. There is a major concern that mistakes of the
past-overconcentration of very poor families-not be repeated.
Successful redevelopment of blighted areas requires strong stable
neighborhoods. Mixed income housing often creates a more stable
community able to sustain new business activity and attract other
neighborhood investment.

Under current law, 90% of HOME rental funds must serve low income
families below 60% of median income; 100% of funds must serve
families below 80% of median income. Under the Committee bill,
projects located in blighted areas, as measured by poverty and
high incidence of vacant land or abandoned buildings, could use
HOME funds to assist both moderate and low income families.
Income targeting would be changed only slightly in very
distressed communities. Deeper targeting to very low income
families would be included with limited assistance to moderate
income families. HOME assisted families and the entire community
would benefit from the rebuilt neighborhood. Low income families
would benefit directly through HOME assistance and indirectly
through better access to stores and good schools, a more stable
housing market, and potentially increased property values.

Low income use restrictions

HUD regulations have required that the low-income use
restrictions on both rental housing and homeownership units be
maintained even in the event of a foreclosure. The Committee has
heard testimony that this will make it extremely difficult to
secure financing through private lenders and the secondary
mortgage market. It has recently come to the attention of the
Committee that HUD will not revise this restriction in pending
regulations. The Committee, therefore, intends to pursue
additional legislative remedies prior to floor consideration of
the housing bill.

The Department's regulations also establish a long term low
income use period of only 20 years in order to attract private
sector participation. Shorter terms are provided for nominal
investments. The Committee has heard testimony that these use
restrictions should be lengthened to avoid repetition of the
recent experience with the preservation of housing financed under
older HUD development programs. The state of California's low
income housing tax credit program-which gives strong preference
for projects with 55 year low income use restrictions-continues
to attract private sector involvement. The Committee directs HUD
to reconsider the low income use restriction terms prior to
publishing a final rule.

TITLE III

SUBTITLE A-HOMEOWNERSHIP INITIATIVES

National homeownership trust

The Committee bill would authorize the National Homeownership
Trust (``NHT'') for fiscal years 1993 and 1994. The Committee
bill would also add a new eligible activity under the NHT. In
addition to assisting individual homeowners, the NHT could be
used to capitalize revolving loan funds at the state or local
level to provide homeownership assistance to eligible first-time
homebuyers. These revolving loan funds would be subject to all of
the program requirements applicable to individual borrowers. In
addition, the Committee bill would require participating state
and local governments to match the federal contribution with an
equal amount of local investment into the fund. Any proceeds or
repayments from loans made from the state or local revolving loan
fund would be used to provide additional homeownership
assistance.

This provision is modeled on the successful program establish in
San Mateo County. San Mateo's Employer Homeownership Program
(EHOP)-through a partnership among the federal, state and local
governments, private lenders and Fannie Mae-provides second
mortgage assistance to County employees who have difficulty
finding affordable housing within the County.

Enterprise zone homeownership opportunity grants

As Congress has considered the problems facing our inner cities
and economically distressed areas, many analysts and government
officials have concluded that enterprise zones can play a useful
role in reviving distressed urban areas. Most of the direct
incentives included in enterprise zone proposals concentrate on
encouraging business formation, investment, and economic
development. Many of these incentives require changes to federal
tax policy, which is the jurisdiction of another Senate
Committee.

However, there are federal policies under the jurisdiction of
this Committee that can also contribute to efforts to revive
distressed urban areas. In fact, any comprehensive strategy for
significantly improving the living environment of such areas must
encourage the development of strong communities and neighborhoods
as well as new business activity. Although there are many
existing programs that can provide assistance to such
communities, they are not targeted specifically to enterprise
zones.

In addition, these programs may not allow specific activities
that could help the residents of these communities achieve
stability and prosperity, such as promoting homeownership. Areas
that are likely to qualify as enterprise zones are likely to be
characterized by relatively low homownership rates. Because
homeownership fosters positive feelings about one's community,
creates incentives to promote neighborhood stability and
well-being, and gives owners a greater stake in their community,
increased homeownership should lead to stronger communities and
neighborhoods. Consequently, a program to encourage homeownership
in enterprise zones would both strengthen the sense of community
and provide a stronger base for economic stability and growth.

Therefore, during markup the Committee accepted an amendment to
establish a program to promote homeownership in enterprise zones.
This program, the Enterprise Zone Homeownership Opportunity
Program (EZ HOME) is designed to encourage homeownership by
families who are not otherwise able to afford to purchase their
own home, to encourage the redevelopment of economically
depressed areas, and to provide better housing opportunities in
federally-approved and equivalent state-approved enterprise
zones. Under this program, HUD may provide assistance to
nonprofit organizations to provide interest-free loans of up to
$15,000 to first-time homebuyers purchasing homes constructed or
rehabilitated in accordance with an enterprise zone homeownership
opportunity program. Such loans shall be secured by a second
mortgage held by the Secretary on the property involved and be
repayable to the Secretary upon the sale, lease, or other
transfer of such property. Families purchasing a home under this
program will have a family income on the date of such purchase
that is not more than the median income for a family of 4 persons
(adjusted for family size) in the metropolitan statistical area
in which a federally-approved or equivalent state-approved
enterprise zone is located.

Expenditures to correct defects

The Committee bill would amend section 518(a) of the National
Housing Act to extend the homeowner protections against
structural defects available to owners of newly constructed, FHA
insured single family homes to FHA insured condominiums.

Section 518(a) of the National Housing Act was enacted in 1964 to
provide a four-year warranty against structural defects that
threaten the safety of new construction FHA insured single family
homes. Currently, Section 518(a) protection are not available to
owners of FHA-insured condominiums.

In the case of FHA insured condominiums, HUD accepts the
existence of a homeowners warranty in lieu of conducting a series
of inspections for a property. (FHA only conducts a final
inspection before insuring a mortgage). THe logical expectation
is that homeowners' warranties will cover structural defects that
do not meet local building standards. However, there have been
many cases-one in Florida called Seville Place that has since
been resolved in the courts-that have left FHA-insured
condominium owners without compensation for severe structural
defects, even in the presence of homeowners' warranties.

The Committee believes that when the Federal government
relinquishes its inspection role in the presence of a homeowners'
warranty, it must hold that warranty company accountable to the
homeowner for structural defects-or as a last resort-correct the
defects itself.

Currently, Section 518(a) only applies where HUD does
pre-construction review of plans and specifications and three
inspections during construction and not where a warranty exists.
The Committee bill would amend Section 518(a) to include
condominiums that are backed by a warranty plan acceptable to the
Secretary. This will give HUD the added incentive to hold
warranty companies more accountable for costs resulting from
structural defects in FHA-insured homes. Under the Committee
bill, where warranty policies fail to compensate for structural
defects, condominium homeowners will be eligible to apply for
assistance under Section 518(a).

SUBTITLE B-FHA AND SECONDARY MORTGAGE MARKET

A. Summary

The continuing decline in affordable housing and the explosive
growth in the low-income population, have combined to produce a
serious mismatch between supply and demand. Researchers with the
Joint Center for Housing Studies at Harvard University noted in
The State of the Nation's Housing, 1991, that:

 Housing the nation's poor remains a problem because of two broad
trends: the persistence of poverty and the loss of low-cost units
. . . The poor . . . face high and rising rents as the stock of
low-cost housing continues to dwindle. As a result, millions of
low-income households must live in units that are either too
costly relative to their incomes, inadequate to their needs, or
both.

As the need for affordable rental housing continues to intensify,
attention has focused on the multifamily housing delivery systems
and the ability of these systems to meet the growing demands. Of
particular concern has been multifamily housing finance and
expanding access to capital for affordable multifamily housing
production.

Multifamily rental housing finance has collapsed in recent
years-partly because the recession has dampened demand, but also
because of profoundly adverse developments in the lending
markets. The demise of the S&Ls, changes in the risk-based
capital rules, financial weakening of the insurance industry, the
withdrawal of Freddie Mac from the multifamily market, and the
near shutdown of FHA multifamily activity have sharply reduced
multifamily credit from traditional sources.

The Housing Subcommittee conducted two hearings on the issue of
multifamily housing finance-one in October 1991 and one in April
1992. The general consensus from witnesses at both hearings was
that the outlook for expanding and preserving the supply of
affordable rental housing remains bleak. Testimony presented by
industry experts underscored the seriousness of the problems
associated with multifamily finance and the need for immediate
action on a number of fronts to begin to reverse the current
trends. While the first hearing focused on identifying the
problems in the multifamily housing finance area, the second
hearing followed up with a more thorough discussion of specific
recommendations for improvement, including recommendations from
the General Accounting Office, the National Task Force on
Financing Affordable Housing, state and local housing finance
agencies, secondary market entities, lenders and other
multifamily experts.

GAO presented the preliminary results of its study on legislative
or administrative actions that could improve the availability of
mortgage financing for affordable multifamily housing. The GAO
recommended several credit enhancement options focused primarily
on modifying and improving the current insurance programs of the
Federal Housing Administration (FHA). GAO suggested
implementation of these options on a pilot basis involving FHA
and state and local housing finance agencies (HFAs) with a
demonstrated capacity to undertake multifamily housing financing.
GAO also highlighted the need for more accurate data on the
general and performance characteristics of affordable multifamily
housing loans, and recommended the establishment of a national
database on multifamily loan performance.

On June 11, 1992, the National Task Force on Financing Affordable
Housing, composed of representatives from all areas of housing
finance and development, issued its final report and recommended
a revitalized system for financing rental housing. The Task Force
report, in particular, supported the establishment of a
multifamily loan database and the exploration of new risk-sharing
mechanisms between old and new sources of credit enhancement.

Title III of the Committee Bill draws upon the suggestions and
recommendations of GAO, the Task Force and other multifamily
experts and contains proposals designed to address multifamily
data collection and improve credit enhancement for affordable
multifamily loans. Section 311 of the Committee Bill would
establish a National Interagency Task Force on Multifamily
Housing in order to begin the process of building a complete and
useful national database on multifamily housing loans. Section
312 would authorize a demonstration program which would enable
the Federal Housing Administration (FHA) to tap the resources and
expertise of state housing finance agencies, federal government
sponsored enterprises and other market participants in order to
preserve and expand the supply of affordable rental housing.
Section 312 would also authorize a specific pilot program to
allow FHA to enter into partnerships-or risk sharing
arrangements-with qualified state or local housing finance
agencies to produce affordable housing.

B. Background

Affordable housing needs.-The nation's affordable housing crisis
continues to worsen. Over half of poor households-households with
incomes below official poverty levels-now pay more than 50
percent of their income for rent and utilities. The failure of
incomes to keep pace with housing costs over the past two decades
has put homeownership beyond the reach of many young families
with moderate incomes. Rental housing is increasingly becoming
the sole housing option open to low and moderate income
households.

The number of low-income renters has grown considerably. In 1974,
9 million households had incomes that fell below official poverty
levels. By 1989, 12.3% (11.5 million) of the nation's households
still lived in poverty. Current trends suggest that the growth in
the number of renter households will be largely among low and
moderate income households.

At the same time, the supply of affordable rental housing has
declined substantially in the past two decades. Specifically, the
supply of housing renting at $250 or less-affordable to a family
earning $10,000 per year-fell by 2.6 million units from 1974 to
1989. In the late 1980s, 197,000 rental units were removed from
the housing stock each year, including 75,000 low-cost units and
15,000 subsidized units. A recent report by the Joint Center of
Housing Studies at Harvard University on the current state of the
nation's housing noted that?

 With the onset of the recession in 1990, private housing starts
tumbled to their lowest levels in nearly a decade and have
retreated even further in 1991 . . . Multifamily starts took the
hardest hit, plummeting 56% between 1985 and 1990 to 297,000
units.\1\(FOOTNOTE)

(FOOTNOTE)\1\``The State of the Nation's Housing, 1991,'' by
Apgar, DiPasquale, Cummings and McArdle, Joint Center for Housing
Studies of Harvard University, 1991. p. 6.

The result of these trends is a classic and dangerous mismatch
between affordable housing supply and demand, leading to higher
rents, higher rent burdens, increased overcrowding, increased
evictions and increased homelessness.

Current trends in multifamily housing finance.-During the last
two decades, single family mortgage finance has undergone
dramatic changes. A huge increase in mortgage demand has been
accommodated largely by increased sophistication and innovation
in the secondary mortgage market.

Multifamily housing, which is rental property with five or more
units, has not benefited from similar improvements in mortgage
finance. On the contrary, much of the earlier support for
multifamily housing has collapsed in recent years. The recession
has dampened demand for market-rate housing. But weakening in
demand has been exceeded by the shrinking of multifamily mortgage
credit from traditional sources. Also contributing to the problem
have been changes to the tax code, the collapse of S&Ls, changes
in bank and thrift capital requirements, financial weakening of
the insurance industry, the withdrawal of Freddie Mac from the
multifamily market, and the near shutdown of FHA multifamily
activity.

The report of the Task Force on Financing Affordable Housing
noted that:

  M ortgage credit has contracted sharply over recent years in
response to continually interacting forces-changes in the
economic environment and in tax and regulatory policy, the
decade-long Federal thrust to extricate government from direct
provision of subsidies and to reduce intervention in the market,
the collapse of the thrift and real estate industries, and the
changed practices of the Federal Housing Administration (FHA).

The impact of tax reform.-Since rental housing is an investment
asset, the return on investment is an important determinant of
the supply of rental housing. The investment return to rental
housing is significantly influenced by tax policy. Historically,
the federal tax code granted very favorable tax status to rental
housing. However, changes included as part of the Tax Reform Act
of 1986 removed the financial incentives for investment in
multifamily housing. These included changes which decreased
marginal income tax rates and increased the capital gains tax
rate, significantly lowering the after tax return on rental
housing.

Perhaps the most significant blow to real estate investment under
the 1986 Tax Reform was the provision that ``passive'' investors
(which include most investors in limited partnerships of rental
housing) could no longer offset ordinary income with losses from
real estate investments. For many investors, this provision
substantially eliminated the tax benefits of investing in rental
housing. This in turn has added to the decline in multifamily
housing starts. Some industry analysts would also argue that the
Tax Reform changes have significantly contributed to the
widespread disinvestment and abandonment of marginal or
distressed multifamily properties by owners.

For multifamily housing, one positive element of the 1986 Tax
Reform Act was creation of the Low Income Housing Tax Credit
(LIHTC) to replace other tax incentives that the Act eliminated.
Until enactment of the HOME program in 1990, the LIHTC was the
only viable federal vehicle for the production of new affordable
multifamily housing. Since its inception, the LIHTC has helped
finance the production of more than 420,000 housing units.

LIHTCs have had a perilous existence. The original authorization
expired in 1989. Since then, Congress has enacted a series of
short-term extensions. This year to year uncertainty weakens the
ability of the LIHTC to support investment in affordable
multifamily housing.

The collapse of FHA.-The Federal Housing Administration (FHA) of
HUD has long been a dominant source of mortgage insurance for
multifamily mortgages, particularly for low and moderate income
housing.

Over the last 21 years, HUD has insured a total of $72.7 billion
of multifamily mortgages for conventional and low-income
projects. This figure includes $56.6 billion for new properties
and $16.1 billion for existing properties.

Currently, FHA provides multifamily insurance through two
programs. Section 221(d) provides financing for new construction
or substantial rehabilitation of multifamily housing. Section
223(f) insures mortgages either for the purchase and
non-substantial rehabilitation of existing housing or for the
refinancing of such housing.

In the past three years, HUD has virtually withdrawn from the
multifamily market. FHA multifamily insurance dropped from $5.6
billion in 1987 to only $630 million in 1989 and $1.8 billion in
1990. FHA's share of total multifamily mortgage insurance fell
from 30% in the early 1980's to only 3% in 1989. The FHA share of
insurance on new properties dropped from more than 52% in 1982 to
less than 8% by 1989 and 6% in 1990.

In addition to the dramatic decline in FHA's multifamily mortgage
insurance origination activity, recent reports from the HUD
Inspector General have highlighted significant material
weakenesses in the FHA program as well as a general lack of
staffing capacity.

Under the Chief Financial Officers Act, the HUD IG has
responsibility for the audit of the FHA's financial statement.
The IG contracted with Price Waterhouse to conduct the audit
work. The Housing Subcommittee received the most recent IG/Price
Waterhouse report on March 28, 1992.

The audit of the 1991 financial statement indicated that: the MMI
fund has capital of $871 million-slightly less than it had in
1990; the GI Fund may experience significantly higher losses than
anticipated; and material weaknesses in FHA's internal controls
continue to persist.

The audit cited three inter-related material weaknesses:

 FHA monitoring must place more emphasis on default and loss
prevention.-Price Waterhouse recommended that FHA make its
monitoring ``more proactive and preventive in nature. Preventing
defaults before they become claims is essential from the
standpoint of curtailing the amount of default losses and easing
the administrative burdens assumed by FHA when excessive numbers
of properties and loans must be managed, served and sold.''

 FHA must place continued emphasis on improving accounting and
financial management systems.-The absence of modern information
systems constrains monitoring and loss prevention efforts. Under
current systems, for example, FHA's losses ``can only be
attributed to major activities . . . but cannot be pinpointed
with precision to individual programs. . . .'' Price Waterhouse
indicated that FHA must receive more precise information if it is
to determine which programs are losing money and which management
actions can curtail identified losses.

 FHA must take action to curb losses in the resolution and
management of defaulted single and multifamily loans.-The number
of single family and multifamily notes being assigned to FHA has
substantially increased. This is due partly to difficult economic
conditions and partly due to known flows in the underwriting of
certain programs (e.g. multifamily coinsurance). Yet losses to
the federal government have been exacerbated because FHA has
inadequate systems to prevent further assignments and to more
quickly dispose of loans for which it is responsible.

The totality of these material weaknesses raise a very real risk
of widespread defaults, putting even more significant drains on
the multifamily insurance fund.

The HUD IG has also highlighted serious deficiencies in HUD's
staffing capacity and its ability to monitor loan performance,
provide loan servicing or take appropriate actions to prevent
project defaults. A recent audit report by the HUD Inspector
General of the Multifamily Division of the Grand Rapids, Michigan
field office underscored the pervasiveness of this problem and
the real threat of loss it poses to the federal government.

The IG pointed out that HUD staffing was so inadequate ``the
Office did not take adequate steps to protect HUD's interest as
the insurer or holder of the projects' mortgages.'' The IG went
on to note that programs and systems put in place to monitor
project health and to forecast potential loan defaults went
unutilized, allowing seriously adverse conditions-such as
enormously high vacancy losses; underfunded tenant security
deposits and unauthorized withdrawals from operating reserves-to
go uncorrected.

In comparing HUD's staffing capacity at the Michigan field office
with that of the state housing finance agency the IG noted that
the staffing capacity of the state housing finance agency far
exceeded that of HUD-while the program staff of the state housing
finance agency each handled an average of 16 projects, each of
the HUD program staff were responsible for 71 projects.

The legacy of coinsurance.-The demise of the coinsurance program
is often cited as contributing to the current decline in
multifamily activity. Although coinsurance was authorized by
Congress in 1974, the Reagan Administration is responsible for
greatly expanding the use of FHA coinsurance as part of its
``privatization'' policy. Coinsurance was originally conceived as
an idea to have the federal government share the risk of loss on
multifamily loans with private lenders.

Under coinsurance, FHA delegated the mortgage insurance
underwriting functions, servicing, management and property
disposition functions for multifamily loans to private lenders
and agreed to share insurance premiums with the lenders. In
exchange, lenders agreed to assume responsibility for a portion
of any loss (up to a maximum of approximately 20% of the loan).

By 1989, it had become clear that the coinsurance program had
been poorly designed and grossly mismanaged. Instead of a careful
risk sharing program with qualified and well-capitalized lenders,
coinsurance-as implemented by the Reagan administration-became a
vehicle for massive staff cutbacks and a complete and total
abdication of function, responsibility and oversight by HUD.

In addition, HUD lacked the staffing capacity to monitor the
activities of lenders, and a majority of the coinsurance
portfolio was originated by just two lenders.

In September 1989 Price Waterhouse reported that the FHA General
Insurance Fund, which covers the multifamily coinsurance program,
would suffer losses of $3.5 billion in 1989, of which about $2.7
billion were attributable to the coinsurance program.

The reasons behind the failures of the coinsurance program were
examined at length by the Senate Banking Subcommittee on HUD/Mod
Rehab Investigation and reported in the Subcommittee's final
report (S. Prt. 101-124).

In January 1990, Secretary Kemp announced termination of the
coinsurance program effective November 1990. In its place, the
Secretary proposed implementing a new, full insurance delegated
processing system. Under delegated processing, approved
processors perform the technical underwriting functions for the
FHA, but unlike coinsurance, the processors will not have the
authority to issue insurance commitments. The delegated
processing program began operation in the spring of 1991. It has
suffered from numerous deficiencies and is unlikely to meet the
need for affordable rental housing that serves low and moderate
income families.

Secondary market activity.-While there was substantial growth in
the secondary market for multifamily mortgage loans in the 1980s,
this segment remains quite small compared with the single family
secondary market. In 1989, $10 billion in multifamily loans were
sold in the secondary market, representing 33% of multifamily
originations. In contrast, $274 billion in single family
mortgages were sold in the secondary market, representing 78% of
originations in 1989.

The National Task Force on Financing Affordable Multifamily
Housing noted the importance of a viable and vibrant secondary
market for multifamily loans in its final report:

 The need for a stable, high-volume secondary market that would
serve subsidized as well as market-rate multifamily housing is
clear; its timely development should not be left to chance . . .
The Task Force recognizes the far greater challenge of developing
a secondary market for multifamily, as opposed to single family
housing. However, the benefits of a secondary market are too
numerous to allow the challenge to go unmet.

The Federal National Mortgage Association (Fannie Mae) and the
Federal Home Loan Mortgage Association (Freddie Mac) have had
mixed multifamily results. In addition, there is a growing
perception in recent years-among a wide coalition of lenders,
builders, tenant advocates, state and local governments and other
housing organizations-that Fannie Mae and Freddie Mac are simply
not ``doing enough'' to serve the housing needs of low and
moderate income families.

While the total volume of Fannie Mae's multifamily mortgage
activity at the end of the third quarter of 1990, was $17.9
billion, industry observers point out that the bulk of Fannie
Mae's multifamily activity has been directed to the high end of
the rental market for more luxury type multifamily dwellings in
suburban communities.

The Freddie Mac experience and track record in multifamily
housing has been dismal. Freddie's multifamily volume dropped
from a high of $3.4 billion in 1986 to $600 million in 1989. In
September 1990, Freddie Mac suspended new business for its
multifamily program, after suffering large losses as a result of
poor underwriting and geographic concentration in housing markets
in Atlanta and New York.

Freddie Mac's chairman announced at a Subcommittee hearing in
October 1991, that it intended to re-enter the multifamily market
sometime in the middle of 1992. At a subsequent Subcommittee
hearing on April 3, 1992, Freddie Mac announced its intention to
commit $1 billion toward the purchase of existing multifamily
loans in the agency's portfolio.

The Committee remains concerned about the nature and scope of
Freddie Mac's multifamily activity. While activities such as the
refinancing may help to forestall further defaults in Freddie
Mac's multifamily portfolio, they do not expand the supply of
affordable rental housing.

The Committee anticipates increased regulatory and legislative
oversight of both Fannie Mae and Freddie Mac as a result of the
GSE legislation currently awaiting conference between the House
and Senate. In particular, the Committee is hopeful that Title V
of the GSE bill-which is designed to amplify and clarify Fannie
Mae's and Freddie Mac's responsibility for serving the housing
needs of low and moderate income families-will help to stimulate
the agencies' affordable multifamily activities.

C. Responses to structural impediments

Housing Subcommittee Hearings. In preparation for reauthorization
of the 1990 National Affordable Housing Act, the House
Subcommittee conducted two hearings on multifamily housing
finance during the fall of 1991 and the spring of 1992. The
hearings were designed to explore the current state of
multifamily housing finance in this country and to begin to
formulate recommendations for improvements. The first hearing,
held on Tuesday, October 21, 1991, was conducted as a roundtable
discussion. Witnesses included HUD Assistant Secretary for
Housing, Arthur Hill, as well as leaders in multifamily housing
lending, development, investment-both non-profit and for-profit;
the secondary mortgage market; and mortgage security specialists.

The hearing focused on the adequacy of the current system for
financing multifamily housing; recommendations for changes,
particularly legislative changes in Federal policy to provide
more adequate financing of affordable multifamily housing; and
the appropriate role of the secondary market in multifamily
housing finance.

In addition to regular written testimony, the Subcommittee
requested that four of the witnesses prepare discussion papers on
multifamily finance in advance of the hearing. These discussion
papers were distributed to all witnesses prior to the hearing in
order to stimulate a more effective roundtable discussion.

The discussion papers included the author's assessments of the
adequacy of the current system for financing multifamily housing,
particularly housing that is affordable to low-income and
moderate-income families; an analysis of the important trends or
public policies that might affect, either positively or
negatively, the adequacy of that financing over the next decade;
and recommendations for changes, especially legislative changes,
in Federal policy to improve the financing of affordable
multifamily housing to meet national needs.

Testimony presented at the hearing highlighted the need for more
effective credit enhancement for multifamily housing; the need
for an enhanced role for Fannie Mae and Freddie Mac in the
purchase of multifamily loans; the need to improve the ability of
FHA insurance program to process the existing and future
multifamily pipeline; and the need to begin to develop more
uniformity in the multifamily area, from underwriting to
documentation.

By far, the most overwhelming and consistent opinion expressed by
witnesses at the hearing was the need to have a vibrant and
effective FHA back in the multifamily market. Witnesses uniformly
stated that FHA provides the key credit enhancement for
affordable multifamily housing; the FHA programs currently suffer
primarily from insufficient staff which result in excessive
delays in approvals. Several witnesses also suggested an enhanced
role for FHA, which would entail working in better cooperation
with state and local entities such as housing finance agencies,
as well as with Fannie Mae and Freddie Mac.

The second Housing Subcommittee hearing, held on Friday April 3,
1992, followed by with a more thorough discussion of specific
recommendations for improvement, including recommendations from
the General Accounting Office, the National Task Force on
Financing Affordable Housing, state and local housing finance
agencies, secondary market entities, lenders and other
multifamily experts.

GAO report.-The 1990 National Affordable Housing Act directed the
General Accounting Office to undertake a study on multifamily
finance and to identify legislative or administrative actions
that could improve the availability of mortgage financing for
affordable multifamily housing through various credit
enhancements.

In April 1992, the GAO presented its preliminary findings at the
Housing Subcommittee hearing. The GAO recommended several credit
enhancement options focused primarily on modifying and improving
the current insurance programs of the Federal Housing
Administration (FHA).

In conducting the study and formulating its recommendations, GAO
drew upon the expertise of a wide range of senior and midlevel
officials representing private financial institutions (including
commercial bankers, mortgage bankers and savings and loan
officials), bond insurers, credit rating agencies,
government-sponsored mortgage finance corporations (GSEs),
for-profit and nonprofit housing developers, government
regulatory organizations, state and local housing finance
agencies (HFAs), community development organizations, and
representatives of academia.

The GAO concluded that a broad consensus exists among the
industry that (1) significant barriers impede access to the
capital markets for rental housing targeted to low and very-low
income households and (2) there is a need to improve the
availability of long-term fixed-rate financing for affordable
housing. GAO's preliminary recommendations represent an attempt
to respond to this consensus.

GAO presented four credit enhancement options which focused
primarily on modifications to the existing FHA mortgage insurance
programs. These included: (1) delegated processing; (2) delegated
underwriting; (3) primary bond insurance; and (4) bond
reinsurance. GAO suggested implementing these options on a pilot
basis with FHA and those state and local housing finance agencies
(HFAs) with a demonstrated capacity to undertake multifamily
housing financing. Under each option, HFA's would agree to assume
the expected losses on loans they originate based on this
historic loan performance.

Under delegated processing, FHA would allow selected HFAs to
originate and process individual loans and submit loan packages
directly to FHA for final approval for full mortgage insurance.
FHA would be required to approve or deny the loan insurance
within a specified time frame (e.g. 30 days). With the exception
of timely review, FHA's current delegated processing program
operates in much the same way as the GAO recommended option.

The second option would delegate underwriting to a selected group
of the most experienced HFAs, allowing them to commit FHA to full
mortgage insurance on individual loans without requiring final
approval by FHA. GAO noted that this option would allow each HFA
the flexibility of applying its own underwriting criteria to meet
the needs of its local communities.

The third option would allow FHA or the Government National
Mortgage Association (Ginnie Mae) to provide primary insurance on
bonds issued by HFAs that are backed by multifamily loans.
Proceeds from the bonds would be used to purchase or originate
affordable multifamily loans. GAO noted that this option would
provide more extensive access to HFA financing for local lenders
who are currently originating small- and medium-sized loans for
affordable multifamily housing.

Under the fourth option, private bond insurers would provide the
primary bond insurance to HFAs. FHA or Ginnie Mae would reinsure
the primary insurance policies. GAO noted that the availability
of this reinsurance could encourage private bond insurers to more
actively participate in providing credit enhancements for
affordable multifamily housing.

CAO also highlighted the need for more accurate data on the
general and performance characteristics of affordable multifamily
housing loans, and recommended the establishment of a national
database on multifamily loan performance.

National Task Force on Financing Affordable Housing.-The National
Task Force on Financing Affordable Housing was launched in
February 1990. The Task Force set out to identify obstacles that
impede access to capital or market efficiency for multifamily
housing and to explore the development of a fully-functioning
secondary market, particularly for affordable rental housing.

Participants in all areas of housing finance and development
comprised the membership of the Task Force and included
representatives from the banking and insurance industries,
mortgage bankers, underwriters multifamily developers, non-profit
housing organizations, federal, state and local housing agencies,
potential investors and representatives from secondary market
agencies such as Fannie Mae and Freddie Mac.

Two of the members of the Task Force, Carl Eifler and Barbara
Cleary, testified at the Subcommittee's hearing on April 3, 1992
and presented the group's preliminary findings.

On June 11, 1992, the Task Force released its final report and
recommended a revitalized system for financing rental housing as
well as the development of a large-scale secondary market for
multifamily mortgages, which would make private capital more
available for investment in rental housing. The report also
recommended: (1) defining a multifamily loan database in order to
move toward greater standardization in multifamily housing
finance; (2) exploring new risk-sharing mechanisms between old
and new sources of credit enhancement; and (3) establishing a
Multifamily Institute to coordinate and to pursue the
recommendations of the Task Force, and in particular to create
standards for the industry.

D. Legislative response

The multifamily finance proposals contained in Title III of the
Committee Bill draw upon the suggestions and recommendations of
GAO, the Task Force and other multifamily housing experts. The
proposals are designed to address multifamily data collection and
improved credit enhancement for affordable multifamily loans.

Section 311 of the Committee Bill would establish a National
Interagency Task Force on Multifamily Housing in order to begin
the process of building a complete and useful national database
on multifamily housing loans.

The Task Force would be composed of The Secretary of Housing and
Urban Development, the Chairperson of the Federal Housing Finance
Board, the Comptroller of the Currency, the Chairperson of the
Federal Reserve Board, the Director of the Office of Thrift
Supervision, the Chairperson of the Federal Deposit Insurance
Corporation, the Chairperson of the Federal National Mortgage
Association, and the Chairperson of the Federal Home Loan
Mortgage Corporation or their designees.

In addition, the Task Force would also include representatives
appointed by both the Secretary of HUD and the Chairperson of the
Federal Housing Finance Board. The HUD Secretary would appoint a
representative from each of the following: a State housing
finance agency, a local housing finance agency, the building
industry with experience in multifamily housing, and the life
insurance industry with experience in multifamily loan
performance data.

The Chairperson of the Federal Housing Finance Board would
appoint a representative from each of the following: the
financial services industry with experience in multifamily
housing underwriting, the nonprofit housing development sector
with experience in subsidized multifamily housing development,
and a nationally recognized rating agency.

The Task Force would be jointly chaired by the Secretary of
Housing and Urban Development and the Chairperson of the Federal
Housing Finance Board.

Section 312 of the Committee Bill would authorize a demonstration
program which would enable FHA to tap the resources and expertise
of state housing finance agencies, federal government sponsored
enterprises and other market participants in order to expand the
supply of affordable rental housing.

Under the general demonstration program, the Secretary would be
authorized to explore the feasibility of entering into
partnerships or other contractual arrangements with state or
local housing finance agencies, the Federal Housing Finance
Board, Fannie Mae, Freddie Mac, and other state or local mortgage
insurance companies or bank lending consortia. In establishing
the demonstration program the Secretary would be required to
consult with the appropriate public or private agencies,
organizations or individuals with experience in multifamily
lending, underwriting, insurance and development. The Secretary
would also be required to consider any recommendations made by
the GAO pursuant to the study on credit enhancement mandated in
the 1990 National Affordable Housing Act.

Section 312 would also authorize a specific pilot program to
allow FHA to enter into partnerships-or risk sharing
arrangements-with qualified state or local housing finance
agencies to produce affordable housing.

Housing finance agencies would be given the ability to underwrite
multifamily loans with full FHA insurance if they agree to
reimburse the federal government for a specified portion of any
losses which the loan may incur. This partnership between FHA and
the housing finance agencies would enhance their shared public
missions of providing affordable housing without taking undue
risks with either agency assets or federal assets.
E. Response to Administration concerns

The Administration has raised several concerns regarding the
multifamily demonstration program.

First, the Administration contends that the demonstration would
repeat the failures of the coinsurance program. The Committee
strongly disagrees, believing that the demonstration would learn
the lessons from the coinsurance debacle.

The Final Report of the HUD/Mod Rehab Investigation Subcommittee
noted in 1990 that ``coinsurance or risk sharing remains valid as
a concept. HUD's failures in implementing the coinsurance
authority merely illustrate that a sound concept can be poorly
executed.''

Under coinsurance, FHA delegated the insurance underwriting
functions for multifamily loans to private lenders and agreed to
share insurance premiums with the lenders. In exchange, lenders
agreed to assume 20% of the risk of loss on coinsured loans.

By most accounts and by HUD's own admission, coinsurance failed
primarily due to flawed program design, inappropriate
implementation and a complete lack of monitoring and oversight.
Under coinsurance, lenders had an incentive to overvalue loan
mortgages since they were required to put up little if any of
their own capital as assurance that any losses would be repaid.

The demonstration, by contrast, would utilize qualified state
housing finance agencies with substantial assets, a clear public
purpose and a proven track record-instead of ``fly-by-night''
operations with minimal assets, virtually nothing to risk and
everything to gain. Significantly, the experience of state
housing finance agencies under coinsurance was
exemplary-originating more than $200 million coinsured loans and
producing more than 2500 units affordable housing-without causing
a single loss to the federal government.

The demonstration would avoid the problems of coinsurance by:
requiring a demonstrated capacity of the agency's ability to
reimburse its share of any losses under the program, and by
establishing standards for HFA qualification which reflect an
agency's ability to execute the underwriting and processing
functions as well as its performance, personnel and fiscal
capacity.

Second, the Administration asserts that the multifamily
demonstration will expose the federal government to excessive
risk. The Committee also disagrees with this contention. Sharing
the risk with state housing finance agencies will lessen rather
than increase the federal risk by utilizing the significant
experience and resources of the state agencies-including loan
underwriting capacity, loan servicing and monitoring experience.
As noted earlier under the discussion of the diminished capacity
of FHA, HUD currently faces a very real risk of widespread
defaults of existing federally insured multifamily loans
primarily because the capacity of HUD to monitor loan
performance, provide loan servicing or take appropriate actions
to prevent project defaults is seriously deficient.

When the HUD IG compared HUD staffing with that of the state
housing finance agency, it noted that the staffing capacity of
the state housing finance agency far exceeded that of HUD-while
the program staff of the state housing finance agency each
handled an average of 16 projects, each of the HUD program staff
were responsible for 71 projects.

The partnership between FHA and the state housing finance
agencies would enhance their shared public missions of providing
affordable housing without taking undue risks with either agency
assets or federal assets.

Title IV-HOPE

Authorization/amendment

The Committee bill would consolidate authorizations for the four
HOPE programs for fiscal years 1993 and 1994. Conforming
amendments would be made to existing law to strike separate
authorizations. The bill would also add non-federal public
housing to the list of multifamily rental properties eligible for
homeownership under HOPE II.

HOPE for youth: Youthbuild

In general.-The Committee bill would establish a new grant
program called Youthbuild to empower economically disadvantaged
youth to become self-sufficient while at the same time increasing
the supply of affordable housing. The Secretary would be
authorized to provide planning and implementation grants to
capable public and private non-profit organizations to educate
and to train disadvantaged high school dropouts through a program
involving construction and rehabilitation of housing for
low-income people.

The Youthbuild program would be modeled on existing programs that
have grown up at the grass roots level. These programs have
proven effective over the course of the last 10 years, first in
East Harlem in New York City; then in the South Bronx; and more
recently in Roxbury, Massachusetts; and in Cleveland, Ohio: San
Francisco, California; Milwaukee, Wisconsin; Indianapolis,
Indiana; and Tallahassee and Gadsen County in Florida.

The Committee believes that the Youthbuild model offers a unique,
comprehensive approach to the revitalization of distressed
communities and the integration into the social and economic
mainstream of what is in danger of becoming a lost generation of
poor, minority youth. Youthbuild experiences link education and
training in marketable job skills with leadership development and
the production of a needed community resource-affordable housing.

The Committee designed the federal grant program both to enable
organizations that have already run Youthbuild programs to expand
their operations and to permit fledgling organizations, the
managers or directors of which have experience in youth training
and/or housing development, to develop new Youthbuild programs.
The grant program would have sufficient flexibility so that
grantees could operate Youthbuild programs independently or in
conjunction with other federal, as well as state or local,
housing development programs.

The Committee included the Youthbuild program as a new subtitle D
of Title IV of the Cranston-Gonzalez National Affordable Housing
Act, which contains the HOPE programs that enable recipients of
federal housing assistance to purchase their units and provide
those recipients with counseling and training aimed at economic
empowerment. The Committee views the Youthbuild program, which
seeks to empower low-income youth, as an analogue to the other
HOPE programs. The Committee further believes that Youthbuild
would be best administered by the Department's Office of
Community Planning and Development, which also administers the
HOPE program under Subtitle C of Title IV.

Planning grants.-The Secretary could award planning grants of up
to $150,000 and would have discretion to approve higher amounts
with good cause. Planning grants could be used to study the
feasibility of establishing a Youthbuild program and for program
planning and development, including identifying and selecting a
site, preliminary architectural or engineering work, staff
identification and training, and program activity planning.
Planning grants could also be used to fund development of
implementation grant applications. An applicant would not need to
have control of the site to receive a planning grant. Applicants
would be selected to receive grants based on competitive
criteria, including their qualifications and experience, their
potential for developing a successful program, and the need for
the prospective program. The Committee intends that newly formed
organizations should be eligible for grants as long as their
principals have experience as specified in the criteria for
selection.

Implementation Grants.-The Secretary would award implementation
grants for the purpose of carrying out Youthbuild programs.
Implementation grants could be used for architectural and
engineering work; acquisition, rehabilitation and/or construction
of housing and related facilities; administrative costs (which
would be limited to 15% of the grant amount or a higher
percentage determined necessary by the Secretary to support
capacity development by a private nonprofit organization);
education and job training services and related services
including counseling and leadership development; wage stipends;
operating expenses and replacement reserves of the property;
legal fees; and technical assistance.

Grants would be awarded based on competitive criteria. As with
planning grants, these criteria would include an applicant's
qualifications and experience, its potential for developing a
successful program, and the need for the prospective program.
Other criteria would include the apparent commitment of the
applicant to leadership development, education and training of
participants; the inclusion of previously homeless tenants in the
housing provided; and the amount of resources from non-program
sources that the applicant or an affiliate would contribute to
the program. The Committee intends that newly formed
organizations should be eligible for grants as long as their
principals have experience as specified in the criteria for
selection.

Although the Committee intends that the amount of nonprogram
funds an applicant can provide should receive serious
consideration in the selection process, the Committee does not
intend that this should be the determining factor. A proposed
program with strong indicia of likely success and/or a program
that meets a great need should be funded before a program with
weak indicia of likely success or that addresses a minimal need
even if the applicant for the latter program can provide a larger
portion of program costs.

An applicant would receive priority in the award of an
implementation grant to the extent that the applicant proposed to
finance housing development, operation, and maintenance costs
from nonprogram funds. The Committee decided to include this
provision to encourage coordination of Youthbuild programs with
existing federal housing programs as well as with state and local
housing programs in order to minimize unnecessary duplication of
housing development programs and to leverage federal housing
development dollars. The Committee was concerned, however, that
many organizations that have and will operate Youthbuild programs
may have difficulty coordinating with existing housing programs.
Organizations that currently operate Youthbuild programs often
experience such difficulty because federal housing production
programs have goals and requirements that are inconsistent with
the educational and training aspects of Youthbuild programs. The
Committee therefore intends that funding Youthbuild programs with
other housing production programs, but who perform well in the
other selection criteria.

The Secretary would be required to develop a procedure whereby
applicants would apply at the same time for a planning and an
implementation grant. Receipt of implementation funds would be
conditioned on successful completion of the goals for which
planning funds were awarded.

Program requirements.-The bill would impose certain requirements
both on the operation of the Youthbuild program and on the
housing projects that would be constructed or rehabilitated
through the Youthbuild program.

Each residential project assisted would have to make 90 percent
of its units available for families with incomes less than 60
percent of the area median with the remainder of the units
available for low-income families. The bill would also impose
certain tenant protections and tenant selection procedures and
would limit the rent paid by tenants to the level specified in
Section 3(a) of the Housing Act of 1937. Transitional projects
would have to comply with requirements regarding service
delivery, housing standards, and rent limitation imposed on
comparable housing receiving assistance under Title IV of the
Stewart B. McKinney Homeless Assistance Act, and homeownership
projects would have to comply with the requirements of either
HOPE II or HOPE III. Profits on both rental and transitional
housing would be limited to a six percent annual return on equity
and an additional return on equity at disposition to offset
inflation. Nonprofit organizations would have to use any profit
for the purpose of providing housing for low and moderate income
families. All restrictions would apply for the remaining useful
life of the property.

The bill would also impose limitations on youth eligible to
participate in a Youthbuild program. Participation would be
limited, subject to certain exceptions, to
economically-disadvantaged youth aged 16 through 24 who have
dropped out of high school. Individuals selected for
participation would have to be offered participation for 6 to 24
months. Program time would be required to be equally divided
between education services and activities and work experience.
Provisions of the Job Training Partnership Act relating to wages
and benefits, labor standards, and nondiscrimination would apply.
However, the bill would provide that programs could use funds
from sources other than the Youthbuild subtitle to pay higher
wages if appropriate. The Committee included this provision to
provide flexibility to accommodate variations in living costs
among program areas. Experience with existing Youthbuild programs
has indicated that this flexibility is necessary to ensure
program success.

Technical assistance.-The Committee bill would require the
Secretary to set aside 5 percent of appropriations to fund
technical assistance, for organizations operating or intending to
operate Youthbuild programs. The Committee believes this
provision is important to the bill's goal of developing the
capacity of nonprofit organizations to operate Youthbuild
programs.

Regulations.-The Secretary is authorized to issue regulations to
carry out the Youthbuild program. Although the bill would not
impose any deadline for the issuance of regulations, the
Committee intends that the Secretary issue regulations as
expeditiously as possible.

TITLE V-HOUSING ASSISTANCE

SUBTITLE A-PUBLIC AND INDIAN HOUSING

Authorizations

The Committee bill would authorize a series of public and indian
housing programs and activities for fiscal years 1993 and 1994.
These programs and activities would include public housing
operating subsidies, the public housing vacancy reduction
program, public housing resident management, public housing
family investment centers, public housing early childhood
development grants, and the indian public housing early childhood
development demonstration program.

Overview

The Committee bill contains several initiatives to improve living
conditions for the residents of public housing. The causes for
troubled public housing are complex and interwoven, but the
Committee believes that reforms need to proceed along two tracks.
The first track is management reform aimed at improving the
operating performance of that small percentage of public housing
authorities which has been consistently mismanaged over the
years. The second group of provisions are aimed at solving the
problems of severely distressed developments which are beyond the
scope of current public housing programs and cannot be resolved
solely by improving the management of the PHA.

Reform of the public housing system needs to proceed along both
tracks: either solution by itself would be inadequate. In some
cases, HUD and the residents need to take action to improve
management and accountability of the PHA. In other cases,
residents and community groups need to be involved in a
comprehensive process to rebuild and reconfigure existing
buildings and address the underlying causes of social and
economic distress. Most significantly, residents need to be an
integral part of whatever set of reforms is pursued.

Management reform

The Committee bill would contain two provisions designed to
enhance the ability of the Department and residents to reform
troubled public housing agencies. The first provision would amend
existing law to give HUD additional powers, resources and
mandates to reform and, if necessary, take over troubled public
housing agencies. Resident participation in such reform efforts
would also be substantially expanded. The second provision would
establish a limited demonstration to test the effectiveness of
giving residents of housing administered by troubled PHAs the
ability to choose alternative management.

Amendments to existing law.-Section 6(j) of the United States
Housing Act of 1937-as amended by the National Affordable Housing
Act-provides the general framework for treatment of troubled
housing authorities. The section: (1) requires HUD to designate
troubled PHAs, based largely upon a PHA's performance under
statutory indicators; (2) directs HUD to enter into agreements
with each troubled PHA, setting targets for improved performance,
strategies for meeting such targets and incentives or sanctions
for effective implementation of those strategies; (3) gives HUD
the authority, after finding a PHA in substantial default, to
contract out the management of some or all of the developments
administered by a troubled PHA or petition the courts for the
appointment of a receiver to manage a troubled PHA.

It is apparent that existing law provides HUD with a strong set
of powers. The Committee believes that these powers, if properly
implemented, would go a long way towards reforming the management
of troubled PHAs and improving the living conditions of tenants
who reside in housing administered by these agencies. Yet the
Department has rarely exercised these powers, concentrating its
efforts in recent years on publicizing the management failures of
various agencies with regard to vacancies, expenditure of
modernization funds and other critical elements of public housing
management.

Clearly, some public housing management problems stem from forces
beyond the control of managers; lack of social and income
diversity, inadequate operating subsidies, unpredictable
modernization funds, political interference by local politicians.
Yet, it is a sad fact that some PHAs no longer practice the type
of on-site project management that is synonymous with good real
estate management. Some PHAs do not even use project-based
accounting methods so that differences in operating, maintenance
and utility costs can be calculated on a project-by-project
basis.

The Committee believes strongly that the federal government has
an affirmative responsibility-to the residents of public housing,
to the federal taxpayers-to use its resources to remedy the
management deficiencies in those few local agencies that are
troubled. HUD cannot ``shift the blame'' to local malfeasance or
incompetence; it ultimately has the responsibility to monitor the
performance of recipients of federal aid and to act aggressively
when such aid is being misused.

HUD's inaction also has larger consequences for federal housing
policy. The few public housing agencies who are persistently
troubled-with apparently little hope of self-reform-garner the
lion's share of media attention. Unfortunately, this attention
reflects negatively on thousands of PHAs, nonprofit and forprofit
developers across the nation which do the unglamorous work of
developing and maintaining decent, safe and sanitary affordable
housing for low income families. Allowing troubled PHAs to
persist unchecked clearly weakens the political support for all
federally-supported affordable housing.

The Subcommittee on Housing and Urban Affairs held a hearing on
March 25, 1992 to ascertain, in part, how well HUD was
implementing the statutory framework described above and how
existing law could be improved.

The most helpful testimony was provided by Ms. Josephine Hood, a
tenant organizer with the Chester Economic Development and Tenant
Management Corporation and Mr. Roger Ashodian, Counsel with the
Delaware County Legal Assistance Association, two individuals who
had ``lived through'' the Department's take-over of the Chester
Housing Authority. They provided a detailed record of HUD
inaction in the face of irrefutable evidence-six years on
Inspector General and independent audit reports, management
reviews, occupancy audits, maintenance operations reviews,
engineering reviews, CIAP reviews, and Section 8 reviews-that the
Chester Housing Authority had ceased to function as a caring and
effective housing entity. They also provided a series of
statutory recommendations that formed the basis for the
Committee's legislative initiative.

In general, the Committee bill would strengthen (1) HUD's ability
and responsibility to take action against troubled PHAs,
particularly in cases where the inadequacies of management are
causing substandard living conditions; and (2) the ability of
residents to ensure that necessary steps are taken, either by
themselves or by HUD.

The Committee bill would require HUD, upon designating a PHA as
troubled, to provide for an on-site, independent management
assessment carried out by a knowledgeable assessment team. In
addition to general management issues, the assessment team would
consider, as appropriate, issues relating to the agency's
resident population and physical inventory, including adequacy of
the PHA's comprehensive plan, extent of resident involvement in
management and the presence of severely distressed developments
which need comprehensive assistance. The Committee believes
firmly that a team of knowledgeable experts are better equipped
than HUD's staff-many of whom have never worked in a local
housing agency-to determine the root cause of management
deficiencies and to recommend a series of management improvements
or other actions to remedy these deficiencies.

The assessment teams would be required to consult with tenants
and local public and private entities in carrying out its
responsibilities. The tenants are the real ``experts'', knowing
better than anyone else the effects of bad management. The
Committee intends that the Department establish guidelines to
ensure that these consultation requirements be treated seriously
by the assessment teams and carried out in a meaningful fashion.

HUD would also be given specific authority to include in
memoranda of agreements with troubled PHAs plans for enhancing
resident involvement in management, including representation on
the PHAs governing body, where appropriate. Mr. Ashodian's
testimony referenced a bill under consideration in the
Pennsylvania House of Representatives that would require all five
member PHA boards to include at least one tenant representative.
The Department should survey other states and consult with groups
representing tenants, PHAs and other interested parties to
determine what level of representation is suitable.

The Committee bill would expand the statutory remedies that are
available to HUD when a PHA is found to be in violation of its
basic covenants. The bill would clarify that HUD has the power
under existing law to select private management agents that are
chosen by the tenants of a particular development. This
clarification incorporates within the existing legal framework a
major goal of the Administration's Choice in Management
proposal-to allow tenants living in housing developments
administered by troubled housing agencies to select their own
manager. The bill would also permit HUD to solicit competitive
proposals for construction managers if needed to oversee
implementation of modernization programs.

The Committee bill would strengthen the leverage of public
housing residents by allowing residents of troubled PHAs to
petition HUD to take one or more of the remedial actions
specified by the statute (such as hiring alternative managers or
construction managers or petitioning for receivers) and requiring
HUD to respond to such petitions in writing with its plans and
the reasons why any such plans differ from the actions proposed
by the residents. The bill would also require HUD to take one or
more of these actions where a PHA has either (1) been on the
troubled list for three consecutive years; or (2) has
substantially defaulted on its obligations in a manner that is
contributing to the substantial deterioration of public housing
living conditions. Residents would also be empowered to petition
directly for the appointment of a receiver if these conditions
are met and HUD fails to act in a timely fashion.
Finally, the Committee bill would authorize HUD to make
assistance available to receivers or other alternative managers
to remedy substantial deterioration of living conditions or
related emergencies endangering the health, safety and welfare of
the residents. The bill would authorize a $25 million set-aside
from modernization funds for each of fiscal year 1993 and 1994 to
carry out such activities as well as other efforts (e.g.
assessment teams, alternative management) permitted under the
law.

Choice in management.-The Committee bill would also incorporate a
limited version of the Administration's Choice in Management
proposal. As originally proposed, Choice in Management would have
given residents in most public housing developments administered
by troubled PHAs the opportunity to choose whether they want
their development managed by an entity other than the PHA. The
Committee was initially skeptical of this proposal. First, as
demonstrated above, existing law already gives HUD a wide range
of tools to attempt to reform-and, in some cases, remove-troubled
public housing authorities. As the Chester testimony indicates,
HUD has persistently failed to use these tools and carry out its
responsibilities.

Second, under the Administration's original proposal, all the
developments under the administration of a troubled PHA were ``up
for grabs'', irrespective of whether a development is
well-managed or in a severe state of distress. This lack of
targeting could have had counterproductive results. Under one
likely scenario, the proposal could have lead to well-managed
developments opting out of the inventory (e.g. to receive
additional modernization funding) while distressed developments
remain under PHA control.

Nevertheless, the Committee recognizes that alternative
management could offer public housing residents a chance to
dramatically improve their living conditions. The threat of
alternative management could also spur improvement at troubled
PHAs.

For these reasons, the Committee, on the basis of bipartisan
discussions, made five major refinements to the Administration's
proposal. First, the proposal was essentially reduced to a
demonstration. Over the next two years, HUD will be given the
authority to transfer management in only 15 developments
administered by troubled PHAs. This will give Congress and others
the opportunity to evaluate the effectiveness of this alternative
approach to reforming troubled PHAs.

Second, transfer of management has been limited to developments
that have been identified as severely distressed.

Third, the universe of troubled PHAs that are subject to this
demonstration has been circumscribed. The Administration's
original proposal defined the term ``troubled public housing
agency'' as meaning a PHA that owns or operates 250 or more units
of public housing and has been designated by HUD as a troubled
PHA for the current Federal fiscal year and the past two Federal
fiscal years. The Committee bill would also restrict coverage to
those troubled PHAs that have not met the targets for improved
performance that are contained in their agreements with HUD.
Choice in Management would, therefore, be limited to those
troubled PHAs that are making no progress in reforming
themselves.

Finally, authorizations for the rehabilitation component of the
program would be capped at $50 million, instead of the $100
million originally proposed by the Administration.

The other elements of Choice in Management have generally been
retained in their original proposed form. Resident councils would
apply to HUD for approval to transfer management of their
development if a majority of the board and the residents
supported such a change. The alternative manager could be a
private nonprofit (including an RMC), a public nonprofit, a
public agency, a forprofit entity or a PHA other than the one
which owns the building.

New managers would receive the development's operating subsidies
and modernization funds directly from HUD and would maintain the
same income eligibility, preference and rent rules as public
housing. New managers, however, would be allowed to terminate
tenancy without an administrative grievance process and would not
be required to select families from the PHAs waiting list.

Developments that do not need rehabilitation could be transferred
to alternative managers with HUD approval at any time.
Developments that need rehabilitation could not be transferred
unless they received a rehabilitation grant. As discussed above,
the program would set aside $50 million in FY 1993 and 1994 from
the public housing modernization program to provide the necessary
rehabilitation funding. These funds would be awarded through a
national competition.

Distressed public housing developments

The Committee bill would authorize two new programs to eliminate
unfit living conditions in distressed public housing
developments. The first provision would authorize a separate
program to revitalize the most distressed public housing
developments by involving residents and community groups in
comprehensive planning, major reconstruction, supportive service
and economic development initiatives. The provision incorporates
some of the promising recommendations recently put forward by the
National Commission on Severely Distressed Public Housing. The
second provision would include the Administration's Take the
Boards Off proposal, designed to transfer substantially vacant
developments, currently owned by troubled public housing
agencies, to nonprofits and other specified entities in order to
return this housing to productive use.

Committee revitalization initiative.-For the past fifty years,
public housing has been a strong pillar of national housing
policy. Public housing is home to more than 3.4 million people
whose average income is less than $6,000 a year. Most public
housing in the nation consists of small garden-style apartment
complexes which are well maintained and relatively
indistinguishable from other subsidized or unsubsidized rental
housing.

Nevertheless, among the nation's 10,000 projects, there exist a
few highly visible family public housing developments with
intolerable and seemingly intractable conditions that are
perennially spotlighted by the media. These few developments
reflect negatively on the efforts of PHAs, nonprofit and
forprofit developers across the nation to develop and maintain
affordable housing for low income families. These developments
also often occupy sites of a size or value which could not again
be assembled for affordable housing and, thus, are a potentially
valuable public resource.

The severely distressed developments typically share common
characteristics. First, these developments require major redesign
(if not partial or total demolition) to correct not only for
years of deferred maintenance and the physical deterioration or
obsolescence of major systems but for serious flaws in the
original design. Many low-rise developments, for example, were
built without attention given to notions of defensible space.
High-rise developments often contained elevator banks open to the
elements. In both cases, developments are often densely
populated.

Second, the families residing in these severely distressed
developments are themselves distressed. The problems generally
associated with the inner city poor-high rates of unemployment
and teenage pregnancy, broken families, lack of adequate
education, drug-use and drug-trafficking, vandalism, random
violence-are magnified and exacerbated by the concentration of
families with children in dense, segregated living environments.
In some developments, 85 percent or more of the residents receive
AFDC benefits.

In the past few years, the future of distressed public housing
has become a subject of national debate. A growing body of
literature (e.g. Nicholas Lemann's ``The Promised Land,'' Alex
Kotlowitz's ``There Are No Children Here'') has focused national
attention on some of the most notorious developments and the
communities in which they are located. Individuals from diverse
disciplines and backgrounds-tenant rights, civil rights, child
advocacy, welfare reform and public housing-are joining hands to
formulate innovative solutions. The Administration, through
Housing Secretary Jack Kemp, has put forward a number of
controversial and provocative proposals.

The national debate has recently been enhanced by the preliminary
report of the National Commission on Severely Distressed Public
Housing. The Commission, established by the HUD Reform Act of
1989, was charged with identifying public housing developments in
a severe state of distress, assessing the most promising
strategies to improve the condition of these projects and
developing a national action plan to eliminate by the year 2000
unfit living conditions in those public housing developments
determined by the Commission to be severely distressed.

The 18 members of the Commission were appointed in equal numbers
by the Administration, the Senate and the House. The Co-Chairmen
of the Commission are Congressman Bill Green of New York and
Vince Lane, Chairman of the Chicago Housing Authority. Senate
appointees included Anne Rudin, the Mayor of Sacramento,
California; David Gilmore, Executive Director of the San
Francisco Housing Authority; Richard Baron, a St. Louis-based
developer of affordable housing; and Irene Johnson, President of
the LeClaire Courts Resident Management Corporation in Chicago.

Since first convening in February of 1991, the Commission has
undertaken an ambitious schedule of site visits and public
hearings. On March 25, 1992, several of the Commission Members,
including Congressman Green, discussed their preliminary findings
at a hearing held by the Housing Subcommittee. On June 1, 1992,
the Commission released its preliminary report and proposed
National Action Plan in accordance with the statutory mandate.

The Committee has attempted to incorporate within the
authorization bill some of the legislative recommendations made
by the Commission. The Committee recognizes that this is only a
partial response to the Commission's work since development of
the Committee bill was far along by the time the Commission
issued its report. The Committee intends to continue working with
the Commission and Commission Members on a broader legislative
agenda and has extended the life of the Commission, in part, to
accomplish this objective.

The key Committee initiative would establish a separate funding
program to revitalize severely distressed public housing, as
recommended by the Commission. The Committee agrees with the
Commission that the financial and regulatory structure now
provided for public housing across the country, including
operating subsidies, comprehensive grants and the various
restrictive regulatory provisions, simply will not allow the most
severely distressed public housing developments to be addressed
in other than a piecemeal fashion. The Committee also concurs
that residents of these developments must be fully involved
throughout the revitalization process if comprehensive efforts
are to be successful. Finally, the Committee recognizes that
there have been a number of instances of very successful public
housing redevelopment efforts, such as redevelopment of the
Commonwealth development in Boston. The Committee notes that Rod
Solomon-the Deputy Executive Director of the Atlanta Housing
Authority and former General Counsel of the Boston Housing
Authority-provided critical technical and expert advice on this
and other public housing matters throughout the legislative
process.

The new program would be targeted to ``severely distressed public
housing''. The term would generally be defined as meaning those
developments which require major redesign, major reconstruction
or redevelopment, are occupied predominantly by families with
children who are in a severe state of distress, are locations for
recurrent vandalism and criminal activity, and have suffered from
severe management deficiencies, including those caused by
inadequate operating funding. Covered developments would also be
limited to those projects where the elements of distress
identified above cannot be remedied through existing funding
programs such as operating subsidies, modernization or other
programs generally available. The Committee bill would require
public housing agencies to identify those developments they
consider severely distressed within ninety days, based on the
definition contained in this legislation, and for HUD to review
the developments submitted and publish a list of such
developments within another ninety days.

The Committee recognizes that developments may be listed as
severely distressed for which assistance under this new program
is not available for some time. Even where planning grants are
immediately available, the planning process as well as any
necessary design process takes time. The Committee intends that
housing authorities be required to continue to address urgent
needs, and undertake modernization as practical at severely
distressed developments under the Comprehensive Grant program
until more extensive resources can be applied under this section.

The Committee bill would authorize HUD to award planning grants
on a competitive basis. The importance of comprehensive planning
was particularly emphasized by the Commission. As the Commission
concluded: `` t he rehabilitation of severely distressed public
housing requires substantial skills and knowledge beyond those
required for standard modernization activities.''

The planning authorized under the Committee bill, therefore,
would not simply cover modernization planning, but would
encompass studies of alternatives for revitalization, technical
or organization support to ensure resident involvement throughout
planning and implementation, improvements to stabilize the
development, including security investments, planning for
economic development, job training and self-sufficiency
activities, planning for necessary management improvements,
design of a suitable replacement housing plan where this is
necessary, and any other necessary aspects of revitalization of a
severely distressed development. The criteria for selection, in
addition to elements such as strength of the applicant, extent of
resident interest, involvement of local public and private
entities and potential for successful program, would include the
need for and potential impact of the revitalization program.
These provisions recognize that although severely distressed
developments, by definition, need funds now, it will be necessary
to set priorities. The criteria regarding need and impact were
included to emphasize that HUD should give substantial
consideration to promising proposals regarding developments
clearly recognized as among the most severely distressed.

The Committee bill would also authorize the award of
implementation grants. Again, these grants are to encompass not
just physical redesign, reconstruction or redevelopment as
necessary, but all the activities needed for comprehensive
revitalization of the site. These include management
improvements, transitional security, any further support as
needed for tenant involvement, and provision of supportive
services coordination and self-sufficiency activities. Criteria
for selection would mirror those used for the planning grants.

The Committee bill would recognize that to enhance the long-term
viability of formerly severely distressed developments, it may be
advisable to waive or modify the applicability of various
regulatory measures. These include measures governing rents (for
example, restrictions on maximum rents), income eligibility (for
example, limitation of new tenants to very low-income tenants),
and other areas of public housing management. A PHA would also be
permitted to select tenants in accordance with a local system of
preferences, rather the federal preference system. Such a local
preference system would need to be established in writing and
respond to local housing needs and priorities. (The deficiencies
of the federal preference system are discussed in greater detail
below.)

The bill would allow for establishment of cost limitations on
revitalization activities and generally sets a ceiling for
economic development activities, subject to exceptions for good
cause, of $250,000 per development. Experience in the successful
redesign and redevelopment of public housing developments around
the country, supported further by the research by the National
Commission, indicates that realistic cost limitations need to be
equal to or greater than public housing development cost
limitations. Such investments are justified where current sites
are potentially viable and could not now be obtained, and where
replacement housing options realistically are limited.

The bill would ease the rules governing the replacement of
demolished public housing: a 1 for 2 requirement would apply to
severely distressed public housing instead of the 1 for 1
requirement that currently applies to the general program. The
Committee has continued to hear convincing arguments that the
rigidities of the existing replacement requirement, and the lack
of available funding, has prevented cities from dealing with
distressed projects that ceased years ago to provide decent
living environments for low-income families. Easing of the
replacement rules is necessary since it is likely that
revitalization strategies will involve the selective demolition
of public housing units and that funding for replacement housing
will not be sufficient to meet the demand. The Committee does not
want the revitalization process for individual developments
unnecessarily delayed because of the replacement requirement. The
Committee believes that the exception established by the bill is
fairly constrained, applying only to situations where the
targeted housing no longer serves as an affordable housing
resource.

The bill would adopt the Commission's recommendation that HUD
establish an Office of Severely Distressed Public Housing
Revitalization. The Committee concurs with the Commission that
HUD's current organizational structure cannot adequately address
the magnitude of the problems faced by these developments and the
complexity of comprehensive solutions. PHAs are currently forced
to receive several different approvals for key elements of
revitalization strategies: modernization or other major
reconstruction, demolition or disposition and replacement housing
plans, and occupancy-related initiatives. If revitalization
programs are to be successful, HUD needs to establish a separate
unit whose primary mission is the rebirth of this inventory and
which can act as a ``one-stop-shop'' for all necessary approvals
and reviews. The Committee directs the Secretary to ensure that
personnel with sufficient expertise and experience are assigned
to this special unit and to use the Commission's recommendation
for the level of staffing as a guide to making this allocation
decision.

Finally, the bill would limit applicants for assistance to public
housing agencies not designated as troubled, public housing
agencies or management agents selected or receivers appointed to
run housing authorities in breach of basic covenants, and
``troubled'' public housing agencies which act in concert with
private non-profit organizations resident management
corporations, or other entities approved by HUD.
Take the boards off.-The Committee bill would include the
Administration's Take the Boards Off initiative to address the
problems of severely distressed developments which are at least
50 percent vacant and administered by troubled PHAs. This
initiative would allow such developments to be removed from the
public housing inventory and sold to private nonprofit
organization, state or local governments or PHAs.

Developments (or one or more buildings within developments, if
the buildings are sufficiently separable from the rest of the
development) owned by troubled PHAs would be eligible for
transfer. (This summary uses the term ``housing'' to cover both
developments, or public housing project, and buildings in
developments.)

The law would create two classes of applicants-priority
applicants and other applicants. private nonprofit organizations,
representing current and former residents of public housing in
the locality, would be able to apply as priority applicants, to
take over ownership and restore the housing to use as assisted
housing. If there were no priority applicants interested in
owning the housing, States, units of general local government,
and PHAs (other than the one which currently owns the housing)
could apply as other applicants to use the housing to provide
affordable rental or homeownership opportunities for low-income
families, including the homeless

If another applicant were interested in acquiring the property,
it would be required to make public notification of its interest.
A resident council or priority applicant would then have a period
of six months (or issuance of the next Notice of Fund
Availability for the appropriate program, if that is at a later
date) to apply for the housing. (If no resident council or
priority applicant applied, the other applicant could apply. If,
however, a resident council or priority applicant did apply, it
would be given the opportunity to hire an alternative manager to
acquire the housing before other applicants seeking the same
housing.

The program would provide funding or redevelopment of this
housing through a set-aside from the Public Housing Comprehensive
Grant program. Funds would be awarded through a national
competition. Only housing receiving this funding could be
transferred to eligible applicants.

Priority applicants would be required to operate the housing as
assisted housing, following most of the current public housing
rules. The rent and income rules for public housing would
continue to apply. Ongoing operating subsidies and the accrual
portion of the housing's modernization funding would go directly
to the priority applicant.

Other applicants would be required to operate the housing in
accordance with rules similar to those in the HOME program for
provision of affordable housing. If the housing were redeveloped
as rental housing, families selected for the units would be
required to have income not exceeding 60% of the area median
income and would be required to pay no more than the Fair Market
Rent for their units. These restrictions would remain in effect
for 15 years after transfer of the property. If the housing were
redeveloped for homeownership, eligible families could not have
incomes that exceeded 80% of the area median income and
homebuyers would have to be able to afford the monthly purchase
costs (principal, interest, taxes, and insurance) with 30% of
their adjusted income. Windfall profit restrictions would apply
for a 10-year period after sale to individual families.

The rights of existing residents in housing acquired by other
applicants would also be protected, with the ownership entity
receiving transitional operating subsidies for these families for
a period up to three years and housing vouchers, in order to
enable them to remain in the housing or move to other housing.
Units in buildings sold to other applicants would be replaced on
a one-for-one basis with section 8 vouchers given to the PHA that
previously owned the housing. Vouchers would be given the PHA
upon transfer of the housing and the PHA could use them for other
purposes on an interim basis. However, it would have to make them
available, at the end of the transitional operating subsidy
period, to these existing residents.

A key feature of the program would be its emphasis on allowing
public housing residents to choose how the housing would be
redeveloped. If they would want the housing to remain as assisted
housing, they may join with a private nonprofit organization to
purchase the housing. If they would reside in housing transferred
to other applicants, they would be able to remain as renters and
their rent-to-income ratios would be protected as they would be
if the housing remained in the public housing inventory. In
either case, the Act would provide for a set-aside for technical
assistance to help them make informed choices about their
options.

Regulatory relief to public housing agencies

The Committee bill would direct the Department to review current
regulations, administrative procedures, record keeping, and
documentation requirements with respect to public and Indian
housing operations, modernization, development, and the PHMAP
program. Within nine months, the Department is to report to the
Congress on its findings on which of the above activities impose
unnecessary burdens on public and Indian housing agencies and
what changes the Department has undertaken to reduce such
burdens. The review is to be undertaken in consultation with
public and Indian housing organizations and individuals, tenants,
management experts, and academicians.

The purpose of this provision is to reduce governmental costs to
both HUD and PHAs by reducing the administrative and paperwork
burden on both. The Committee shares the commitment of the
Department's leaders to redirect HUD operations to more
mission-driven and less rules-driven activities. The emphasis
should be on productivity rather than process throughout the HUD
chain of command and with its local partners, PHAs.

The Committee is concerned about the increasing straightjacketing
of local housing agencies resulting from HUD over-regulation,
excessive reporting requirements, and mirco-management.
Administrators of local housing agencies have written and
testified to the stifling of their creativity and innovation
resulting from heavy-handed HUD rulemaking. They are unable to
meet unique local needs and circumstances because of the level of
detail in the multitude of HUD rules affecting their operations.
The people who suffer or are denied affordable housing as a
result of these cumbersome guidelines are low income Americans.

The Paperwork Reduction Act, the Regulatory Reform Act, the Grace
Commission Report, and recent initiatives by the President to
hold in abeyance proposed federal rules which may impede the
nation's economic recovery, all point toward a need to revisit
the many HUD handbooks, guidelines, rules, forms, reporting
requirements, and administrative procedures with a new, rational
perspective. A fresh approach to the volumes of HUD requirements
now in place affecting PHAs and IHAs is long overdue.

The Committee believes that the Department should give careful
scrutiny to the administrative burdens imposed by the Public
Housing Management Assessment Program (PHMAP). This new procedure
for evaluating and rating the performance of PHAs requires
consistent application by all HUD field offices. The Department
should reconsider and reduce the number of HUD rules, forms
required, and frequency and scope of HUD monitoring reviews for
PHAs scoring above the 90th percentile.

High performing PHAs under PHMAP should have more flexibility to
internally modify their budgets without HUD approval. The
Committee believes such freedom from HUD micromanagement will
enable high performing PHAs to deal swiftly with local problems
as they arise, forestalling more costly future ones, and
improving their level of service to residents.

The Department should also carefully review the public comments
on this rule as well as the more current ground-level experience
of PHAs and HUD with the program.

The Committee also expects HUD to review the current staff ratio
guidelines in the HUD Personnel, Modernization, and other
handbooks to determine their relevance to current local
circumstances in PHAs, the programs they administer, the mandates
they must meet, and the special but often unanticipated resident
needs they must increasingly meet.

The Department is directed to give priority attention to these
requirements with a view toward reducing the costs of the time
and paperwork for local housing agencies to comply with such
requirements.

Public housing replacement

Section 18 of the United States Housing Act of 1937 prohibits the
Secretary from approving a PHA's application for public housing
demolition or disposition unless the PHA has a plan for the
replacement of each public housing unit. The section permits such
one-for-one replacement to be provided in total or in part
through the acquisition or development of additional public
housing units. The section also requires the Secretary to agree
to commit (subject to the availability of future appropriations)
the funds necessary to carry out an approved plan.

The Committee bill would incorporate two revisions to existing
law suggested by the Administration that are designed to allow a
reasonable degree of flexibility while still adhering to the
basic objectives of the current statutory formulation. The
changes are moderate adjustments, needed to enable HUD to apply
the replacement requirements in a way that takes appropriate
account of varied local situations. The Committee emphasizes that
the amendments to current replacement requirements would not
change the requirements governing the relocation of displaced
residents. If a unit is presently occupied and displacement is
contemplated, the statute would continue to require relocation to
suitable, affordable housing, totally apart from any form of
replacement requirement.

The Committee bill would make two modifications to the current
statutory replacement requirements. First, the bill would
establish a de minimis exception to the replacement rules,
covering situations where the units demolished or disposed of do
not exceed the lesser of (1) five units; or (2) five percent of
the total number of units in the PHA's public housing inventory.
The maximum exception for the largest PHA would be five units;
the minimum for the smallest PHA, one unit. The Committee
believes that this de minimis exception is warranted for cases
were demolition or disposition is clearly justified (e.g. a
fire-damaged, scattered site unit). For one to five units,
replacement may be infeasible, and satisfaction of all of the
statutory requirements for a replacement housing plan is far out
of proportion to the situation. The Administration contended in
proposing this exception that the number of units involved in
such small cases has been, and is likely to remain, insignificant
from either a national or local perspective. To address the
concerns of Committee Members that the exception might be abused,
the Committee bill would allow a PHA to use this exception only
once in a five-year period.

Second, the Committee bill would permit PHAs to locate some or
all of the replacement units outside of their jurisdiction, but
within the same housing market. At present, section 18 restricts
the location of replacement units to the PHA's jurisdiction. The
amendment would permit locating some or all of the replacement
units outside of the jurisdiction of the PHA but within the same
housing market area, based on a realistic look at housing needs
in the real economic community, and not simply according to the
boundaries of the political jurisdictions. For core-city PHAs,
this might solve the problem of the unavailability of suitable
replacement sites within their jurisdictions. It would allow
adjoining communities to cooperate in a way that best serves the
interests of low-income families and might help to open up
housing opportunities in adjacent areas where the employment
picture is favorable.

Preference rules

Existing law establishes statutory preferences for tenant
selection under the public housing program. Specifically, the law
requires a public housing agency, for not less than 70 percent of
the units that are made available for occupancy in a given fiscal
year, to give preferences to families that fit within the federal
preference categories. The federal preference categories cover
families that, at the time they are seeking assistance, occupy
substandard housing, are paying more than 50 percent of family
income for rent or are involuntarily displaced. The agency is
then free, for any remaining units, to give preferences to
families that fit within a local definition of preference
categories that responds to local needs and priorities. Such
``local'' preferences are established after public hearing.

The 70/30 divide between federal and local preferences was
established by the National Affordable Housing Act; a 90/10
divide had previously governed tenant selection.

As in 1990, the Committee has heard convincing testimony about
the deleterious effects that the preference rules are having on
the ability of public housing agencies to develop and sustain
viable housing communities. The effect of the preference rules
(when implemented in combination with income eligibility
requirements) has been to concentrate in public housing
developments the poorest of the poor. Many of these families and
individuals have multiple social, health and educational
problems. Clearly, the problems generally associated with the
inner city poor-high rates of unemployment and teenage pregnancy,
broken families, lack of adequate education, drug-use and
drug-trafficking, vandalism, random violence-are magnified and
exacerbated by the concentration of families with children in
dense, segregated living environments.

The Committee bill would, therefore, revise the existing
preference rules to require a PHA, for not less than 50 percent
(rather than 70 percent) of the units that are made available for
occupancy in a given fiscal year, to give preferences to families
that fit within the federal preference categories.

The Committee notes that HUD has yet to promulgate a rule
implementing the 1990 provisions; another indication of the
Department's serious capacity problems. The Committee bill would,
therefore, direct the Secretary to issue final regulations
implementing changes to the preference rules made in the National
Affordable Housing Act not later than 30 days after the date of
enactment of this Act.

SUBTITLE B-LOW-INCOME RENTAL ASSISTANCE

Vouchers and certificates homeownership

The Committee bill would include the Administration's
proposal-long promoted by prominent low-income housing advocates
such as Cushing Dolbeare-to permit recipients of section 8 rental
assistance who are first-time homebuyers to use their vouchers or
certificates to support homeownership. Under existing law,
vouchers and certificates can be used to support homeownership
only in cooperatives (and, for vouchers, mutual housing). The
Committee bill would broaden the use of vouchers and certificates
to include all other forms of homeownership.

Eligibility.-Under the Committee bill, a family receiving voucher
or certificate assistance could select the homeownership option
if it: (1) is a first-time homeowner; (2) either participates in
a PHA's family self-sufficiency (FSS) program or demonstrates
that it otherwise has sufficient income; (3) demonstrates that 1
or more adult members are employed; and (4) participates in a PHA
administered homeownership and fair housing counseling program.

The homeownership option could be exercised by either new or
existing voucher or certificate recipients. For the most part,
vouchers and certificates are issued to very low-income families,
though families previously assisted under the U.S. Housing Act of
1937 and certain other families are also eligible. The Federal
preferences for selecting families to be assisted would continue
to apply. Thus, the proposed new authority would not exclude
families with the highest need; it would only make it possible
for them to choose homeownership over rental assistance.

First-time homeowner.-For purposes of the proposed homeownership
authority, the term ``first-time homeowner'' would be defined to
mean-(1) a family, no member of which has had a present ownership
interest in a principal residence during the three years
preceding the date on which the family initially receives
assistance for homeownership; and (2) any other family, as HUD
may prescribe.

The Committee intends to include a family that includes an
individual who is legally separated from a spouse under decree of
divorce or of separate maintenance and that complies with the
requirements that HUD may describe.

The purpose of including in the category of first-time homeowners
those who would not otherwise qualify, but for a situation of
divorce or separate maintenance is to include those who would be
displaced from their owner-occupant dwelling as the result of
marital discord or other special circumstances. The Committee
generally intends to pattern eligibility after the definition of
``first-time homebuyer'' contained in the National Affordable
Housing Act.

Economic independence and self-sufficiency. As discussed above,
the Committee bill would require that families be enrolled in the
Family Self-Sufficiency (FSS) program. Those families that
already have members with earned income would be excepted since
they are already well on the way towards becoming
self-sufficient. All families electing the homeownership option
would be required to attend homeownership counseling.

The purpose of the FSS program is to coordinate the use of public
housing and section 8 rental assistance with supportive service
funding to enable families to achieve economic independence and
self-sufficiency. The program becomes mandatory for PHAs in FY
1993.

A departure from the current FSS program is that the family would
be required to attain a milestone, including having one or more
members with earned income for a minimum period of continuous
employment, before it could qualify for homeownership. (HUD could
exempt families, such as elderly families, from the employment
requirement.) As in the current FSS program, families would
contract with the local PHA, setting forth milestones to
self-sufficiency within five years, extendable for an additional
two years for good cause. The PHA would tailor supportive
services to help the family meet those milestones. As under the
existing FSS program, families could be denied housing assistance
if they substantially violated their FSS contract.

Families required to participate in the FSS program would also be
eligible for the FSS escrow account, with several modifications.
Under the regular FSS program, a family may receive the escrow
balance only when the family is no longer a recipient of Federal,
State, or other public assistance for housing. Families electing
to use vouchers and certificates for homeownership could use up
to 50% of the escrow account for a down payment and the remainder
to cover the costs of major repair and replacement needs of the
dwelling that arise after the family becomes a homeowner. If a
family's mortgage is foreclosed, the remaining amounts of the
escrow account would be paid to HUD, and the family could be
required to reimburse the escrow account for some or all of the
amounts used in connection with homeownership.

Amount of assistance.-For a family that wishes to exercise the
homeownership option, the subsidy usually would be the difference
between the payment standard established by the PHA and 30% of
the family's adjusted income, which is the income contribution
that the family would ordinarily make if receiving rental
assistance. In no case could the assistance payment exceed the
amount by which the monthly homeownership expenses, as determined
in accordance with HUD requirements, exceed 10% of the family's
income (without adjustments).

For certificate families, there would be no cap on homeownership
expenses, thus making the Certificate program similar to the
Voucher program for this purpose. This change would be in
addition to the recently-enacted authority for some certificate
families to pay more than 30% of income. Otherwise the proposal
would make no other changes to the Voucher or Certificate program
except those changes that are necessary to allow for the option
of homeownership. For vouchers, the assistance would be
calculated in the same way whether a family used it for rental or
homeownership.

The payment standard would be the same for homeowners and
renters, as would be the adjustments in the payment standard for
inflation. If a PHA does not have a Voucher program and,
therefore, has not established payment standards, it would be
required to establish them for this purpose. Income would be
measured in the same way for renters and homeowners, except that
the imputed income on the homeowner's equity would be excluded.

Housing quality standards.-As for the current rental programs,
regulations would require that the dwelling being purchased meet
housing quality standards (HQS) for decent, safe, and sanitary
housing before any assistance payment could be made. The PHA
would make annual or more frequent inspections to determine that
these standards continue to be met. Assistance payments would not
be made for a dwelling unit which failed to meet the quality
standards.

FHA mortgage insurance.-Voucher and certificate holders
exercising the homeownership option would be eligible for the
FHA-insured financing. They would, in general, be given the same
treatment as any other family applying for an FHA-insured loan.
The dwelling would be subject to the same property appraisal, and
the family would be subject to the same credit analysis.

For purposes of credit analysis, families would be treated like
any other family with income received from local, State, or
Federal assistance programs. This assistance qualifies for
inclusion in effective income if ``the payments are expected to
continue for the first five years of the mortgage and the income
is received on behalf of the borrower or the borrower's immediate
family.''

Voucher and certificate assistance, in general, meets both of the
requirements for income inclusion. The initial term of the ACC
between HUD and the PHA would be for five years. But there is no
fixed limit on the term over which a family may receive
assistance.

Section 203(b) mortgages to be obligations of GI fund.-While the
mortgage insurance may be provided under section 203(b) of the
National Housing Act, the mortgage would be an obligation of the
General Insurance (GI) Fund (in accordance with new section
203(u) and an amendment to section 519), instead of the Mutual
Mortgage Insurance (MMI) Fund.

The claims cost on mortgages insured under the section 203(b)
program on homes owned by families exercising the homeownership
voucher or certificate option is expected to exceed the premiums
received on these mortgages. These families, therefore, would be
receiving a subsidy (known as a ``positive subsidy'' under Credit
Reform) as the result of their FHA mortgage insurance.

The MMI Fund has a minimum capital requirements to achieve the
goal of actuarial soundness, which have not yet been met. Under
Credit Reform, the MMI fund has been determined to have a
negative subsidy so that these capital requirements can be met.
The GI Fund, however, does not have a goal of actuarial
soundness. Under Credit Reform, activities in the GI Fund with a
positive subsidy must receive an appropriation in the amount of
the subsidy. Because the FHA mortgage insurance associated with
the exercise of the homeownership option involves a positive
subsidy, this insurance would be made an obligation of the GI
Fund, and a request for appropriation for this subsidy is
included in the FY 1993 budget submission.

Mortgagors under section 203(u) would pay the same mortgage
insurance premium as other mortgagors with mortgages insured
under section 203.

Other Government programs. The homeownership voucher or
certificate could be used to purchase homes sold under the FHA
Property Disposition (PD) Program. Other properties, such as
Resolution Trust Corporation (RTC), Federal Deposit Insurance
Corporation (FDIC), and State or locally-owned properties could
also provide eligible single family stock. In addition, the
homeownership option could be combined with programs for down
payment assistance, such as those offered by State, local, or
non-profit entities. State programs funded from the proceeds of
mortgage revenue bonds could be used to finance dwellings being
purchased with voucher and certificates.

A family could not be assisted under the homeownership option
during any period when assistance is being provided for the
family under other Federal homeownership assistance programs, as
determined by HUD. The bill would require that HUD exclude the
purchase of units being assisted under at least the HOME
Investment Partnership Act, Homeownership and Opportunity through
HOPE Act, the Low-Income Housing Preservation and Resident
Homeownership Act of 1990, and the Farmers Home Administration's
section 502 program. These homeownership assistance programs are
designed to provide sufficient subsidy internally to meet various
low-income housing needs. To combine the homeownership option
with these other Federal homeownership programs would raise
substantial issues regarding subsidy layering, which would impose
at the very least significant administrative burdens to resolve.
Once assistance is no longer being provided (such as when
operating assistance under the HOPE for Public and Indian Housing
Homeownership program ends at the end of five years), a
homeownership option family could purchase a unit from a family
under the HOPE program.

Remaining issues.-Remaining aspects of the voucher and
certificate homeownership initiative are discussed in the
section-by-section component of the Committee report.

Moving to opportunity demonstration

The Committee Bill would include the Administration's proposal to
extend the Moving to Opportunity (MTO) demonstration program
established under HUD's FY 1992 appropriations Act for two
additional years. The appropriations law set aside $20 million
(i.e., 566 certificates) for a demonstration involving five
cities with populations exceeding 400,000 and in metropolitan
areas with populations exceeding 1.5 million. The law requires
the HUD Secretary to carry out metropolitan wide programs
designed to help families with children move out of areas with
high concentrations of persons living in poverty. The Secretary
is to carry out the demonstration through contracts with (1)
nonprofit groups for counseling and other services; and (2) PHAs
for administration of the section 8 rental assistance.

The MTO demonstration is modeled on the Gautreaux program in
Chicago. In Gautreaux v. HUD, a federal court found that HUD and
the Chicago PHA had violated the Constitution by operating
racially discriminatory and racially segregated public housing in
Chicago. Part of the court-sanctioned remedy was to establish a
program to enable minority residents of family public housing to
move to privately owned rental units throughout the metropolitan
area using section 8 assistance. Since 1976, more than 4,500
families have moved through this program to non-segregated
communities in Chicago and 115 suburbs.

The distinctions between the Gautreaux program in Chicago and
typical section 8 programs are as follows:

 Gautreaux is administered by a private, nonprofit fair housing
agency whereas section 8 is administered by local PHAs;

 Tenants are provided assistance in locating landlords willing to
cooperate;

 Families receive significantly more counseling than is provided
by PHAs; and

 The administering agency is required to avoid over concentration
of assisted families in a development or neighborhood.

The Gautreaux experiment was the subject of a recent article in
Fannie Mae's ``Housing Policy Debate'' by James Rosenbaum of
Northwestern University. Mr. Rosenbaum's analysis has discovered
that ``just by moving people and without providing additional
services, this program has uncovered capabilities of low-income
people that were not evident in the city.'' Moving to the suburbs
clearly increased adults' employment and childrens' education and
employment. The effects are particularly pronounced for children,
who are much less likely to drop out of school, much more likely
to go to college, and much less likely to be neither in school
nor working.

The Committee Bill would extend the appropriations demonstration
for FY 1993 and 1994. The bill would also revise the
demonstration (and the Administration's legislative proposal) in
a number of ways, pursuant to recommendations put forward by fair
housing advocates.

First, the bill would delineate the range of issues that the MTO
demonstration is designed to evaluate, an area neglected by both
existing law and the Administration's proposals. Specifically,
the program would evaluate the extent to which mobility
initiatives: (1) further objectives of the Fair Housing Act; (2)
enhance the short- and long- and long-term educational and
employment opportunities of child participants. Finally, the
program would compare and contrast the costs associated with
implementing a mobility program with the costs associated with
the routine implementation of the voucher and certificate
programs.
Second, the bill would expand the number of families served under
the demonstration. The bill would authorize HUD to reserve, from
amounts made available for the Certificate program for fiscal
years 1993 and 1994, budget authority to fund up to 1,500 units
each year for families from existing Voucher/Certificate waiting
lists who chose to participate in the MTO demonstration. These
1,500 units would be in addition to the annual allocation of
units available for the area. The Committee notes that the
Administration proposal recommended the use of vouchers in the
demonstration; the Committee continues to believe that rental
certificates are a more affordable form of rental assistance than
vouchers.

Third, the bill would expand the number of metropolitan areas
served by the demonstration. The bill would direct HUD to fund
programs involving cities with populations exceeding 350,000 that
are in consolidated metropolitan statistical areas (CMSAs) as
established by the Office of Management and Budget, with
populations exceeding 1,500,000. The population threshold for
eligible cities would be reduced from 400,000, as provided in the
FY 1992 appropriations Act demonstration, to 350,000 since it
would make the following CMSA's eligible: Atlanta, Cincinnati,
Miami, Minneapolis, Oakland, Pittsburgh, and St. Louis. These
CMSA's may be suitable for participation under the demonstration.

Fourth, the bill would permit up to $1.5 million of the funds
appropriated for the section 106 housing counseling program in
each of FY 1993 and 1994 to be available for use for counseling
and other activities in connection with the mobility
demonstration. Authorizations for the counseling program would be
increased by $1.5 million to accommodate this use of funds.

The Committee notes that the Certificate ``start-up''
administrative fee would be allocated among the non-profit
organization responsible for counseling families and providing
other services and PHAs in the CMSA, based on their roles in the
program. PHAs in the CMSA would earn the on-going fee. HUD would
provide up to an additional $1,000 per family for costs not
covered by these fees, from a set-aside of the appropriation for
housing counseling. For example, non-profit organizations would
screen families applying to participate in the MTO demonstration
for credit histories, conduct home visits to determine the
willingness of families to maintain rental property, provide
transportation and other search assistance, and help each family
negotiate with a landlord in a low poverty area to rent to the
family under the Certificate program. Any additional costs beyond
those covered by the administrative fees and the counseling funds
would be provided from other public or private sources.

At this point, the PHA for the jurisdiction in which the family
had selected the unit would execute and otherwise administer the
housing assistance payments contract with the owner. For a few
months, the non-profit would continue to provide assistance to
the family in adjusting to the new environment.

Fifth, the bill would require HUD to submit a report to Congress
by September 30, 2004, describing the long-term housing,
employment and educational achievements of the assisted families.
This reporting requirement was recommended by the Administration.
In addition, the Committee added a requirement that HUD submit
interim reports to Congress starting 2 years after the date of
enactment of this Act. The interim reports would include
information on the number of persons served, the level of
counseling and the types of services provided, the cost of
providing such counseling and services, updates on the employment
record of assisted families and any other appropriate
information.

Finally, the bill would require HUD to take additional actions to
expand tenant choice and mobility beyond the scope of this
limited demonstration. Housing advocates have long been concerned
that recipients of section 8 assistance are heavily concentrated
in distressed, segregated neighborhoods and communities. The
reasons for this over-concentration could be multiple: landlord
discrimination, inadequate section 8 FMRs, inadequate counseling
by the PHA. Significantly, section 558 of the National Affordable
Housing Act requires GAO to examine, as part of a larger study on
the adequacy of section 8 fair market rents, the extent of
geographical dispersion of families receiving section 8 rental
assistance.

The Committee bill would, therefore, direct HUD to, within 1
year, review and comment upon the GAO study, independently assess
what factors impede the geographic dispersion of section 8
recipients, review the extent of counseling that section 8
recipients currently receive, implement any administrative
revisions that would enhance geographic dispersion and tenant
choice, and report back to Congress on HUD's findings, its
administrative actions (if any) and any recommendations for
additional legislative action.

Family unification assistance

The Committee Bill would authorize funding for family unification
assistance at $100 million for fiscal year 1993 and $103.2
million for fiscal year 1994.

The family unification program, established in the National
Affordable Housing Act, to designed to help families stay
together when extreme housing problems threaten them with
separation. The program provides section 8 certificates to
families who are otherwise eligible for section 8 and whose
children are either in foster care or cannot return home from
foster care because their parents are homeless or lack adequate
housing.

The Committee is aware of the continued crisis in the
availability of affordable housing and its potential impact on
families. Currently, more than 2 million parents and children are
on housing assistance waiting lists around the country. The
additional resources authorized by the Committee bill will help
to address the growing number of families who need housing
assistance to keep families together.

SUBTITLE C-GENERAL PROVISIONS AND OTHER ASSISTANCE PROGRAMS

Authorization

The Committee bill would authorize a series of important public
and assisted housing programs and activities for fiscal years
1993 and 1994. These programs and activities would include:
public and Indian housing development, revitalization of severely
distressed public housing, vouchers and certificates, public
housing modernization, property disposition certificates, loan
management assistance, the renewal of expiring section 8
contracts, amendments to existing section 8 contracts, public
housing lease adjustments and amendments, and public housing
replacement activities.

The Committee bill would also authorize various housing
counseling programs for fiscal years 1993 and 1994.

Finally, the Committee bill would also authorize the public and
assisted housing drug elimination program for fiscal years 1993
and 1994. The drug elimination program provides grants to public
housing agencies and private, for-profit and non-profit owners of
federally assisted housing for use in eliminating drug-related
crime.

Amendments

The bill would issue one directive on-and make one amendment
to-the public and assisted housing drug elimination program.

The Committee Bill would require the Department to issue a Notice
of Funding Authority (NOFA) or any other regulations necessary to
implement the assisted housing portion of the Drug Elimination
Grant Program.

The National Affordable Housing Act expanded the Public Housing
Drug Elimination grant program to include federally assisted
housing and set aside a percentage of the authorized funds for
this purpose. The Committee is deeply concerned that to date, the
Department has failed either to promulgate regulations or to
issue a NOFA for the assisted housing portion of the program. The
Committee fully expects the Department to begin implementation of
the assisted housing portion of the drug elimination grant
program in an expeditious fashion.

The bill would also allow public housing drug elimination grants
to be made for non-federally funded public housing (i.e. housing
that is owned by a PHA but is not assisted under federal housing
programs) if the housing is located in a high intensity drug
trafficking area and the PHA demonstrates that drug-related
activity at the housing has a detrimental effect on public and
other federally assisted housing.

TITLE VI-PRESERVATION

Subtitle A-Prepayment of Mortgages Insured under the National
Housing Act

Authorization

The Committee bill would authorize the Title VI preservation
program for fiscal years 1993 and 1994. The bill would also
provide set-asides for each of the fiscal years to assist in the
completion of transfers under the mandatory sales program and to
carry out technical assistance and capacity building efforts.

Amendments to 1990 preservation law

In general.-One of the most significant challenges facing the
Congress is to preserve the affordability of hundreds of
thousands of older subsidized housing units that are threatened
with conversion to market-rate housing through mortgage
prepayments and other methods of terminating low-income
affordability restrictions.

Title II of the Housing and Community Development Act of 1987
provided a temporary, interim solution to the problem that was
designed to give Congress the ``breathing room'' to consider and
act upon the research and recommendations then being developed by
several private sector task forces.

The ``breathing room'' created by the 1987 Act was well used.
From countless hearings, task force reports and intense
negotiations emerged Title VI of the National Affordable Housing
Act, a permanent preservation solution that balances the
interests of the owners, the tenants and the communities in which
the housing is located. The preservation solution places prime
emphasis on the need to retain the affordable housing inventory
for its remaining useful life and, in the Committee's strong
opinion, is, by far, the most cost-effective strategy available
to the federal government for addressing the potential loss of
this vital inventory.

The Committee believes that HUD's implementation of the 1990
preservation law has been severely deficient in several respects.
First, the Department has failed to implement the law in
accordance with clear statutory deadlines. Section 604(d) of the
National Affordable Housing Act provided that HUD promulgate
preliminary regulations 90 days after the Act's November 28, 1990
enactment date. Section 604(d) further provided for interim or
final rules within 45 days thereafter, which would have been
April 12, 1991. Yet HUD's preliminary regulations were delayed
until May 12, 1991 and HUD's interim regulations were not
published until April 8, 1992-a full year after they were
mandated to be issued. HUD's dilatory implementation of such a
critical component of the National Affordable Housing Act is
simply inexcusable.

Second, HUD's regulations do not reflect Congressional intent in
a number of provisions that are central to the preservation
program, particularly those provisions facilitating the transfer
of assisted properties to nonprofit groups and resident
organizations. HUD's actions cannot be attributed to vague or
ambiguous statutory or report language. After reviewing proposed
regulations, key Congressional actors submitted lengthy comments
to the Department, explaining in great detail how such rules
deviated sharply from legislative intent. HUD responded to a
number of concerns; curing, for example, the proposed
regulation's unwarranted emphasis on resident homeownership. Yet
the interim regulations have resisted Congressional wishes on a
number of elements-acquisition loan terms, streamlined financing
for rehabilitation costs, reimbursement of transaction costs,
return on actual cash invested-that are critical if the sales
component of the preservation program is to work.

Finally, and most significantly, the Administration has sought to
fundamentally alter the 1990 preservation law by capping the
Federal cost limit at the local section 8 Fair Market Rent,
rather than 120 percent of local market rents. The Administration
contends that when the value of an incentives package exceeds the
local section 8 fair market rent, it is more cost effective for
the federal government to allow the owner to prepay and assist
the displaced low-income families with vouchers or certificates.

The Committee bill would not incorporate the Administration's
proposal. The Committee believes strongly that the issues raised
by the Administration were debated at length during the 1990
housing conference and should not be reopened. The conferees
considered and rejected, for example, providing vouchers where
the cost of preservation is ``too high''. The conferees believed
then and the Committee believes now that vouchers do not work
well in the types of rental markets where prepayment is most
likely; and the federal government must strive to mitigate, not
exacerbate, the persistent loss of housing affordable to
low-income families.

The 1990 conferees also considered and rejected using the section
8 fair market rents as a cost limit. As the 1990 Conference
Report stated:

 The second cost limit was developed because of a serious concern
that, in some cases, there might be no correlation between the
fair market value of eligible housing upon conversion and the
Section 8 Fair Market Rents. Section 8 FMRs have several
deficiencies for purposes of establishing a federal cost limit
for the federal preservation program: they are based on the 45th
percentile rent; they exclude newly constructed housing; and they
generally cover large geographic areas.

Furthermore, the 1990 conferees recognized that the cost of the
permanent solution would be expensive. OMB provided conferees
with an estimate of the cost of preservation-$27.4 billion over
the next 20 years. Yet conferees agreed on a bipartisan basis
that alternative solutions would either be more costly (i.e.
providing replacement housing), subject to extended litigation
(i.e. capping the value provided to the owners) or harmful to the
tenants (i.e. providing vouchers).

Conferees also believed that failure to enact a strong Federal
preservation strategy would have destructive consequences for
affordable housing issues. States and localities would be
compelled to fill the vacuum left by the Federal government with
emergency preservation measures that would potentially fracture
affordable housing coalitions and inhibit their ability to focus
on the myriad of other housing problems.

The Committee believes that the 1990 preservation law represents
a cost-effective compromise among competing interests-tenants,
owners, local communities, the federal government. The ultimate
cost of the preservation program will depend, however, on how
well it is implemented by the Administration. The Committee has
grown increasingly concerned that HUD's own incapacity may be
driving up the cost of preservation solution. The HUD Inspector
General, for example, has informed the Committee that appraisals
under the 1987 Act have been overinflated-due in part to the lack
of expertise among HUD staff and the absence of firm guidelines.
In addition, HUD is not implementing various provisions of the
1990 law which require owners with assigned mortgages to
recompense the FHA insurance fund before receiving preservation
incentives. The Committee believes that the Department should
concentrate its efforts and energies on implementing the law
efficiently, rather than on attempting to alter the law in ways
that lead to the loss of affordable rental housing and the
displacement of low income tenants.

Loan term.-The Section 241(f) insurance program was the center of
much discussion and debate during the legislative process.
Congressional discussion always assumed that the Department's
practice of underwriting 241(f) loans for 40 years-established
under the emergency preservation solution enacted in 1987-would
continue under the permanent preservation program. This
expectation is evidenced by the Conference Report to the 1990
Act, which specifically used a 40 year loan term in explaining
how the section 241(f) loan would work.

Despite Congressional protestations, HUD's regulations would
restrict the term for section 241(f) loans to the lesser of 20
years or the remaining term of the first insured mortgage. The
Committee strongly believes that HUD's action is contrary to the
general goals of the preservation program and the specific intent
expressed in the Statement of Managers. Shortening the loan term
will, inter alia, force more projects into the mandatory sales
process and potentially lead to greater displacement of tenants
in tight rental markets.

The Committee bill would require loans insured under section
241(f) of the National Housing Act to have a 40 year maturity and
amortization period.

Rehabilitation financing.-Existing law-section 241(f)(6)-permits
HUD to combine rehabilitation loans under section 241(d) with
equity and acquisition loans under section 241(f) The conferees
expected that this combination of loans could be carried out in
an effective, common sense fashion-perhaps by adding the
rehabilitation expenses that are mortgageable under the section
241(d) program to a section 241(f) loan.

After further examination, the Committee has concluded that the
expectations of the conferees cannot be met. Various features of
the section 241(d) program-statutory cost limits, additional
equity requirements-are antithetical to the purposes of the
preservation program. In addition, HUD's regulations do not
provide a mechanism for combining the underwriting of
rehabilitation and equity or acquisition loans under the section
241 program. Failure to combine these loans may make it difficult
to sell one or both of the loans on the secondary market.

The Committee bill would enable loans insured under section
241(f) of the National Housing Act to cover the amount of
rehabilitation costs required by the preservation plan of action
and related charges. The bill would also, as a conforming
amendment, strike section 241(f)(6). The Committee believes that
allowing owners to receive a combined equity take-out and
rehabilitation loan-and purchasers to receive a combined
acquisition and rehabilitation loan-will make the preservation
process more streamlined and efficient.

Appraisal guidelines.-HUD's notice on appraisal guidelines states
that rental assistance contracts that survive a prepayment must
be considered by an appraiser and may depress the value of a
property. The Committee has learned that certain owners have
responded to the notice by submitting one year notices to opt out
of their section 8 contracts, in order to have no federal rental
subsidies in place for their Title VI appraisal. The Committee is
concerned that HUD's notice is inadvertently promoting section 8
opt-outs and refusals by owners to accept new holders of section
8 rental assistance.

The Committee bill would, therefore, require that HUD's appraisal
guidelines and instructions be amended to provide as an
additional assumption that existing section 8 contracts are
terminated when the mortgage is prepaid. However, the Committee
does not intend that this revised appraisal assumption reduced in
any way any of the owners' duties under existing law to renew
expiring contracts, not discriminate against certificate holders,
and refrain from interfering with tenants' efforts to obtain rent
subsidies.

Notices of intent.-The 1990 preservation law made residents
``full-fledged participants'' in the preservation of federally
assisted housing and placed special emphasis on transferring this
affordable inventory to resident councils and nonprofit housing
developers. A series of notice provisions and procedural rules
were designed to achieve these two related objectives. After
further examination, the Committee has concluded that the
preservation law's notice and procedural provisions did not go
far enough in a number of respects.

First, the Committee bill would amend section 216(d) of the 1990
preservation law to require that owners file a copy of their
second notices of intent to sell with the State or local
government and the mortgagee and inform the tenants of the
filing. The Committee notes that HUD's interim rule already
requires that the second notice be sent to all the parties except
the mortgagee. The Committee amendment is meant to support HUD's
action with respect to providing the second notice to State and
local governments and the tenants. In addition, providing the
second notice of intent to the mortgagees will confirm that the
property may be sold and the mortgage assumed by the purchaser.

Second, the Committee bill would amend section 216(d) to penalize
owners who fail to market the property or reject bona fide offers
after submitting a second notice of intent to sell. Such owners
would be barred from filing a new plan of action or notice of
intent to receive incentives for two years and would be required
to reimburse the reasonable expenses incurred by priority
purchasers who filed an expression of interest.

Third, the Committee bill would amend section 217 of the 1990
preservation law to give tenants and the relevant state and local
government access to the documentation supporting the plan of
action. The Committee intends that the access to supporting
documentation should include access to any pertinent analyses
prepared by the owner or HUD. The rent schedule and the rent
increase phase-in decision, in particular, are not included in
the Plan of Action and access is needed to the computations on
which they are based. The Committee provision is intended to
provide tenants with access to relevant information about the
project held by the owner of HUD at any point during the
preservation process after the initial notice of intent is filed,
so that they may fully participate in the process of developing
an appropriate plan.

Finally, the subsection would amend the preservation law's
transition provisions to require owners electing to proceed under
the 1987 Act provisions to comply with the notification
provisions contained in the 1990 Act.

Priority purchasers.-The 1990 preservation law-unlike the
emergency 1987 measure-delineates a structured process for
transferring the assisted inventory to new ownership. The process
contains substantial risks; owners seeking to transfer their
housing are allowed to prepay if no qualified purchaser makes a
bona fide offer within the applicable time periods. Given the
specter of prepayment and loss of affordable housing, the 1990
housing conferees fully expected the Department to establish by
regulation and practice a workable transfer process.

Despite Congressional intervention during the regulatory process,
HUD regulations continue to undermine the sale process
established by the 1990 Act.

Three concerns are of paramount importance.

First, existing law-Section 220(d)(2)(E)-states clearly that
qualified purchasers (which include priority purchasers) should
receive an adequate return on any actual cash investment. The
limitation of Section 241(f) insured financing to 95 percent of
preservation equity raises the possibility that priority
purchasers will contribute actual cash to an acquisition. The
conferees did not believe that priority purchasers should be
treated any differently than for-profit purchasers in the event
of cash investment.

Yet HUD's regulations do not follow the legislative intent,
requiring nonprofit owners to deposit their 8 percent return in a
residual recipts account. The committee bill would, therefore,
amend existing law to: (1) emphasize that priority purchasers are
able to receive the same incentives made available to other
qualified purchasers; and (2) require that a priority purchaser
receive an 8 percent return on any actual cash invested in a
project.

Second, existing law-Section 220(d)(2)(F)-states that priority
purchasers should receive adequate reimbursement for transaction
expenses related to acquisition of eligible housing, subject to
HUD approval. Conferees were plainly aware of the types of
legitimate costs that priority purchasers incur during
acquisition of assisted housing. The Section 241(f) program, in
fact, was revised so that insured acquisition loans for priority
purchasers could include any expenses associated with the
acquisition, loan closing and implementation of the plan of
action.

Yet HUD's regulations arbitrarily limit the reimbursement of
transaction expenses in two ways: first, by setting a cap of 5
percent of preservation equity; and second, by conditioning
reimbursement on ``standards applicable to insured loan
transactions under this chapter.'' These limits are contrary to
the legislative intent that the reimbursement be ``adequate'' for
all reasonable expenses. The limits are also contrary to industry
practice, because transaction expenses do not correlate with the
value of size of the property acquired.

The bill would, therefore, amend existing law to require that
priority purchasers receive reimbursement of all reasonable
expenses associated with the acquisition, loan closing and
implementation of an approved plan of action. In revising the
statutory language, the Committee emphasizes that the
reimbursement of all such reasonable expenses associated is not
to be governed by any other program rules or standards.

Finally, the bill would recognize sponsor project oversight
expenses as an eligible expense in establishing rents under the
Plan of Action, and for purposes of future rent increases. This
amendment reflects a recognition that many priority purchasers
will be community-based nonprofits or resident-based nonprofits.
Their volunteer board members cannot be expected to discharge the
full range of ownership obligations. Priority purchasers must
either be professionally staffed to carry out the myriad
responsibilities of ownership, or they must hire professional
asset managers on a fee basis. (Owner responsibilities include,
for example, working with HUD and the residents, overseeing
property management, retaining and working with accountants in
the preparation of audited financial statements, establishing and
implementing annual budgets and preparing long-range
projections.) The Title VI program must provide a source of
funding to defray the cost of project oversight for priority
purchasers, because owners typically defray this cost from the
annual distribution or from partnership funds. Priority
purchasers do not have these alternatives.

Preemption.-Section 232(a) of the 1990 preservation law generally
allows HUD to preempt State or local laws or regulations that are
applied only to prepayment eligible projects or are inconsistent
with the provisions of the prepayment statute. Section 232(b)
lists various types of laws and regulations (e.g. relating to
building standards, zoning limitations) that are not preempted to
the extent they are of general applicability. HUD's regulations
treat the list as exhaustive and basically preclude the
identification of other relevant laws of general applicability
that should not be preempted. The Committee believes that HUD has
misinterpreted Congressional intent. The Committee bill would,
therefore, amend section 232(b) of the 1990 preservation law to
clarify that existing law does not contain an exhaustive list of
laws of general applicability that are not preempted.

Technical assistance and capacity building.-The 1990 preservation
law does not set aside any funds to (1) help residents
participate meaningfully in the preservation process; (2)
facilitate the transfer of assisted housing to community based
nonprofits and resident organizations; nor (3) to carry out other
technical assistance efforts. This oversight was corrected
partially by the FY 1992 appropriations law which set-aside up to
$25 million for ``tenant and community based nonprofit education,
training and capacity building and the development of State and
local preservation strategies''.

The Committee bill would authorize a $25 million set-aside from
preservation funds for each of fiscal years 1993 and 1994 to
support technical assistance and capacity building efforts. The
authorized program would have two components: 90 percent of the
set-aside funds would be used for providing ``direct assistance
grants'' to resident groups and community-based nonprofit
purchasers; 10 percent would be available for other purposes,
including the development of model preservation programs and
local initiatives.

The Committee intends that groups controlled by residents of
several projects in a locality be considered as eligible
applicants for purpose of obtaining capacity development grants
for resident outreach, education, and resident organization
development activities.

The direct grant assistance program would be administered by
regional, State and local intermediaries on behalf of HUD. These
intermediaries-nonprofits, quasi-public agencies and state and
local housing agencies-would be conduits for delivering funding
to resident groups and purchasers.

The Committee has chosen to distribute direct grant assistance
through intermediaries for a number of reasons. First, HUD's
commitment to the sales component of the preservation program is
suspect. As of early July, the Department had still not
distributed any technical assistance/capacity building funds
appropriated in the FY 1992 appropriations law. Second, even if
HUD were supportive, the Committee believes it would be an
overwhelming burden for the agency to receive applications on a
monthly basis and review and decide on these request monthly or
even quarterly. Since each step in the Title VI program has exact
guidelines, the distribution of these funds on an expeditious
basis is critical. Moreover, the amount of each resident capacity
grant is so small ($30,000) that direct administration by HUD
would be administratively infeasible. Finally, the Committee
believes that state and local government and nonprofit
intermediaries are better suited to screening applications, since
these intermediaries are closer to grassroots housing providers
and can sensibly evaluate each applicant's legitimacy and
capacity.

Definition of eligible low income housing.-The Committee bill
would bring the preservation statutes into conformance with
original legislative intent and correct a drafting error in the
definition of ``eligible low income housing''. In enacting the
preservation program, Congress intended to include only those
Section 221(d)(3) Market Rate projects that were assisted under
the Rent Supplement program, but have been converted over to the
Section 8 loan management program. Because of a drafting error,
the statutory definition has been interpreted to include Section
221(d)(3) Market Rate projects that have Section 8 New
Construction and Substantial Rehabilitation set-asides.

Windfall profits test.-Section 222(e) of the Low-Income Housing
Preservation and Resident Homeownership Act of 1990 delineates a
``windfall profits test'', permitting HUD to make incentive
payments available only in rental markets where there is an
inadequate supply of decent, affordable housing (if HUD
determines there is adequate data to permit ``objective and fair
implementation'') or where necessary to accomplish the other
public policy objectives of the Act.

The section instructs HUD to implement the ``windfall profits
provision'' in a manner consistent with the process established
by the subtitle. The Statement of Members encouraged HUD to
``apply the test early in the process so that all parties can
achieve a definitive outcome within the time frame set forth in
the Act.'' HUD's April 8, 1992 interim guidelines state that HUD
will apply the test immediately after receipt of a Notice of
Intent and before the appraisal process is initiated. The timing
is consistent with legislative intent. With respect to affected
properties (those located in a market area in the affordable
housing list) HUD will notify the owner of the results of the
windfall profits determination within 30 days.

The Committee believes that HUD's implementation of the windfall
profits provision does not comport with the statutory directive
contained in section 222(e). HUD has not proposed any procedure
for either notifying tenants of the preemptive denial of
preservation incentives nor has it provided the tenants or public
agencies with an opportunity for comment at this critical stage.
As part of the windfall profits determination, HUD must assess
whether other public policy objectives would be served by the
provision of incentives. Specifically, HUD must investigate and
make findings that the denial of incentives will not materially
affect: (1) the availability of decent, safe and sanitary housing
affordable to low income families; (2) the ability of low income
households to find affordable, decent, safe and sanitary housing
near employment opportunities; and (3) minority housing
opportunities.

As HUD acknowledges, these public policy criteria require a
project-specific inquiry. Affected tenants, who will have
information that is highly relevant to these findings, as well as
state and local government agencies, must be included in the
decision making process.

The Committee bill would require HUD to notify the tenants of a
preliminary windfall profits determination at the same time that
the owner is informed. For a 60 day period after individual
notice is mailed to each unit by HUD, comments from the owner,
tenants and state and local agencies would be received. Following
the comment period, and based on the record developed, the
Secretary would make a final determination.

SUBTITLE B-RESTORE FOR TROUBLED MULTIFAMILY HOUSING

The Committee bill would include portions of the Administration's
RESTORE proposal, an initiative designed to alter the way that
the federal government addresses the needs of the troubled,
federally assisted inventory.

As originally proposed, the RESTORE program was designed to
replace and substantially revise an array of existing
preservation programs and assistance-Flexible Subsidy, capital
improvement loans, loan management set aside, property
disposition subsidies. These existing programs place primary
emphasis on preserving the federally assisted inventory for
long-term use by low-income families and use project-based rental
assistance, operating assistance and capital subsidies to meet
these objectives.

The Committee concurs with the Administration that the needs of
the older assisted inventory-and the families residing in this
inventory-need to be addressed in a comprehensive manner. As the
National Low-Income Housing Preservation Commission reported in
1988, a large portion of the older assisted inventory-some 43
percent-are likely to default by the year 2003. These properties
share common characteristics: (1) they suffer from operating cash
deficits because income does not cover expenses; (2) they often
need repairs that the limited cash flow cannot cover; (3) owners
have ceased to invest additional capital following the Tax Reform
Act of 1986; and (4) possibilities for the infusion of capital
from other sources are limited, given the distressed inner-city
neighborhoods in which these properties are located, the
substantial tax liabilities facing owners in the event of
transfer to new ownership and other negative consequences of the
Tax Reform Act of 1986.

The Committee does not believe, however, that the
Administration's RESTORE proposal constitutes such a
comprehensive preservation proposal. The proposal, in some
respects, would actually undermine existing preservation policy
and exacerbate the loss of affordable rental housing. As James
Grow of the National Housing Law Project, a leading tenant
advocate, informed the Committee:

  RESTORE is  just another ploy for converting subsidized housing
to vouchers, which Congress has already properly rejected for
troubled public housing, subsidized prepayment projects, Section
8 contract expirations, and to date for these troubled subsidized
projects. It will not successfully preserve the troubled
inventory, which has suffered from a lack of resources, sound
planning, competent ownership and management, and adequate
oversight, technical assistance and enforcement from HUD.
Residents' needs, views and interests have been largely ignored.
As a substitute for HUD oversight, initiative and accountability,
RESTORE proposes a disguised abdication of responsibility.

Under RESTORE, for example, the rules governing the disposition
of HUD-held and HUD-owned property would be significantly
weakened. Existing law, by virtue of amendments made in 1987,
requires subsidized and formerly subsidized projects to remain
affordable for 15 years and generally receive 15 year project
based assistance. Under RESTORE, such requirements would end of
projects located in softer rental markets; there, tenant-based
vouchers would be provided to currently subsidized families and
unsubsidized very low-income families.

The RESTORE proposal would essentially support the ``up and out''
syndrome in affordable rental housing-one factor among many that
has fueled the loss of virtually millions of affordable units in
the past two decades. Because of this loss, HUD's distinction
among ``soft'' and ``tight'' markets is increasingly artificial.
Low-income tenants face increasing rent burdens even in so-called
``soft rental markets''. In addition, the vagaries of the
marketplace-with soft markets rapidly becoming tight because of
economic and demographic shifts-argue for a permanent stock of
housing that can remain affordable to low-income tenants for its
remaining useful life. Finally, this housing is needed as a
resource for those many families for whom tenant-based subsidies
do not work well, and its rehabilitation may be an integral part
of a community revitalization strategy. Current federal
preservation policy is sound and responsible; the Committee
believes it should remain so.

The Committee did find the RESTORE proposal acceptable in two
important respects. First, the RESTORE proposal recommended
several improvements to the Flexible Subsidy program, designed
primarily to tighten allocation of scarce federal resources and
enhance the involvement of residents in these older assisted
units. The Committee bill would, therefore, amend section 201 of
the Housing and Community Development Amendments of 1978
(authorizing the ``Flexible Subsidy'' program) by requiring the
following additional elements before an owner can receive
funding: (1) all reasonable attempts have been made to take all
appropriate actions within the power of the owner or manager of
the project to provide suitable housing for project residents;
(2) the project has a feasible plan to involve the residents in
project decisions; (3) the affirmative fair housing marketing
plan meets applicable requirements; and (4) the owner certifies
that it will comply with various equal opportunity statutes. The
Committee bill would also incorporate selection criteria
recommended under RESTORE proposal, and exclude projects
receiving ``RESTORE'' loans from eligibility for preservation
incentives. Finally, the Committee would rename the ``Flexible
Subsidy'' program the ``RESTORE'' program, clearly a more
appropriate title for a program designed to preserve and renovate
the federal assisted inventory.

Second, the RESTORE proposal essentially recommended a marked
increase in coordination among federal property disposition,
rehabilitation and loan management programs. The rationale for
coordinating such assistance is readily apparent-it will clarify
alternative solutions and permit HUD to more effectively evaluate
the impact of their decisions. The current system of denying one
form of assistance only to be faced with more costly solutions a
year later clearly needs to be altered.

The Committee bill would also make a series of additional
amendments to the existing Flexible Subsidy (now RESTORE)
program, namely to condition federal assistance on a ``remaining
useful life'' low income restriction where new federal investment
in a project is substantial and to give owners credit for
advances made to the project during a three year period prior to
the application for assistance.

The Committee bill would also require owners of assisted housing
to undertake a comprehensive planning process. The Committee's
action has been taken in partial response to HUD's dilatory
action on the capital assessment study mandated by section
204(c)(1) of the HUD Reform Act of 1989. That provision required
HUD to conduct a study ``to determine the physical renovation
needs of the Nation's federally assisted multifamily housing
inventory that is distressed and to estimate the cost of
correcting deficiencies and subsequently maintaining that
inventory in adequate physical condition.'' HUD's findings were
initially due by December 15, 1990. At the behest of the
Administration, that deadline was extended to March 1, 1992 by
section 583 of the National Affordable Housing Act. Despite the
extension of the statutory deadline, Congress has yet to receive
a copy of this critical report. Even Committee efforts to receive
preliminary findings have been rebuffed by the Department.

As the HUD Inspector General has consistently reported, the
Department's lack of effective information systems remain a major
``material weakness'', inhibiting the Department's ability to
conduct risk management and curb mounting losses in the FHA
multifamily program. The Committee hopes that enabling owners to
undertake capital planning and devise preservation strategies
tailored to the needs of individual projects should go a long way
toward filling this information vacuum and pave the way for
meaningful federal solutions. The Committee expects that HUD will
link the allocation of applicable resources to the preservation
strategies identified in project plans to the maximum extent
possible.

Title VII-Rural Housing

In general

The 1990 Census figures indicate that nearly 62 million Americans
live in rural America. 31 million people-or 13.7 percent of the
total population-live in communities of less than 2,500. The
other 31 million live in rural areas within metropolitan
counties.

Rural areas suffer from a shortage in the stock of affordable
housing, a preponderance of substandard housing, and a lack of
mortgage credit. The National Housing Task Force reported that
4.3 million low income families in rural areas had housing
problems of some type; nearly 2 million of these occupied rural
homes that are substandard, lacking plumbing, heat or some other
necessity of life. The Congressional Research Service estimates
that the demand for housing in rural areas exceeds production by
more than 75,000 units per year.

In recent years, the problem of homelessness in rural areas has
been on the rise. The Housing Assistance Council, based on
several studies, has estimated that 6-12 percent of homeless
persons live outside of metropolitan areas. Although rural areas
are eligible for McKinney homeless assistance through their
states, advocates contend that the needs of rural homeless
persons have not been adequately addressed.

Program authorizations

The Committee bill would authorize the FmHA rural housing
programs at loan levels of approximately $2.5 billion for FY93
and FY94 and grant levels of approximately $500 million for FY93
and FY94.

Underserved areas and colonias

The National Affordable Housing Act authorized a new program to
allocate housing funds to 100 of the most distressed counties and
colonias each year in an immediate and concentrated fashion. The
Committee bill would reauthorize the funding set-asides for
underserved rural areas and colonias for FY93 and FY94. The
colonias provisions would also be amended to allow housing
provided outside of, but serving the residents of, a colonia to
be eligible for set-aside funds. Colonias are smaller squatter
communities located in the four states bordering Mexico. These
communities are composed of Mexican immigrants living in near
primitive conditions and often do not have basic infrastructure,
water, sewers or decent housing. Because housing assisted under
FmHA programs must have these basic necessities in place, it is
often difficult to fully address the housing needs of colonias
residents. The Committee intends to provide some flexibility so
that federal programs can be used most effectively in targeting
the needs of colonias residents.

Section 523 mutual and self-help housing

The Committee bill would provide permanent authorization for the
section 523 mutual and self-help housing program. The program
would also be amended to add the repair of 502 inventory
properties as an eligible activity.

Non-profit set-aside

The Committee believes that a strong non-profit housing
development sector is an important component of federal housing
policy. Under the HOME program, for example, 15% of the program
funds are set-aside for use by community-based non-profits.
Non-profit participation in section 515 has dropped off in recent
years. Between the inception of the section 515 program in 1968
and 1979, one-third of all section 515 units were developed by
non-profit sponsors. Between 1979 and 1989, non-profit
sponsorship had dropped to 8 percent. Currently, non-profit
participation stands at 5 percent. During the same period, the
sponsorship of section 515 projects by limited dividend sponsors
has risen to 95 percent of all units.

In many rural communities, non-profit organizations play a vital
role in providing housing and community development assistance.
For example, Self Help Enterprises (SHE), located in the Central
Valley of California, provides a range of services to low-income
communities that are inhabited by migrant and seasonal
farmworkers. SHE has not only developed more than 3,000 units of
housing through the FmHA self-help housing program, it has also
developed rental housing for farm worker families and provided
home repair assistance to low-income households and technical
assistance to communities trying to secure financing for needed
community facilities such as water and sewer systems. The
Committee strongly believes that organizations such as
SHE-governed by boards of business, civic and community
leaders-should play a substantial role in the development of
section 515 rental housing.

The National Affordable Housing Act of 1990 created a set-aside
of section 515 funds for projects sponsored by non-profit
developers. Each state set-aside 7 percent in FY1991 and 9
percent in FY1992 or a minimum of $750,000 per year in states
with a smaller allocation. Set-aside funds are generally made
available to non-profits for six months, after which any funds

not used by non-profits are made available for projects financed
by for-profit developers. The Committee bill would extend the 9%
non-profit set-aside of section 515 rural rental housing funds
through FY93 and FY94.

Non-profit housing providers suggested several refinements to the
set-aside based upon the experience of the past two fiscal years.
The Committee bill would amend the set-aside to allow non-profit
project sponsors to utilize the low income housing tax credit
with projects financed under the set-aside. An eligible
non-profit entity would be defined to prevent ``shell''
non-profits from accessing the set-aside funds. A non-profit
would have to own an interest in and materially participate in
the development and operation of the project; have non-profit
tax-exempt status under sections 501(c)(3) or 501(c)(4) of the
Internal Revenue Code; have among its purposes the planning,
development or management of low-income housing or community
development; and not be affiliated with or controlled by a
for-profit organization.

The process for reallocating unused set-aside funds would also be
amended. Currently, funds from states whose set-aside funds do
not total $750,000 are pooled and made available to all states in
this category. States with allocations above $750,000 are not
subject to pooling of set-aside funds. The Committee bill would
make funds available for eligible non-profits nationwide before
reallocating unused funds on a proportional basis to the states
for use by for-profit developers. This is consistent with the
set-aside reallocation process under the HOME program, the low
income housing tax credit and the overall section 515 program.
The Committee intends to create an incentive for states to
develop the capacity of the non-profit sector, not reward states
that already have a capable non-profit sector. Therefore, the
pooling would not begin until 1994.

Finally, the Committee bill would amend the small state minimum
non-profit set-aside to allow FmHA to provide more than $750,000
to a state if such amounts are necessary to finance a 515
project.

Housing preservation grants

The section 533 Housing Preservation Grant program has provided a
successful mechanism to assist very low income families. The
Committee bill would expand the eligible activities under the
program to allow grants to be used for replacement housing when
rehabilitation is not practical and the owner could not otherwise
qualify for replacement assistance under the section 502 loan
program. The use of housing repair would remain as a priority
above replacement but this increased flexibility would be
available. In order to ensure that the costs per unit would not
significantly increase at the expense of the number of families
assisted, replacement costs provided under this program would be
capped at $15,000 per unit. This amount of assistance may be
enough to assist very low income homeowner to qualify for 502
loan or other source of financing to cover any additional costs.

Rural homelessness

The Committee bill would include several provisions from
legislation introduced by Senator Bumpers-S. 2181-to address the
problem of homelessness in rural America.

The Committee bill would amend the FmHA property disposition
program to make it easier to obtain property for transitional
housing and for homeless persons to eventually qualify for lease
or ownership of FmHA homes. Under current practice, FmHA may
lease or sell inventory property to public and nonprofit entities
for use in providing transitional housing to homeless persons.
Non-profits are eligible to lease certain properties for up to 10
years for $1 or purchase certain properties at a 10% discount off
of the fair market value. The Committee bill would expand the
number of properties eligible for sale or lease to nonprofits on
favorable terms as transitional housing.

The Committee intends that FmHA develop outreach materials to
distribute to FmHA district and state offices and conduct
aggressive outreach to organizations potentially interested in
leasing or purchasing property under this program. For example,
FmHA should, on a regular and timely basis, distribute lists of
eligible properties to organizations that have expressed interest
in participating in the program when properties become available
in their area.

Preservation of existing inventory

During the past several years, the Committee has been deeply
involved in resolving the problems presented with the termination
of low income use restrictions on federally assisted property.
The Housing and Community Development Act of 1987 established a
preservation program to preserve the affordability of section 515
projects financed prior to 1979 that are threatened with
conversion to market-rate housing. The HUD Reform Act of 1989
established long term use restrictions for section 515 projects
financed prospectively. On the urban side, the National
Affordable Housing Act established a permanent solution to
preserve the affordability of projects subsidized under the older
section 236 and section 221(d)(3) programs.

The universe of section 515 projects funded between 1979 and
1989, however, is not subject to the preservation program
established by the Housing and Community Development Act of 1987.
Although this problem does not yet pose an immediate threat to
the low income housing stock, the Committee believes that an
early resolution will avert a potential crisis in later years.
The Committee bill would extend the 1987 Act rural housing
preservation provisions to section 515 projects financed between
1979 and 1989.

Implementation of the existing preservation program for projects
financed prior to December, 1979 has been criticized as
inconsistent and overly generous to project owners. FmHA has
provided generous incentives to owners to maintain the low income
use of their property even in cases where the private market
would be unlikely to sustain a project at higher rent levels
without federal subsidies. FmHA's monitoring of the low-income
use restrictions in cases where an owner has accepted an
incentive package has also been criticized. To address these
concerns, the Committee bill would establish an Office of Rural
Rental Housing Preservation in FmHA National headquarters to
provide consistent evaluation and processing of prepayment
applications.

Many 515 projects financed prior to 1979 received section 8
project-based assistance contracts. Over the years, section 8
contract rent increases have been granted by HUD to some of these
projects but not approved by FmHA. These excess funds have
accrued to the section 515 project reserve accounts. Although
owners pay tax on the reserve accounts as project income, FmHA
does not allow owners to access the funds except for project
repairs. The value of these reserves are not considered in the
property appraisals under the preservation program. The Committee
bill would allow owners to access these reserve accounts in
exchange if the long-term low-income use restrictions are
extended on the project.

Disaster assistance in rural areas

The National Affordable Housing Act provided FmHA with the
authority to divert rural housing funds to areas affected by a
natural disaster. For this purpose, the definition of rural area
is waived. The Committee bill would amend these provisions in
current law to draw funds from FEMA appropriations rather than
rural housing program funds. The Committee bill would also limit
the waiver of the rural area definition to areas that have high
concentrations of farmworkers.

FmHA appeals process

In 1978, Congress adopted legislation intended, among other
things, to provide FmHA borrowers and tenants with an opportunity
to administratively appeal FmHA decisions to foreclose on
single-family home loans and landlord decisions to evict tenants
from FmHA-financed rental and farm labor housing. While FmHA
implemented the legislation as intended in 1979, it amended its
tenant grievance and appeal regulations in 1983 to exclude
evictions from the administrative appeals process. Efforts by
tenants to judicially overturn FmHA's 1983 amendment of the
tenant grievance and appeals procedure have been unsuccessful. In
addition, recent court decisions can be interpreted to give FmHA
discretion to deny some homeowners facing foreclosure the right
to an administrative appeal hearing prior to the foreclosure. The
amendment to section 510(g) of the Housing Act of 1949 is
intended to restore to tenants in FmHA rental and farm labor
housing the right to administratively appeal proposed evictions
prior to a landlord's initiating a state court eviction.

Rural Development Administration

The 1990 Farm bill authorized the establishment of a Rural
Development Administration (RDA) within the Department of
Agriculture. The RDA was chartered with the responsibility to
administer FmHA programs for waste water treatment, community
facilities, rural development and other programs ``as
necessary''. Initially, the sponsors of this provision also
proposed the inclusion of the FmHA multifamily housing programs
under the RDA; the single-family housing programs would be
remained under FmHA. Although this proposal was successfully
eliminated, there is a considerable amount of concern in the
rural housing community that the Secretary of Agriculture may use
his ``as necessary'' authority to fold in housing programs into
the RDA at a later date. The Committee bill would prohibit the
transfer of rural housing programs to the RDA.

Rural housing reform package

This spring, the FmHA Inspector General and the General
Accounting Office (GAO) both provided testimony to the House
Energy and Commerce Committee and the House Banking, Finance and
Urban Affairs Committee identifying vulnerabilities in the
section 515 rural rental housing program.

The FmHA IG presented the findings of audit work focused on loan
approvals, project construction and project operations in the
section 515 program. These findings indicated that FmHA needed
improved internal controls to reduce the potential for abuse in
the section 515 program. The IG made several recommendations,
many of which have already been adopted by FmHA or are now the
subject of proposed regulations. The IG is also investigating
cases referred by FmHA involving possible fraudulent activity by
specific borrowers.

The GAO testimony, developed in response to a request from
Congressman John Dingell, addressed both the potential for abuse
in the section 515 program and the potential for developers to
receive excess profits through the program. The GAO concurred
with the FmHA IG's findings and recommendations for improving
FmHA internal program controls. The focus of the testimony,
however, was on developer profit in three case studies; the
report concluded that developers receive excessive profit under
the section 515 program. The Committee reviewed this report
carefully and remains seriously concerned with GAO's analysis and
characterization of profit under the 515 program.

In developing its finding that ``profits represent ed  returns of
780 to 970 percent on the developers' initial cash investment'',
the GAO treated ``profit'' and ``return on investment'' as
interchangeable concepts. Such an approach has several
deficiencies. First, the development and construction of a
multifamily housing project is not a passive financial investment
and therefore is generally not viewed in terms of return on
investment. Unlike a passive investment, development of
low-income housing involves substantial services rendered and is
often an involved, time-consuming, potentially risky undertaking.

Second, there is a substantial difference between gross profit
and net profit which the GAO analysis does not recognize. Under
the FmHA section 515 loan, only a  8-12% builder fee and ``hard''
overhead costs are permitted. A developer fee and ``soft''
overhead costs of project development must be deducted from what
the GAO calls ``profit''.

Third, the GAO's conclusions that profits under the section 515
program are excessive are based on their comparison with profits
considered excessive under the Section 8 Moderate Rehabilitation
program. The two programs are markedly different, however.
Section 515 projects involve considerable up-front construction
or acquisition investments but have generally limited operating
revenues and 50 year low income use restrictions. The section 8
moderate rehabilitation program required relatively minimal
investments to undertake light rehabilitation, unrestricted rents
and short low income use requirements. The investment of time,
risk and equity involved in a 515 project is more substantial
than the mod rehab program and therefore needs a larger up front
incentive to attract private sector participation in the program.

While disagreeing with the general methodology, conclusions and
characterizations contained in the GAO testimony, the Committee
staff pursued a series of meetings with the Federal Housing
Administration, the GAO, the National Council of State Housing
Finance Agencies and rural housing developers to discuss the
foundations and conclusions of this audit work. On the basis of
this subsequent research and discussion, the Committee believes
that both the FmHA IG and the GAO did discover some significant
program vulnerabilities. The Committee bill thus includes a
number of reforms to strengthen the section 515 program.

Equity contribution/operating reserves.-The Committee bill would
increase the maximum allowable owner equity contribution for 515
loans and require that operating reserves be in the form of cash.
Since 1988, owner downpayment requirements have statutorily
limited to 3% of the loan. Prior to that, FmHA commonly required
a 5% downpayment. In response to concerns about the section 515
program, FmHA requested that this limit on maximum equity
contribution be eliminated. Instead, FmHA would have used
``market studies, expected returns, size and location of project
to determine the percentage of investment required of the
developer.'' The Committee rejected this open-ended proposal but
did increase the maximum equity contribution required of
borrowers from 3% to 6%, except for projects developed in areas
of extreme poverty and substandard housing or projects not
developed in conjunction with the low income housing tax credit.

The purpose of this change is twofold. First, FmHA would be
provided greater flexibility to establish equity contribution
levels consistent with total expected returns. As is commonly
accepted practice in many aspects of the housing industry,
expected profit would be higher for projects involving more
risk-such as those in difficult-to-develop areas or those without
the additional subsidy provided by the low income housing tax
credit. Second, FmHA could reward project sponsors willing to
develop housing in the neediest areas-those with
higher-than-average incidence of poverty and substandard housing.
While section 515 projects are developed in markets with
demonstrated low income housing need, many of the neediest
communities go unserved. The Committee attempted to address this
issue with the set-aside for underserved areas established in the
National Affordable Housing Act; this provision should provide an
additional tool to accomplish this purpose. The Committee bill
would also require FmHA to establish a process for coordinating
the selection of projects under section 515 with the housing
needs and priorities as established in a state's comprehensive
housing affordability strategy (CHAS) and low income housing tax
credit allocation plan.

Under the section 515 program, borrowers must provide a 2%
project operating reserve. This reserve may be in the form of
cash or irrevocable letter of credit. The Committee bill would
eliminate the option to use a letter of credit for the project
reserves.

Identity of interest.-The FmHA Inspector General uncovered
several examples where borrowers also performed general
contractor and subcontractor functions, allowing them to receive
several layers of profit. In some cases project costs were
inflated. The Committee expects FmHA to expand its regulatory
definition of ``identity of interest'' arrangements to include
family and indirect affiliations. The Committee further expects
that FmHA will limit profit and overhead expenses to the general
contractor when more than 50% of a project's supplies are
subcontracted out to one supplier or when more than 75% is
subcontracted out to less than three entities.

Another recommendation of the FmHA Inspector General was to
provide independent certification of project costs when identity
of interest relationships exist among entities involved in
project development or management. FmHA requested the authority
to charge a user fee on section 515 loan applications to cover
the costs of such certifications and other administrative costs
such as property appraisals, market surveys, and inspections. The
Committee rejected the imposition of a user fee on 515 borrowers
to pay for program administration. The Committee agreed, however,
with the recommendation that independent cost certifications be
performed where necessary. The Committee bill would authorize
FmHA to finance such audits as an eligible program cost. The
Committee expects that FmHA would routinely request independent
cost certifications for transactions over $1.5 million involving
identity of interest relationships and request audits for other
transactions on a random basis. FmHA would also be authorized to
conduct a multi-state study comparing negotiated bid prices to
competitively bid prices in 11 states and report to Congress on
the results within 18 months of enactment.

Coordination between FmHA and State HFAs. The Committee uncovered
significant inconsistencies between information received by FmHA
offices and state housing credit agencies on their respective
program applications for the same project. These documents
provide the basis of judgments on reasonable project costs,
subsidy needs and profit. The Committee also found that allowable
practices and project expenses varied considerably among FmHA
state offices across the country.

To address both of these concerns, the Committee bill would
require FmHA to establish standard guidelines for allowable
project costs among state offices. FmHA would also be required to
develop uniform procedures for identifying and sharing
information on project costs, builder profit, identity of
interests relationships, and other factors with housing credit
agencies allocating low income housing tax credits to section 515
projects. The Committee is pleased to note that since this
spring, FmHA, the National Council of State Housing Finance
Agencies and individual state credit agencies have actively
embarked upon efforts to improve coordination between the section
515 program and the low income housing tax credit program.

Rural rental housing vouchers

The Committee bill would establish a rural housing voucher
program under the Farmers Home Administration to provide rental
assistance to very low income families. In some rural areas, the
largest housing problem is one of affordability, not
availability. A voucher program would provide an additional tool
to meet the housing needs of residents of such areas. The
Committee notes, however, that most rural areas do not have an
adequate supply of vacant housing; vouchers are virtually useless
in communities without vacant rental stock. The Committee has,
therefore, rejected the Administration's recommendation to shift
funds away from rural housing development and towards the use of
rural housing vouchers. The Committee bill would authorize the
rural voucher program at $140 million for FY93.

The Committee expects the FmHA to coordinate the voucher program
with the section 515 rural rental housing program, the section
533 housing preservation grants program and the rental assistance
programs administered by HUD.

Site acquisition and development

The Committee bill would amend the section 524 site acquisition
and development program to enable FmHA to make grants to
non-profits to capitalize revolving loan funds to carry out
eligible program activities.

Subdivision approval

The Committee bill would amend the rural housing statute to
require FmHA to accept subdivision approvals made by local,
county or state agencies.

TITLE VIII-HOUSING FOR PERSONS WITH SPECIAL NEEDS

SUBTITLE A-SUPPORTIVE HOUSING FOR THE ELDERLY

Authorization/amendment

The Committee bill would authorize federal housing programs that
serve low-income elderly persons for fiscal years 1993 and 1994,
namely the section 202 program, the revised congregate housing
services program and the HOPE for Elderly Independence program.
The bill would also amend the provision governing selection
criteria for section 202 funds to require HUD to take into
consideration the availability of public housing for the elderly
and the vacancy rates for such facilities.

SUBTITLE B-SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES

Authorization

The Committee bill would authorize funding for the section 811
program for fiscal years 1993 and 1994.

SUBTITLE C-SUPPORTIVE HOUSING FOR THE HOMELESS

Authorization

The Committee bill would authorize funding for the federal
homeless programs for fiscal years 1993 and 1994: the Emergency
Shelter Grants program, the Supportive Housing Demonstration
program, the Supplemental Assistance for Facilities to Assist the
Homeless program, the section 8 SRO program, and the Shelter Plus
Care program.

Safe Havens for the Homeless

The Committee bill would include the Administration's proposal to
establish a new, competitive demonstration program, known as
``Safe Havens for the Homeless''. The program would evaluate
whether small residential facilities that provide very low cost
permanent housing would be successful in attracting seriously
mentally ill persons who have been unwilling or unable to
participate in existing treatment programs like Transitional
Housing or Shelter Plus Care.

Key experts on homelessness believe that there is a gap in the
federal programs designed to address homelessness. On the one
hand, emergency shelter programs provide short-duration shelter,
many in barracks style environments. These shelters are often
frightening places for seriously mentally ill persons. They are
crowded sites that offer no safety, peace, or privacy. Assault
and theft are common, and the seriously mentally ill, due to
their vulnerability, are all too often the victims. The skills
needed for survival on the streets (such as the need to mistrust
strangers and use hostility as a defense) differ greatly from
those needed for accommodations indoors. Many seriously mentally
ill persons need not only shelter from the harshness of street
living but also time to reflect and learn to trust helpers before
they are ready and able to adhere to rules and program
requirements.

On the other hand, programs such as Transitional Housing and
Shelter Plus Care are specifically designed to provide
comprehensive, long-term supportive services designed to help
homeless persons achieve greater self-sufficiency. These programs
carefully screen potential residents to determine their
commitment to accept and complete treatment programs and work
toward the goal of greater independence. Understandably, they do
not accept persons unwilling or unable to make these commitments.

The Safe Havens proposal is designed to fill this gap in federal
efforts. It operates on the premise that for many seriously
mentally ill homeless persons who have been living on the
streets, the transition to stable housing is best made in stages,
starting with a small, highly supportive but low-demand
environment where they can live. Safe Havens is designed to offer
the ``portal of entry'' to the service system for homeless people
with serious mental illness.

The Committee believes that this new approach would provide an
alternative to the nomadic and often dangerous life being led by
seriously mentally ill homeless persons who are not ready to
enter high-demand treatment programs. There is a public benefit
to this as well: there will be fewer homeless persons in public
spaces and cycling through jails, emergency rooms, and emergency
shelters.

A Safe Haven program would provide the opportunity to test this
new approach. Providing a stable residence will end the necessity
for these people to carry their possessions in bags and shopping
carts wherever they go. They will have a place to stay other than
parks, transportation facilities, libraries, jails, alleys,
abandoned buildings, and the street. Protection from the elements
will reduce their presence in hospital emergency rooms. The
alcohol- and drug-free environment of the Havens should reduce
their use of these substances. In addition, a stable living
environment in combination with the friendship of the staff at
the Havens may encourage the trust that is needed to engage them
in treatment programs.

The Committee believes this approach is sorely needed and holds
great potential to meet the needs of this difficult-to-serve
population. Failure to develop a means to deal with this element
of the population means failure to achieve the objective of
ending homelessness.

The Committee bill would generally incorporate the Safe Havens
demonstration in the form proposed by the Administration. A
number of key revisions have been made in response to concerns
raised by a wide coalition of homeless advocates and providers.
First, funding for the new program would not come at the expense
of other McKinney homeless programs. The Administration
recommends cutting the Emergency Shelter Grants program by
approximately $55 million at the same time it calls for a $50
million Safe Havens. The Committee has strongly rejected this
suggestion. As one observer noted, `` w hile we all have some
discomfort with emergency shelters, they are an essential piece
in dealing with the problems of homelessness and will remain so
for the foreseeable future.'' Federal funds for emergency
shelters are particularly needed at a time of economic recession,
when states and localities are scaling back safety net programs.

Second, the program's eligible activities would be expanded by
permitting funds to be used for (1) acquisition and acquisition
and/or rehabilitation (as under other McKinney programs); (2)
outreach activities; and (3) a portion of the costs of the
required supportive services (i.e. low-demand mental health care
management).

Third, compliance with the matching requirements would be eased
by allowing federal grant funds to be counted as part of the
required match-as is done under the Shelter Plus Care program.

Fourth, transition to a Safe Haven would be eased by permitting
the occupancy charge to be phased in or reduced based on the type
of accommodations provided.

Fifth, a Safe Haven would be limited to private or semi-private
accommodations; group accommodations would not be allowed.

Sixth, the bill would clarify that HUD can test various types of
Safe Havens including those that are combined with drop-in
centers and/or are located in existing emergency shelters.

Finally, eligibility for SSI and Medicaid benefits would be
preserved by providing that a Safe Haven is neither a ``public
institution'' nor an ``institution for mental diseases'' within
the meaning of the Social Security Act.

The other elements of Safe Havens have generally been retained in
their original proposed form. A Safe Haven would be the size of a
small shelter, serving no more than 25 persons. It would offer
private or semi-private accommodations, as well as other
resources (e.g. telephones, mailing address, a place to lock up
and store belongings). A Safe Haven would be subject to State and
local building codes. Alcohol and illegal drugs would not be
permitted on the premises.

A Safe Haven would afford more privacy than the typical emergency
shelter. In addition to the smaller size and increased privacy of
a Safe Haven as compared with the typical emergency shelter, the
critical difference would be the absence of time limits on the
duration of stay. Residents would not be required to leave after
a given time, such as 30 days, nor would they be required to
vacate the premises during the day.

A Safe Haven would provide low-demand, full-time mental health
case management. Staff would be familiar with the community
resources for housing, medical and mental health treatment, and
other social supports, and would be available when residents are
ready to seek assistance. The hope is that after living for a
while in the stable environment of a Safe Haven, and coming to
trust the staff, residents would be more willing and able to
participate in supportive service programs, such as mental health
treatment, and would start to move toward a more traditional form
of permanent housing. Their agreement to participate in such
programs, however, would not be required.

Eligible program activities under the Safe Haven program would
include: the rehabilitation, acquisition or acquisition and
rehabilitation of a structure for use as a Safe Haven; leasing of
a building or part of a building for use as a Safe Haven; costs
of operating the Safe Haven, including the cost of 24-hour
management; and costs for administration, outreach, low demand
mental health case management, and other activities including the
modification of an existing facility to create a Safe Haven.
On-site management staff would ensure the safety of the residents
and the cleanliness of the facility.

A major aim of the program would be to demonstrate whether Safe
Havens are sufficiently attractive to seriously mentally ill
homeless persons to get them off the street and into this type of
housing. A second aim would be to demonstrate the extent to which
residents are eventually willing to be engaged in treatment
programs and to move toward a more traditional form of housing
after a period of stabilization in the Haven. Third, the program
would demonstrate whether Safe Havens are cost-effective in
comparison with other alternatives for seriously mentally ill
homeless persons. Finally, the program would demonstrate the
various ways in which Safe Havens may be used to provide
accommodations and low-demand mental health case management for
eligible persons.

SUBTITLE D-HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

Authorization/amendments to existing law

The Committee bill would authorize the AIDS Housing program
established by the National Affordable Housing Act for fiscal
years 1993 and 1994. The bill would also amend existing law by
specifying that the Centers for Disease Control would determine
the incidence of AIDS for purposes of allocating formula funding.
The Committee intends that the March 31, 1992 number of
cumulative AIDS cases, as determined by the Centers for Disease
Control, should serve as the eligibility criteria for fiscal year
1993. This is consistent with the way the Ryan White CARE Act
determines eligibility for its formula distribution of funds.

Finally, the bill would require that metropolitan areas designate
their chief elected official to receive grant funds, similar to
the process established in the Ryan White CARE Act.

TITLE IX-COMMUNITY DEVELOPMENT AND MISCELLANEOUS PROGRAMS

SUBTITLE A-COMMUNITY AND NEIGHBORHOOD DEVELOPMENT AND
PRESERVATION

Background on CDBG

The eighteen-year old Community Development Block Grant (CDBG)
program helps local communities foster viable neighborhoods by
improving housing, community facilities and public services, and
expanding economic opportunities. The program focuses especially
on helping low and moderate income families, preventing or
eliminating slums and blight, and meeting urgent community
development needs.

Under the CDBG program, communities may use up to 15% of their
funds for public services such as employment, crime prevention,
education and recreation needs. The Committee would like to
clarify that local programs to keep schools open during the
evening hours, in order to provide public facilities for sports,
music, and other student activities, are an eligible activity and
appropriate for funding under the CDBG program. This expanded use
of school facilities could help reduce crime as well as enhance
educational opportunities.

Program authorizations

The Committee bill would authorize funding for the CDBG program
at $3.9 billion in FY93 and $4 billion in FY94. Set-asides for
work-study, historically black colleges, and insular areas would
also be authorized. The section 108 loan guarantee program would
be authorized at $300 million in each of FY93 and FY94.

Homeownership assistance sunset

The National Affordable Housing Act, added direct homeownership
assistance (such as interest subsidies, downpayment assistance,
closing costs assistance) as an eligible activity under the CDBG
program. The authority for this new activity is scheduled to
expire at the end of October 1992. The Committee bill would
eliminate the sunset provision so that homeownership assistance
would be a permanently eligible program activity.

CDBG/State set-aside for technical assistance
Under current law, states are allowed to use up to 2% of their
CDBG funds for administrative expenses. Over the years, increased
administrative demands of the CDBG program have put further
strains on this cap. Because the state administers the CDBG
program for small nonentitlement communities, the state must
often provide extensive technical assistance to grantees. The
Committee bill would allow states to set-aside 1% of program
funds for technical assistance to local governments and
non-profit program recipients.

Elimination of non-housing community development plan

CDBG grantees are required to prepare both a community
development plan and a comprehensive housing affordability
strategy (CHAS) to document their needs and outline their plan
for resource allocation. The National Affordable Housing Act
added a requirement that communities prepare a non-housing
community development plan in addition to the plans previously
required. Communities have testified that this requirement is
redundant and time consuming. The Committee bill would eliminate
this extraneous requirement.

Loans of CDBG funds

The Committee has become aware that HUD regulations have limited
loan assistance under the CDBG program to housing rehabilitation
efforts or assistance to for-profit entities. Under the
regulations, a community would be able to provide a direct grant
to an entity to carry out certain eligible program purposes but
would not be able to make a loan to the same entity for the same
purposes. The Committee bill would override the HUD regulations
to ensure that grantees could make loans to any eligible entity
and for any eligible purpose for which a grant would be
permitted.

CDBG code enforcement

Since the inception of the CDBG program, code enforcement has
been an eligible use of CDBG funds and until recently, HUD has
been flexible about allowing code enforcement under CDBG as part
of efforts to improve poverty areas or to prevent marginal areas
from deteriorating. More recently however, the Committee has
learned that some HUD regional offices have attempted to unduly
restrict the flexibility localities were provided under the
original 1974 CDBG Act by substituting their judgment for what
the locality determined is needed to justify code enforcement.
The Committee Bill would clarify that code enforcement is an
eligible CDBG activity and would permit consideration of private
as well as public improvement, existing or planned, in allowing
the locality to decide what activities, if any, along with code
enforcement may be expected to arrest the decline of an area.
This change is needed to clarify existing law and to express
Committee support for CDBG code enforcement activities in
connection with a variety of public and private activities as
appropriate including private rehabilitation and non-profit
community efforts as well as public improvement projects.

CDBG set-aside for colonias

Colonias are small squatter communities located in the four
states bordering Mexico. These communities generally consist of
Mexican immigrants living in near primitive conditions and are
often in desperate need for basic infrastructure and sewer
facilities as well as decent housing.

The National Affordable Housing Act created a set-aside of CDBG
funds for colonias and limited the use of these funds to the
planning of infrastructure and housing needs. Funds could not
used for direct investment. The Committee bill would reauthorize
the set-aside for colonias and amend it to allow grants to be
made for any CDBG-eligible activity that serves the needs of the
residents of the colonias-particularly those related to housing
and water and sewage facilities. The Committee hopes that this
revision will enable the relevant states and localities to
address the needs of these areas in an expeditious and
concentrated manner.

Approval of multi-jurisdictional agreements

Under current law, the HUD Secretary must approve
multi-jurisdictional agreements among both entitlement
communities and non-entitlement communities. The Committee bill
would allow states to approve multi-jurisdictional agreements
among non-entitlement communities that receive funding through
the state's small cities CDBG program. The HUD Secretary would
retain approval authority for entitlement communities that
receive funds directly from the federal government.

Neighborhood-based non profits

The Committee bill would expand the definition of eligible
non-profit entities under the CDBG program beyond
``neighborhood-based non-profits'' to ensure that broader-based
non-profits serving rural areas would be eligible for funding.

Economic development

In general.-The Community Development Block Grant (CDBG) program
remains one of the most important federal tools for promoting
revitalization in distressed areas. The Committee intends to
retain the flexibility of the program, which allows states and
localities to use their funds for activities that benefit low and
moderate-income persons, prevent slums and blight, or meet urgent
community needs. At the same time, the Committee intends to
enhance the ability of states and localities to use CDBG funds
for economic development activities.

Economic development was added as an eligible activity under the
CDBG program in 1981. In recent years, however, the Department
has issued administrative rules and other policy guidelines that
impose unnecessarily burdensome standards and documentation
requirements for economic development activities. These standards
and requirements have effectively prohibited or severely
curtailed many activities which would have created significant
public benefits. They have also served to diminish the
flexibility of states and localities to determine local
priorities, as intended by Congress when the original CDBG
program was created.

The Committee bill would make several modifications to the CDBG
program to ease the burdens associated with economic development
activities and to provide the Department with sufficient
direction to compel changes in current administrative rules.

Eligible activities.-The Committee bill would allow CDBG funds to
be used for technical assistance to public and private non-profit
entities to carry out neighborhood revitalization or economic
development. Current law allows CDBG funds to be used to provide
technical assistance and capacity building only to for-profit
entities. HUD has not allowed non-profit organizations to receive
CDBG funds for technical assistance and capacity building even
though non-profit organizations are becoming increasingly
important in neighborhood revitalization activities. The
Committee believes that allowing non-profit organizations to
receive CDBG funds for technical assistance and capacity building
will improve the managerial and administrative capabilities of
these organizations and make them more effective in carrying out
CDBG activities. The Committee bill would exempt from planning or
administrative cost limitations the provision of technical
assistance to public or non-profit organizations. The Committee
also intends to clarify that expenses associated with building
the long term capacity of grantees and subgrantees to implement
economic development activities should be considered direct
program expenses, rather than administrative expenses. The
Committee believes that such capacity building activities enhance
the effectiveness of grantees and subgrantees in carrying out
CDBG activities and creating public benefits.

Rebuilding distressed neighborhoods.-Grantees have criticized the
current CDBG definition of low and moderate-income as unworkable
for economic development activities. The program requires
grantees to use the Section 8 income definitions, which rely on
family income rather than individual income to determine a
beneficiary's financial status. Consequently, a business owner
receiving CDBG assistance must determine not only the income of
the person applying for a job but also the income of all of the
members of his/her household in order to document a low or
moderate-income hire. This requirement has been found to be
administratively burdensome for many businesses and grantees. The
Committee bill would ease this regulatory burden by creating a
presumption that activities carried out in census tracts which
meet specified criteria also meet the national objective of
benefiting low- and moderate-income persons.

Appropriateness test.-The Committee bill includes a provision
intended to clarify when assistance to a for-profit entity is
appropriate. CDBG grantees have experienced significant
difficulties in funding economic development projects since HUD
issued a 1987 administrative rule on the topic. The rule required
projects to meet a ``necessary and appropriate'' standard when
assistance is provided to a for-profit business. Grantees
indicated to the Committee that this standard was
administratively burdensome and discouraged grantees from using
CDBG funds for economic development activities. In 1990, Congress
directed HUD to adopt a less cumbersome ``appropriateness''
standard. However, despite Congressional directives, HUD has
failed to revise the regulatory guidelines and to implement the
change. The appropriateness analysis has been interpreted by many
to be a ``but for'' test in which a grantee must prove that
``but-for the CDBG assistance, the project could not go
forward.'' This test has had the effect of disqualifying
assistance to activities that could create substantial public
benefits. The Committee bill would prohibit HUD from limiting
assistance to activities for which no other forms of assistance
are available or which could not be accomplished but for that
assistance. In determining the amount and appropriateness of
assistance to a for-profit entity, the Committee intends that the
Department focus on whether the amount of assistance is
appropriate relative to the amount of public benefit expected to
be derived, rather than on whether the assistance is necessary
for a project to go forward.

Although the CDBG program is intended to provide states and
localities with flexibility to determine community needs and
whether or not assistance is appropriate, grantees have informed
the Committee that HUD often becomes involved in determining
whether assistance is appropriate prior to an activity receiving
assistance. In order to preserve the intended flexibility and
decentralized nature of the program, the Committee bill would
require HUD to ensure that grantees have an effective mechanism
in place to determine that an assisted activity is financially
viable and that assistance is appropriate relative to the public
benefit to be created. The Committee recognizes, however, that
due to differences in community needs, size or capacity, some
states and localities may not wish to pursue a significant volume
of economic development activities. Therefore, the Committee
intends HUD to exercise flexibility in prescribing the standards
such appropriateness determination mechanisms must meet.
Small and micro-business initiative.-The Committee bill would
facilitate the development of small and micro-businesses through
the use of CDBG-assistance. Small and micro-businesses can play a
significant role in neighborhood revitalization and job creation
or job retention strategies. Grantees have informed the Committee
that current statutory and regulatory requirements should be
revised so that CDBG can be more effectively used for small and
micro-business development. The Committee bill would require HUD
to modify current regulations that impede the development of
these enterprises. HUD would also be required to minimize the
paperwork and regulatory burdens and to incorporate additional
flexibility into the appropriateness standards. The Committee
bill would exempt from administrative cost limitations training,
technical assistance, or other support service costs associated
with helping grantees or subgrantees develop the capacity to
provide assistance for small and micro-business development
activities.

Development directive.-The Committee bill would direct HUD to
implement an on-going training program for Department personnel
involved in economic development activities. Last year, the HUD
Inspector General completed a report that audited several
grantees involved in economic development activities. The audit
found that the grantees did not adequately demonstrate that (1)
assistance provided to businesses was necessary and appropriate;
or (2) jobs were created or retained for low and moderate income
persons. The Inspector General attributed these failings to: (1)
lack of consistent implementation of regulations and guidelines
by HUD personnel; (2) lack of adequate technical assistance to
grantees by the Field Offices; and (3) poor underwriting caused
by inadequate training. The Inspector General's report also
raised the question of whether HUD currently possesses the
capacity to effectively evaluate economic development projects.
The audit indicates a great need to provide better technical
assistance and training to the HUD personnel responsible for
implementing and monitoring these activities. The provision
contained in the Committee bill would ensure: (1) that HUD staff
possess a solid understanding of economic development activities;
and (2) that regulations and guidelines are implemented
consistently. The Committee bill would require the Secretary to
use funds recaptured through the Urban Development Action Grant
program to carry out this requirement.

Job quality study.-The Committee bill would require the
Comptroller General to conduct a study on the types and quality
of jobs created or retained through CDBG assistance, and to
report its findings to the Congress. A persistent criticism of
job creation and retention activities funded through CDBG is that
they tend to encourage the development of low-wage, low-skill and
dead-end jobs. Generally speaking, these jobs do not promote the
development of marketable skills and the long run economic
well-being of CDBG's intended beneficiaries. Economic development
activities designed to create or retain job opportunities should,
to the greatest extent possible, improve the upward mobility of
low and moderate-income persons. The Committee recognizes,
however, that the development of low-wage and low-skill jobs can
also be a viable economic development strategy. This is
particularly true in neighborhoods where limited employment
opportunities exist or in those situations where the intended
beneficiaries lack job skills, education, or have limited
employment histories. The Committee does not wish to imply that
these economic development strategies should be prohibited. The
Committee is interested in an analysis and recommendations on how
the CDBG program can be more effectively used to promote more
skilled job opportunities.

Neighborhood development demonstration

The Neighborhood Development Program has been authorized, on a
demonstration basis, since 1983. The program has traditionally
received $2 million annually to provide grants to 40-45
non-profit, community-based organizations in poor neighborhoods
to rehabilitate housing, develop local businesses, create jobs
and improve neighborhoods. The non-profits receiving federal
assistance must contribute matching grants raised from private
sources such as churches, local businesses, other non-profits or
community residents. This program has been very successful in
stimulating strong community involvement in local neighborhood
improvement efforts and in developing the capacity of
community-based groups to undertake sound housing and development
projects. The Committee bill would authorize the Neighborhood
Development Demonstration Program as a full-fledged program
rather than a demonstration. Because the number of non-profits
who have entered the program over the years has grown
considerably, the limitation on multiyear grants recipients would
be lifted from 30% to 50%. The program authorization would be
increased from $2 million to $2.5 million in FY93 and $3 million
in FY94. The maximum grant award under the program would be also
increased from $50,000 to $75,000, but only if appropriations for
the program exceed 3 million.

The Committee bill would also rename the Neighborhood Development
Program after the late Senator John Heinz, in recognition of his
contributions to the issues of affordable housing and
citizen-based neighborhood revitalization. Throughout his
congressional career, Senator Heinz took a deep and active
interest in housing and urban development issues. His tireless
work to address the continuing shortage of adequate and
affordable housing are well remembered by this Committee.

John Heinz's involvement with the Neighborhood Development
Program began in the early 1980's. Senator Heinz deeply believed
in the principle of community-based redevelopment of distressed
neighborhoods and the involvement of area residents in the
decisions that affect their future. The Neighborhood Development
Program is built on these principles and the Committee believes
it is fitting that the lasting contribution of Senator Heinz be
recognized by redesignating the Neighborhood Development Program
in honor of his memory.

Neighborhood Reinvestment Corporation

The Committee Bill would authorize the Neighborhood Reinvestment
Corporation at $40 million for fiscal year 1993 and $41 million
for fiscal year 1994. The Neighborhood Reinvestment Corporation
provides technical support to community-based development
organizations, and serves as a catalyst for attracting private
and public resources to these entities.

Neighborhood Reinvestment helps to provide a network of
community-based development organizations that often serve as the
primary vehicles to efficiently and effortively channel resources
into economically disenfranchised neighborhoods. These efforts
result in stabilized neighborhoods, job creation and a stake in
the future for community residents.

The additional resources authorized in the Committee Bill would
be used: to expand the capacity of existing community development
organizations as well as to expand the number of organizations
served; to attract additional investment in affordable housing;
and to enhance the nature and level of the training and technical
assistance provided.

SUBTITLE B-REGULATORY PROGRAMS

National Commissions

The Committee bill would: (1) specify that appropriations for the
Manufactured Housing Commission shall remain available until
expended; (2) authorize $500,000 for the National Commission on
American Indian, Alaska Native, and Native Hawaiian Housing and
extend the term of the Commission for an additional 12 months to
complete its work; and (3) authorize $250,000 for the National
Commission on Severely Distressed Public Housing and extend the
Commission's term for an additional 6 months to complete its
work.

SUBTITLE C-MISCELLANEOUS PROGRAMS

Fair Housing Initiatives Programs

Summary.-Section 932 of the Committee Bill would reauthorize the
Fair Housing Initiatives Program (FHIP) and would include
refinements to take account of the expanded coverage of federal
fair housing and fair lending laws and the increased evidence of
discrimination in the housing markets.
FHIP provides the primary support for private fair housing
enforcement efforts around the nation and allows private fair
housing groups and other nonprofit organizations to carry out
testing and related enforcement activities under the Fair Housing
Act.

The Committee Bill would improve testing and enforcement under
FHIP to allow for: large scale investigations of fair housing
violations over a multi-year period; special projects such as the
development of models to respond to new forms of discrimination;
and broader investigative activities such as mortgage lending.

Resources would be provided to help organize and build the
capacity of new and existing fair housing enforcement
organizations, particularly in unserved and underserved areas of
the country, or where large concentrations of protected classes
exist. Support for education and outreach activities (at the
national, regional, local and community levels) would be
strengthened.

The Committee Bill would also significantly increase the
authorization levels for FHIP from $6.3 million a year to $21.6
million a year in fiscal year 1993 and $26 million in fiscal year
1994.

In revising the FHIP program, the Committee consulted with
representatives of organizations engaged in fair housing
activities, including the National Fair Housing Alliance, an
umbrella organization for fair housing organizations nationally,
the National Council of La Raza, the NAACP Legal Defense Fund,
the National Association of Realtors as well as the Assistant
Secretary for Fair Housing and Equal Opportunity at the
Department of Housing and Urban Development.

The Fair Housing Act of 1968.-Congress enacted the Fair Housing
Act as Title VIII of the Civil Rights Act of 1968, following
urban unrest of the mid-1960s and in the aftermath of the
assassination of the Reverend Dr. Martin Luther King, Jr. The law
prohibited discrimination in the sale, rental, and financing of
housing and in the provision of brokerage services. Although the
1968 Act declared a clear national policy against discrimination
in housing, it provided only limited means for enforcing the law.
Under the 1968 law, HUD was authorized to investigate housing
discrimination complaints, but could use only ``informal methods
of conference, conciliation and persuasion'' in an attempt to
resolve them-HUD had no power to sue violators. This conciliation
process was widely criticized because if either party refused to
enter into a settlement, HUD was left with no further role in
enforcement. This left the victim of discrimination with the
costly and time-consuming task of bringing legal action as the
only means of obtaining relief. The Department of Justice did
have some authority to bring housing discrimination suits;
however, that authority was of limited or no use to an individual
because it was restricted to suits raising issues of national
importance and involving a pattern and practice of
discrimination.

The 1988 amendments.-In 1988, Congress passed amendments to the
Fair Housing Act which (1) extended coverage of the protections
of fair housing to families with children and persons with
disabilities, and (2) greatly improved HUD's enforcement
capabilities under the Fair Housing Act, allowing HUD to
prosecute complaints on behalf of individuals before
administrative law judges. If either party elects to have the
case tried in federal district court, the Department of Justice
brings the action on behalf of the complaining party.

The heart of the 1988 amendments is the complete rewriting of the
enforcement provisions of the 1968 Act. Under the new law, HUD's
role in investigating complaints of discriminatory housing
practices is significantly enhanced. HUD is also given authority,
for the first time, to bring administrative actions to remedy
discrimination, as well as authority to refer pattern and
practice and zoning and land use matters that cannot be resolved
administratively to the Department of Justice for litigation.

Continuing evidence of discrimination.-Despite two decades of
enforcement under the Fair Housing Act, evidence continues to
mount of widespread and pervasive discrimination against African
Americans, Hispanics and other minorities, women, families with
children and persons with disabilities in the home mortgage
lending and rental housing markets.

As recently as May 1992, a report on the role of financial
institutions in lower income and minority communities in the Los
Angeles area found that banks and savings and loans associations
make fewer and smaller loans in African-American and Latino
neighborhoods than in white neighborhoods in which residents have
comparable incomes.\2\(FOOTNOTE)

(FOOTNOTE)\2\``Taking It To The Bank: Poverty, Race, and Credit
in Los Angeles,'' Fair Housing Congress of California, 1992.

Amendments contained in the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA), expanded the Home
Mortgage Disclosure Act so that mortgage bankers, as well as
banks, thrifts, and credit unions, must disclose acceptance and
rejection rates for mortgage loan applicants according to the
applicants' race, gender, and income level. Previously, data was
collected only by census tract and only for loans approved.
Language included in FIRREA also provided that starting in June
1990, non-numerical ratings and written evaluations of bank and
thrift compliance with the Community Reinvestment Act would be
publicly disclosed.
In October 1991, data collected under the expanded HMDA
requirements disclosed evidence of pervasive discrimination in
the Nation's mortgage lending markets. The data showed that
minority loan applicants are routinely rejected from two to four
times more frequently than their white counterparts.

The National Housing Discrimination Survey (HDS) released by HUD
in August 1991, demonstrated that the overall incidence of
discrimination is at least 50% for both Hispanic renters and
Hispanic homebuyers and even higher for African American renters
and buyers.

A GAO study recently revealed that the number of mortgage loans
purchased by Fannie Mae and Freddie Mac (the housing government
sponsored enterprises), per homeowner, declined as the percentage
of minorities in a neighborhood increased and the income level of
the neighborhood decreased.

This growing body of evidence served, in part, as the impetus for
Committee action in reauthorizing and refining the FHIP program.

Inadequate resources.-Despite the continued existence of housing
discrimination nationally, the resources available to support the
effort of fair housing organizations remain limited. Since 1987,
the FHIP program has received funding of approximately $6 million
per year. In FY 1990, this amount supported only 28 grants to
private enforcement groups nationally.

In addition, the majority of fair housing activity has been
concentrated in certain urban centers (primarily in the
northeast, the midwest and California), while fair housing
enforcement activity in the South and the Southwest remains
woefully inadequate. At present there are only a total of three
fair housing groups in the south, located in Atlanta, Miami and
Memphis.

At the same time, the need for additional fair housing
enforcement organizations continues to increase. The National
Fair Housing Alliance reported to the Committee that as of May
1992, it had received requests from state and local governmental
agencies, community groups, civil rights attorneys and
individuals in more than 39 cities across the country, including
10 in the south, for assistance in establishing new fair housing
agencies.

Enforcement activities currently funded under FHIP do not
adequately reflect either the addition of families with children
and persons with disabilities as protected classes under the Fair
Housing Act or the growing subtlety and sophistication of housing
discrimination. Data submitted by fair housing agencies on their
recent enforcement experiences supports the need to allocate
resources to foster the continued development of prototypes which
respond to these new and sophisticated forms of discrimination.

Fair Housing Initiatives Program/Evolution.-The growth and
increased effectiveness of fair housing organizations prompted
HUD to join with the National Committee Against Discrimination in
Housing in 1978, to undertake a Fair Housing Enforcement
Demonstration Project, to test whether establishing a formal
relationship between HUD and local private fair housing groups
would make enforcement of the fair housing laws more effective.
Under the two-year demonstration, eight private nonprofit
organizations received modest grants to receive and record
complaints of housing discrimination; to conduct tests and other
investigative work related to specific complaints; to conduct
fair housing testing studies to uncover discriminatory practices;
and conduct education and outreach.

In addition, the midwest fair housing groups developed a working
relationship with the HUD Region V Office in Chicago whereby the
groups could contact HUD by telephone to report a complaint that
required immediate action. The fair housing agencies provided HUD
with test reports and other evidence to support the claims and
HUD employed a ``rapid response'' system by sending an
investigator into the city within days of receipt of the
complaint.

Region V began to receive and successfully resolve more
complaints of housing discrimination than any other region in the
country. The success of this public/private partnership played an
important role in the creation of the FHIP initiative. It
provided a viable alternative to federal district court to
resolve these matters. The speed and efficiency also helped to
restore the faith of victims of housing discrimination that the
``system'' within the government actually worked.

The success and efficacy of the demonstration program served as
the precursor to the Fair Housing Initiatives Program (FHIP),
authorized in the Housing and Community Development Act of 1987.

Current FHIP Program.-FHIP was enacted to: (1) help increase
public awareness of the rights and remedies available under the
Fair Housing Act; (2) conduct outreach to person protected by the
Act; and (3) assist private fair housing groups and other
nonprofit organizations to carry out testing and related
enforcement activities. FHIP has proven an important tool in the
fight against discrimination.

Under FHIP, private fair housing organizations work within local
communities nationwide to promote fair housing through education,
outreach, litigation, conciliation, and research into the nature,
extent and effects of housing/lending discrimination.

Private fair housing organizations evolved in response to the
need for increased enforcement of as well as education about
rights under the nation's fair housing laws. These organizations
began to gradually achieve marked success in combating housing
discrimination and were primarily responsible for the development
of a critical investigative tool-fair housing
testing.\3\(FOOTNOTE)

(FOOTNOTE)\3\ Fair housing testing is described as akin to
undercover investigative work. As described by the US Supreme
Court, ``testers' are individuals who, without an intent to rent
or purchase a home or apartment, pose as renters or purchasers
for the purpose of collecting evidence of unlawful steering
practices.'' Havens Realty Corp. v. Coleman, 455 U.S. 363, 373
(1982). Private fair housing enforcement organizations won a
tremendous victory in 1982 when the Supreme Court ruled that both
the organizations and testers have standing to bring suit to
enforce the Fair Housing Act. Havens at 373-379.

Despite the expanded capacity of both HUD and DOJ under the 1988
amendments, it is private fair housing enforcement organizations
which continue to remain on the ``cutting edge'' with respect to
challenging housing discrimination (including discriminatory
rental, sales, advertising, mortgage lending and appraisal
practices).

The housing discrimination complaint load for HUD and for fair
housing groups has increased dramatically. Both HUD and Justice
are currently contracting with private fair housing groups to
conduct limited testing in complaints received outside of the
immediate geographic jurisdiction of the private fair housing
groups. For example, the Department of Justice has contracted
groups in the South, Midwest and Northwest to have these groups
assist the Department with testing in their respective states and
in adjoining states as well. HUD has contracted with the
Portland, Oregon fair housing center for limited testing in
complaints received from the state of Washington.

The Committee is aware, however, of the impracticality of
expanding testing so far out of the immediate jurisdiction of
private fair housing groups given the limited resources presently
available for the FHIP program.

Legislative proposal.-The revisions to the FHIP program contained
in the Committee Bill are designed to reflect the expanded
coverage of federal fair housing and fair lending laws; to
respond to the increased evidence of discrimination in the
housing markets and to address the scarcity of available
resources to meet current needs.

Enforcement.-The Committee bill would provide resources for
enhanced private enforcement initiatives including large scale
investigations and enforcement; systemic investigations, such as
mortgage lending, real estate sales, and housing advertising;
special projects, such as the development of prototypes to
respond to new or sophisticated forms of discrimination or to
address issues unique to newly protected groups; and fair housing
testing, particularly in areas where no organization with testing
capacity exists.

Capcity building.-The Committee bill would acknowledge the need
for new fair housing enforcement organizations throughout the
country, particularly in unserved and undeserved areas of the
country, or where large concentrations of protected classes
exist. In addition, the Committee bill would acknowledge the need
to enhance the capacity of existing fair housing organizations to
improve testing; to train staff in fair housing issues and in
general to more adequately respond to housing discrimination
complaints The Committee bill would direct resources specifically
for capacity building

Education and outreach.-The Committee bill would increase support
for education and outreach activities at the national, regional,
local and community levels. Education and outreach programs have
proven increasing effective not only in making people more aware
of their rights under the fair housing act, but also in
identifying the many forms that housing discrimination can take.

The National Fair Housing Alliance noted that media products
produced on a national level are best marketed on the local
level. For example, the State of Pennsylvania reported that the
national media campaign products played a major role in
increasing the complaint load and demonstrating to the state
legislature the need for stronger fair housing laws.

Economic opportunities for low and very low-income persons

Defects in current law.-Section 3 of the Housing and Urban
Development Act of 1968 currently requires the Secretary of
Housing and Urban Development to direct, to the greatest extent
feasible, opportunities for training and employment arising in
connection with projects receiving federal housing or community
development assistance to lower income persons residing within
the unit of local government or metropolitan area in which the
project is located. The law also requires that contracts for work
to be performed in connection with such projects be awarded, to
the greatest extent feasible, to business concerns located in or
owned in substantial part, by persons residing in the same
metropolitan area as the project.

Committee investigation revealed that Section 3 has not been
vigorously enforced. The lack of enforcement is illustrated by
the fact that the regulations implementing Section 3 have not
been revised since their initial promulgation, even though the
statutory language was significantly amended in 1980. Although
the Committee believes that the lack of enforcement of Section 3
has resulted in part from lack of attentiveness to the provision
by the Department, the Committee also believes that enforcement
has been made difficult by the statutory language, which fails to
reflect the changes in housing and community development laws in
the last decade and is vague in its focus and scope.

Increased enforcement.-The Committee bill would revise the
language of Section 3 to make the statute more enforceable and to
clarify the scope of its application. The Committee bill would
explicitly require the Secretary to promulgate new regulations
within 180 days. The Committee intends this deadline to be
followed and believes that strenuous enforcement of Section 3 is
critical to national urban policy.

Increased targeting.-The Committee believes that, under current
law, Section 3 is insufficiently targeted. The Committee bill
would therefore explicitly define low and very low income persons
as the intended beneficiaries of Section 3 preferences and would
establish orders of priority within that broad group of
beneficiaries. The Committee intends that, where feasible,
Section 3 should enable federal housing and community development
projects to promote overall neighborhood revitalization. The
Committee bill would therefore give preference for economic
opportunities created by public housing assistance to public
housing residents and give preference for economic opportunities
created by other projects to residents of the neighborhoods in
which the projects are located.

The Committee bill would also give preference to Youthbuild
programs receiving assistance under Subtitle D of Title IV of the
Cranston-Gonzalez National Affordable Housing Act and to
participants in such programs. The Committee included this
preference to further the subtitle's goal that Youthbuild
programs be integrated to the maximum extent feasible with other
federal housing production programs.

Narrowed scope.-The Committee bill would limit the scope of
application of Section 3 in order to increase its enforceability.
Under current law, Section 3 applies to all direct assistance
programs, even though enforcement in certain rental assistance
programs and economic development programs presents severe
administrative difficulties. The Committee believes that the
inadequacy of current enforcement results in part from the
administrative difficulties caused by the broad scope of the
statute. Therefore, the Committee bill would specify those public
and Indian housing program to which Section 3 applies and would
limit the statute's application in other programs to ``bricks,
and mortar'' projects. The Committee intends that this narrowing
in scope will result in a concomitant deepening of enforcement of
the statute.
Relationship to existing laws.-The Committee bill would also
clarify that Section 3 is not intended to preempt current
Federal, state, or local procurement regulations or laws or
regulations requiring affirmative action to promote hiring of
minority employees or use of minority contractors. However, the
Committee intends that full force be given to the preference
created by Section 3 to the extent that preference does not
conflict with existing laws or regulations.

Study of section 3 of the 1968 act

The Committee bill would require the Secretary to report to
Congress on efforts to enforce Station 3 and on external factors
affecting enforcement, including training needs of targeted
employees, technical assistance needs of targeted businesses,
barriers created by procurement regulations, coordination
difficulties with labor unions, and resource limitations of
recipients of federal assistance who must comply with Section 3.

The Committee included the study because the Committee is
concerned that, even as revised, Section 3 may not be fully
effective because of external impediments, In particular, the
Committee is concerned that increased resources to train low
income people and to provide technical assistance to businesses
that benefit them may be needed in order to achieve the goals of
Section 3. The Committee is also concerned that procurement
regulations, primarily at the Federal and state level, impede
giving priority to contractors that provide economic
opportunities for low- and very low-income people. The Committee
intends that the Secretary's report shall review these and
related issues and suggest legislative changes to further the
goal of directing economic opportunities created by federal
housing and community development assistance to low- and very
low-income people.

Study on the impact of military base expansion

As the nation's military conversion program accelerates, some
bases, such as Fort Lewis in Tacoma, Washington, will actually
grow because personnel and facilities will be consolidated from
other areas. Communities such as Tacoma will bear the brunt of
this expansion, and will more than likely face significant
housing shortages. This purpose of this study is to examine the
ability of the public and private sectors to meet this increased
demand, and to evaluate the impact of increased demand on housing
availability and affordability for both homeowners and renters.
The Committee directs the Secretary to conduct the study in
consultation with state and local housing officials, non-profit
housing organizations, local financial institutions, and those
Department of Defense officials involved with the base expansion.
The Committee intends that particular attention be given to
regions such as the City of Tacoma (WA) and Pierce County (WA).
Community Outreach Partnership Act

The Committee bill would establish a five year demonstration
program designed to facilitate the development of linkages
between institutions of higher education and local communities in
solving urban problems. Across the nation, there are many
colleges and universities that already plan an active role in
helping communities address local problems. However, these
activities tend to occur on an ad hoc basis rather than through
an on-going program of community outreach. Although institutions
may encounter similar situations in different communities, no
established mechanism currently exist to allow institutions to
exchange information on problems or problem-solving strategies.
The Committee believes that institutions of higher education can
play an important role in helping to build the capacity of
community groups to solve urban problems and that the federal
government should help to facilitate these linkages.

The Community Outreach Partnership Act (COPA) is intended to
provide support for research and community outreach activities to
solve locally identified urban problems including housing,
infrastructure, economic development, job-training, health care,
education, crime prevention and community capacity building. COPA
is modeled after a successful program operated by Michigan State
University's (MSU) Center for Urban Affairs. MSU's program
conducts research, develops instructional programs and
facilitates public service projects in urban areas. Many
institutions of higher education including Wayne State University
in Detroit, University of Alabama at Birmingham, Cleveland State
University, and the University of South Florida have provided
leadership in research and public service projects on urban
issues. The activities of these institutions and others could be
expanded through COPA to provide outreach to local communities.
The Committee bill is intended to plant the seeds of a formal
network among institutions of higher education, federal, state
and local governments, and communities, to exchange information
and develop strategies to address problems confronting the
nation's cities and neighborhoods.

The program has three primary objectives: outreach, research and
exchange of information. Through its outreach activities,
institutions of higher education would work with local
communities to identify problems, develop problem-solving
strategies and plans, facilitate public service projects, and
develop instructional programs and training for community
leaders. Research activities would focus on topics which have
practical application for solving local problems. The Committee
bill would also establish a national clearinghouse through which
institutions of higher education and communities can share
research findings and information about successful problem
solving strategies.

Community development lending study

The Committee bill would require the Board of Governors of the
Federal Reserve, in consultation with other federal regulators,
to conduct a study comparing lending in low-income, minority and
distressed neighborhoods to lending activity in other
neighborhoods. The lending community has long contended that it
is reluctant to lend in the former neighborhoods because it is
perceived that these activities are riskier, will lead to greater
loan losses, lower profitability, and place the federal deposit
insurance funds at greater risk. However, anecdotal evidence
provided to the Committee by community groups and lenders
involved in community development lending activities indicate
that these activities have not resulted in greater losses or
increased risk to the federal deposit insurance funds. The
purpose of this study is to provide a solid base of analysis from
which policy makers can make informed decisions on the risks
presented by lending in different neighborhoods. In particular,
the study would focus on whether community development lending
has presented real losses to the deposit insurance funds which
are greater than the risks presented by other activities.

Community development banking study

The Committee bill would require the Board of Governors of the
Federal Reserve System and the Secretary of the Department of
Housing and Urban Development to jointly conduct a study on
``community development banks''-insured depository institutions
that focus on revitalizing low-income and chronically distressed
neighborhoods by investing directly in those communities. They
are an innovative mechanism for bringing private capital into low
income communities. These institutions have developed a strong
track record of successfully spurring revitalization in
distressed areas.

The term community development ``bank'' is somewhat of a
misnomer. Typically these institutions are a holding or parent
company, consisting of several subsidiaries or affiliates
including a federal depository institution. The non-depository
subsidiaries or affiliates usually carry out activities that
depository institutions are prohibited from undertaking, but
which support the community development mission of the parent
institutions. The regulated depository within a development bank
must operate in compliance with the safety and soundness
requirements of all federally regulated depository institutions.

The study would examine the track record and accomplishments of
these institutions and explore the factors which contribute to
their ability to promote revitalization, increase access to
capital in traditionally under-served neighborhoods and improve
economic opportunities for low-income and minorities. The report
would also evaluate whether the activities undertaken by these
institutions pose any unusual risks to the federal deposit
insurance funds. Finally, the report would examine the extent to
which these institutions can be replicated in other areas or
neighborhoods and recommend actions the Federal government could
take to facilitate the further development community development
banks.

In recommending actions to facilitate the development of new
institutions, the Board of Governors and the Secretary would also
take into consideration the recommendations of the 1988 report of
the Rouse-Maxwell Task Force on Affordable Housing. The Task
Force recommended developing a major national demonstration
program to seed new community development banks.

Flood control restoration zone

The Committee bill would establish a new zone under the flood
insurance program for communities in which an existing flood
control system, that previously had provided 100-year frequency
flood protection, no longer does so.

Eligibility for restoration zone.-Communities would be eligible
for this zone designation and considered to be in the process of
restoring full flood protection if (1) the flood protection
system has been deemed restorable by a federal agency, in
consultation with the local project sponsor on the basis that no
major impediments exist or the cost-benefit relationship is
favorable; (2) a minimum level of flood protection is still
provided to the community by the disaccredited system; and (3)
restoration of the flood protection system is scheduled to occur
within a designated time period and in accordance with a plan
negotiated between the community and FEMA. The community would
have to develop a schedule of significant milestones to
demonstrate progress towards project completion.

The Committee expects that the scope and construction schedule of
the flood protection system would be determined by the federal
and non-federal sponsors of the project. The Committee intends
that FEMA would recognize that schedule and would accommodate
legitimate and necessary changes in the schedule for reasons such
as delayed federal funding, environmental changes, additional
studies required, or other delays beyond the control of the local
community.

Ineligibility.-A community would be ineligible for the
restoration zone designation if: the flood control system is
determined to be unrestorable; funds are not appropriated for the
project within a reasonable time period; the community cannot
fulfill its share of the project cost; or the community has not
made sufficient progress according to its own timetable through
reasons within its control.

Implications of restoration zone.-With the advance of technology
and the increase in development, FEMA estimates that six to eight
communities will have flood protection projects decertified per
year. The Committee is particularly aware that parts of
Sacramento and Los Angeles counties have had flood control
projects decertified and that these areas are eligible for
designation as a restoration zone. Communities such as these that
meet the eligibility criteria as of January 1, 1992 would remain
eligible for c zone rates for any policy written prior to
promulgation of final regulations for this section. For such
communities, the Committee bill provides that (1) the elevation
for new construction in these AR zones would not exceed three
feet above existing grade, and (2) no elevation of improvements
to existing structures would be required, regardless of the value
of the improvements.

The Committee expects that FEMA would develop flexible elevation
requirements allowing for less than three feet elevation for
circumstances such as when lot size or access considerations
limit the ability to elevate grading, or when the increment of
additional flood protection obtained is not warranted given the
length of time new structures will be subject to the temporary
flood hazard when determining elevation requirements.

The Committee directs that a maximum two feet elevation
requirement would be appropriate for new structures that are
permitted in a restoration zone that would be restored to
adequate flood protection in less than 10 years. The Committee
has received comments from several sources that the increment of
cost between two and three feet is relatively large.

The Committee bill would provide 24 months for FEMA to develop
and promulgate floodplain management and flood insurance premium
regulations. The Committee intends that the regulations allow for
the reconstruction or restoration of structures due to damage or
destruction as the result of fires, earthquakes, or vandalism.
The Committee is concerned about the economic impact of flood
plain management requirements on a temporary flood hazard area.
The Committee believes that property owners and the general
public should be made aware of the temporary flood hazard, and
measures must be taken to mitigate that hazard. However, these
floodplain management measures should not deter property
improvements or impose severe economic hardship.

Energy-Efficient Mortgage Pilot Program

The National Affordable Housing Act of 1990 included important
provisions to improve energy efficiency in housing. The Act
required the Secretary of HUD, in consultation with the Secretary
of Energy, to promulgate a uniform plan to make housing more
affordable through mortgage financing incentives for energy
efficiency by November 1992. The Committee is aware that HUD has
formed a task force to make recommendations and looks forward to
the promulgation of a uniform energy efficient mortgage (EEM)
program by November 1992.

However, because of the limited utilization of EEM programs, the
Committee Bill would require the establishment of a five-state
EEM pilot program designed to seek innovative implementation
strategies that might help overcome barriers to the effective
utilization of current EEM programs.

The provision contained in the Committee bill would provide that
the program be evaluated on an ongoing basis and be extended
nationwide within two years unless the Secretary of HUD
demonstrates to Congress that such an extension would not be
practicable. Federal mortgage assistance programs currently offer
EEM mortgages, but these programs are not widely utilized. The
Committee believes that a pilot program will help increase public
awareness of the benefits of EEMs and answer remaining questions
about their application.

The Committee continues to believe that EEMs allow a home-buyer
who is unable to pay the up-front costs of energy efficiency
improvements to take advantage of the savings gained from
efficient energy use. EEMs increase housing affordability,
complement utility demand-side management programs, and further
the environmental, national energy security and economic goals
associated with reduced energy consumption.

HUD implementation of energy efficient construction standards

The Committee is seriously concerned with the failure of the
Department of Housing and Urban Development to meet a statutory
mandate included in the National Affordable Housing Act of 1990,
requiring HUD to promulgate new energy efficiency standards by
November 28, 1991. These standards are to meet or exceed the most
recent edition of the CABO Model Energy Code applicable to newly
constructed HUD assisted and FHA insured housing. The statutory
deadline passed more than seven months ago and HUD has still not
issued the standards, violating an explicit legal requirement.

The Committee is deeply troubled with HUD's apparent disrespect
for legal mandates. Efforts by the members of this Committee to
understand and work with HUD to overcome legitimate obstacles and
to revitalize the objectives established by the laws of this
nation have been continually rebuffed by agency officials.

Issuance of the new construction energy conservation standards is
not dependent upon the Secretary of HUD's recommendations for a
uniform plan to make housing more affordable through mortgage
financing incentives for energy efficiency, which is required to
be presented to Congress by November 28, 1992. The new
construction energy conservation standard deadline of November
28, 1991 is not a matter within the discretion of the Secretary,
it is a statutory requirement. The Committee believes that the
Secretary should not delay further the implementation of this
important energy conserving policy, and should immediately issue
the new construction energy conservation standards as required by
law.

Prohibition of lump-sum payments

The Committee bill would prohibit the lump-sum payment of
relocation assistance to any displaced residential tenant in
connection with any program administered by HUD, except where
necessary to cover moving expenses or a downpayment or related
expenses associated with the purchase of a replacement residence.

Under current law, tenants dislocated due to the demolition of
their government housing are entitled to moving expenses and
funds to cover housing expenses for up to four years. Under
certain circumstances, tenants have been allocated payments for
long-term rental expenses in a lump-sum payment. There is no
oversight to ensure that this money is used for housing purposes
and often no counseling to assist tenants with those decisions.
This method of payment provides the opportunity for waste and
abuse of government funds. The Committee bill would continue the
protections for displaced individuals but in a fiscally
responsible manner. It would not cut benefits and it would not
impede local control of the process. It would simply eliminate
the opportunity for scarce federal housing dollars to be used for
non-housing purposes.

Smoke detectors

The Committee bill would require HUD, not later than 30 days
after enactment of this Act, to publish regulations to require
the installation of smoke detection devices in HUD-assisted
housing. The bill would contain a modified version of legislation
introduced by Senator D'Amato. The Senator's legislation, the
Fire Safety Enhancement Act of 1991, would direct the HUD
Secretary to modify HUD's current housing quality standards and
minimum property standards to require the installation of working
smoke detectors in HUD-assisted housing. The Senator's
legislation was developed to address a problem illustrated by a
tragic fire that killed three young children and their
grandfather in Port Jervis, New York. The family was receiving
federal assistance under the voucher program.

HUD's current regulations do not require the existence of working
smoke detectors in housing occupied by voucher holders or in
other HUD-assisted housing. Because of this loophole, much of our
Nation's stock of federally assisted housing may be unsafe
because of the lack of sufficient fire detection devices.
According to the National Fire Protection Association, the
presence of smoke detectors in homes reduces by one-half the risk
of a resident dying in a fire.

TITLE X-RESIDENTIAL LEAD-BASED PAINT HAZARD REDUCTION

Title X, the Residential lead-Based Paint Hazard Reduction Act of
1992, would expand significantly the commitment of the federal
government to reduce and eliminate lead-based paint hazards in
older housing. The title is an outgrowth of 20 years of
residential lead poisoning prevention legislation and oversight.
It is intended to greatly increase public awareness of the
hazards posed by lead-based paint to young children and pregnant
women, and it is intended to increase the capacity of the private
sector to reduce lead poisoning hazards safely and effectively.
It is also intended to clarify the responsibility of the federal
government to protect residents of housing associated with the
federal government from the hazards of lead-based paint.

Summary

Over the past five years, there has been tremendous growth in the
health community's understanding of the effects of low-level lead
poisoning and the role of lead-based paint in causing the
disease. The technology to test for leads hazards and lead
content in paint has improved, and more cost-effective methods of
reducing and eliminating these hazards have been developed. Many
of the advances have been achieved through HUD and EPA research,
extensive hazard reduction efforts in Maryland and Massachusetts,
and HUD's public housing lead-based paint inspection and
abatement program.

Despite these advances, very little is being done to reduce lead
poisoning hazards in private and assisted housing and housing
sold to the public by the federal government. This is so despite
recognition by the Department of Health and Human Services that
lead poisoning is the ``number one environmental health hazard
facing American children'' and a change in the Centers for
Disease Control's definition of lead poisoning which increases by
tenfold the number of children considered at risk of permanent
harm.

Title X reflects an attempt to expand federal efforts to control
lead hazards beyond public housing. While this bill builds on the
experience gained through the public housing abatement
demonstration, it does not replicate that model. The Committee
has determined, based on consultation with a broad spectrum of
experts, to institute a new approach. The Committee believes this
new paradigm will prove more workable and cost-effective, and
will extend protection from lead poisoning hazards to more
children in a shorter period of time.

Evolution of the title X approach

Momentum has been building steadily for an overhaul of the
federal government's lead based paint policy. Following
amendments to the Lead-based Paint Poisoning Prevention Act in
1987 and 1988, numerous actions have been taken by the House and
Senate HUD, VA and Independent Agencies Subcommittees to spur
action on the residential lead hazard problem. With the
publication in December, 1990 of HUD's congressionally mandated
report, ``A Comprehensive and Workable Plan for the Abatement of
Lead-Based Paint in Privately Owned Housing,'' the Housing
Subcommittee began work on a legislative initiative that
eventually evolved into Title X of this bill. HUD's ``Plan''
documented the extent of the lead-based paint problem in private
housing, and analyzed the correlation between income, age and
location of housing and poisoning risk. It also attempted to
estimate costs for inspecting and abating hazards in various
types of housing.

The Housing Subcommittee held a hearing in October, 1991 to
announce its plan to move forward with a legislative initiative
and to obtain expert advice to help craft its bill. Lead and
housing specialists stressed the need for a flexible, targeted
approach for protecting children from exposure to lead hazards
while maintaining housing affordability. David Jacobs, CIH, an
environmental research scientist with the Georgia Institute of
Technology and a consultant to the EPA, testified that ``we now
possess a good working knowledge of what constitutes safe and
effective planning, testing and abatement.'' What is missing, he
said, is a framework of workable, enforceable regulations to
enable the lead hazard industry to develop.

Senator Cranston, joined by Senators D'Amato, Sarbanes, Kerry,
Lieberman and Akaka, introduced the ``Residential Lead-Based
Paint Hazard Reduction Act of 1992'' on March 11, 1992. A hearing
was held March 19th to discuss the bill as introduced, and to
hear suggestions for refining it. In response to the hearing and
answers to follow-up questions, refinements were made and S. 2341
was incorporated into this bill. A series of negotiations between
members of Committee staff and the Administration,
representatives of the housing industry and children's health
advocates resulted in further modifications. The Committee
believes that the resulting compromise meets nearly all of the
objections raised by industry and the Administration. The
Committee expects that the few remaining points of disagreement
will be worked out before floor consideration.

The scope of the problem

Since the passage of the Lead-based Paint Poisoning Prevention
Act in 1971, medical attention has turned from the devastating
but relatively rare cases of massive lead poisoning to the much
more common problem of low level lead poisoning. Numerous studies
have documented the long-term harmful effect of exposure to very
small amounts of lead. Lead-contaminated dust from deteriorating
lead-based paint in housing has been determined to be the leading
source of this exposure.

The effects of significant exposure to lead, according to the
CDC, range from subtle behavioral change to coma and death. The
symptoms of chronic, low level lead poisoning include permanent
learning and reading disabilities, reduced attention span,
hyperactivity and hearing loss. Effects on a child's stature,
ability to metabolize vitamin D and blood production have also
been documented. Early exposure to lead is correlated with lower
IQ scores, shorter attention spans, difficulty maintaining
balance, and antisocial behavior including violence and
delinquency.

A study completed in 1990 concluded that young adults who had
been exposed to low levels of lead as children were seven times
more likely than average to drop out of school and six times more
likely to have reading disabilities. The impact on educational
achievement, special education costs, crime and law enforcement,
welfare and health care, productivity, and GNP caused by
undetected lead poisoning is undoubtably enormous, but much more
difficult to quantify.\4\(FOOTNOTE)

(FOOTNOTE)\4\See CDC's Strategic Plan for the Elimination of
Childhood Lead Poisoning for a rough cost-benefit analysis.

Numerous studies confirm that low-income minority children suffer
the highest rates of lead poisoning. HUD and the Agency for Toxic
Substances and Disease Registry (hereinafter ATSDR) report that
the rate of lead poisoning among poor, inner city black children
approaches 70 percent. Testimony presented at the Housing
Subcommittee's March 19, 1992 hearing, attributed this phenomena
to the high numbers of poor African-American children living in
older, dilapidated housing and receiving inadequate nutrition,
which increases absorption of lead.\5\(FOOTNOTE)

(FOOTNOTE)\5\See testimony of Lisa Mihaly for the Children's
Defense Fund and Alice Brown for the NAACP Legal Defense &
Educational Fund, Inc. before the Housing Subcommittee on March
19, 1992.

Lead-based paint which was not outlawed until 1978, is present in
75 percent of the housing stock-some 57 million American homes.
Since exposure to lead is primarily caused by ingesting paint
dust or chips, deteriorating leaded paint presents the most
serious health risks. HUD has determined that almost 20 million
homes contain deteriorating lead-based paint or excessive lead
dust levels, and 3.8 million of these units house children under
7 who are most at risk of permanent damage from exposure to lead.

HUD's response to congressional mandates to address residential
lead hazards

Over the past 20 years, Congress has enacted a steady stream of
measures intended to eliminate residential lead-based paint as a
source of childhood poisoning. Current federal laws and
regulations, if enforced, would require substantial federal
efforts to reduce lead-based paint hazards in public housing and
federally owned, assisted and insured-housing. Despite the
legislative mandates, it appears evident that little has been
done and lead-based paint hazards remain a serious problem in
much of the federally owned and federally assisted inventory.
With the notable exception of public housing, there is little
evidence that owners and residents of housing assisted by the
federal government are receiving accurate information or help in
reducing lead-based paint problems.

Public housing.-With congressional prodding, HUD has made
significant progress in implementing a lead abatement and hazard
control program. The Department is training public housing agency
staff to comply with the lead abatement law and has changed its
system for allocating modernization funding to speed
implementation of lead inspection and abatement requirements. HUD
has recently published a protocol for the conduct of risk
assessments and the interim control of lead hazards pending
permanent abatement. The Committee welcomes these actions, and
intends that the Department would go forward with the public
housing abatement program as it implements the new requirements
of Title X.

Disposition of federally-owned housing.-While existing HUD
regulations require inspection for ``defective paint surfaces''
and covering or removal of these surfaces prior to the sale or
transfer of residential property, it is clear that HUD field
office practice does not always conform to the regulations. A
real estate contract addendum provided by the Department to the
Housing Subcommittee indicates that the Department in some cases
cancels contracts with families with young children rather than
comply with its lead regulations.\6\(FOOTNOTE) The form also
indicates that purchasers may be required to agree to hold HUD
harmless in cases where the Department is ``unable to test the
property for the existence of lead-based paint''. HUD requires
the addendum for contracts to sell HUD-owned pre-1978 single
family homes.

(FOOTNOTE)\6\While the Committee is not familiar with how this
clause is used in practice, it is concerned about the Fair
Housing Act implications of HUD's reservation of the right to
refuse to contract with families with small children.
Further evidence that HUD disposes of FHA properties without
treating existing lead hazards is provided by a March, 1991 study
conducted by the General Accounting Office. It reported that HUD
field offices are generally denied authority to make repairs to
homes in the FHA inventory prior to sale. While repairs are
permissible in certain circumstances, violation of federal lead
paint standards is not one of them.\7\(FOOTNOTE)

(FOOTNOTE)\7\GAO found that under HUD's FHA property disposition
program, HUD's field offices are authorized to make repairs
``only when staff and contractor resources are available and if
(1) repairs would definitely net a greater return; (2) repairs
are necessary to meet FHA-insurance property standards in areas
where conventional financing is unavailable; (3) the condition
severely impedes sale; or (4) repairs are needed to comply with
enforced local codes and ordinances (emphasis added).'' GAO found
the Veterans Administration policy is increasingly to sell
properties ``as is'' and the policies of the Farmers Home
Administration and the Resolution Trust Corporation permit
limited repairs, but do not require compliance with federal lead
law and regulations. U.S. General Accounting Office, ``Property
Disposition: Information on Federal Single-Family Properties,''
GAO/RCED-91-69, page 29.

Federally-assisted and federally-insured housing.-While HUD
appears to lack hard data on the scope and extent of its
inspection and hazard reduction activity in the federally
assisted and federally insured inventory, anecdotal evidence
reveals major problems with the enforcement of requirements
established by the Lead-Based Paint Poisoning Prevention Act
(hereinafter ``LPPPA''). Antoinette and Timothy Burke, homeowners
from Pennsylvania, testified before the Housing Subcommittee that
HUD approved their house for FHA mortgage insurance despite the
presence of defective lead-based paint. In answer to Subcommittee
questioning, HUD indicated that while numerous federal insurance
programs provided funding to address lead-based hazards, the
Department has made ``no special effort * * * to inform lenders
and prospective borrowers about their ability to use insured
funds for lead-paint activities.'' Based on HUD's answers to the
Subcommittee and anecdotal evidence, it appears that the
Department also makes no special efforts to inform owners of
housing receiving project-based assistance of the obligations
imposed by the LPPPA.\8\(FOOTNOTE)

(FOOTNOTE)\8\See ``Questions and Answers on Lead Paint Hazard
Prevention Prepared for Senator Alan Cranston,'' HUD, Feb. 21,
1992.

Private housing.-The fundamental disagreement in approach between
HUD and the Committee is reflected most clearly by Administration
and Congressional proposals for funding lead hazard reduction in
low income private housing. Where HUD suggests slashing the
budget to less than half of its current level, the Committee
voted to expand the program by a factor of five. Assistant
Secretary Joseph Schiff, testifying before the Housing
Subcommittee last March, said the Department's opposition to the
Subcommittee's expanded grants program was grounded on its view
that state and local governments and the private sector in many
states suffer from a ``capacity gap.''\9\(FOOTNOTE) The
Committee, on the other hand, views the lack of current activity
as the primary justification for expanding the federal program.
The Committee believes it is the federal government's role to
``prime the pump'' to encourage states, localities and business
to make the initial investment required to enter the lead
reduction field as well as to provide leverage to insure adequate
quality control.

(FOOTNOTE)\9\Assistant Secretary Schiff testified that the
Administration was also concerned that basic technical questions
about how to test and abate safely and cost effectively still
exist. However, this argument appears to ignore HUD's very
detailed interim guidelines for lead testing and abatement in
public housing and the existence of five EPA-sanctioned regional
training centers for lead contractors and supervisors.

The Residential Lead-based Paint Hazard Reduction Act of 1992

The Residential Lead-based Paint Hazard Reduction Act is intended
to redirect federal lead-based paint policy to acknowledge the
scope of the residential lead poisoning problem and to begin to
solve the problem aggressively and systematically according to
rational priorities. The Committee views progress in the
following areas as critical; setting priories and targeting
resources where they are needed most; increasing resources
devoted to correcting hazards; overcoming technical obstacles
through research and evaluation; increasing awareness of hazard
prevention through public education; building an effective
private sector infrastructure; and reducing uncertainty over
liability by signalling standards of care for landlords.

It should be made clear at the outset that Title X is not
intended to ``solve'' the vast problem of childhood exposure to
hazardous amounts of lead from residential lead-based paint. Lead
paint is present in tens of millions of U.S. housing units, and
some 2 to 3 million young children have levels of lead in their
bodies sufficient to cause neurological damage. This title is
intended to provide a transition to support more effective
strategies for eventually eliminating lead-based paint hazards in
housing as a source of childhood lead poisoning. As a transition
bill, Title X attempts to remove all major obstacles to progress,
making important changes in approach and laying the foundation
for more cost-effective and widespread activities for reducing
lead-based paint hazards.

Sec. 1004 definitions: A more workable framework for reducing
hazards

Title X radically alters the federal paradigm for identifying and
treating lead-based paint hazards. It does this by targeting
federal efforts to the reduction and elimination of actual, not
potential hazards, and by permitting interim hazard reduction
measures, rather than full hazard elimination, in situations
where this approach is both protective and cost-effective.

Lead-based paint hazards.-The current statute requires HUD to
``establish procedures to eliminate as far as practicable the
hazards of lead-based paint poisoning'' in certain HUD-associated
housing. These procedures, at a minimum, include ``appropriate
measures to eliminate as far as practicable immediate hazards due
to the presence of accessible intact, intact, and nonintact
interior and exterior painted surfaces that may contain lead in
any such housing in which any child who is less than 7 years of
age resides or is expected to reside,'' and provision of a
pamphlet warning of the dangers associated with lead-based paint
poisoning. While Title X retains the elimination of hazards to
the extent practicable as its ultimate goal, it sets up a more
practical and specific framework for approaching this goal. The
Committee believes that by clarifying what is meant by ``as far
as practicable'', and by establishing realistic, cost-effective
procedures for achieving hazard reduction, Title X will speed the
clean-up of lead paint hazards in housing and greatly decrease
the incidence of childhood lead poisoning.

The most fundamental change in approach between the current LPPPA
and Title X is reflected in the new definition of ``lead-based
paint hazard''. The current statute defines immediate hazard to
include the presence of intact paint that may contain lead. Title
X makes two major changes. First, it limits the definition of
hazard, and thus the scope of the bill, to actual
hazards-conditions ``that cause    exposure to lead * * * that
would result in adverse human health effects''. This change would
require HUD and other agencies to rewrite regulations (and more
importantly, alter actual practices) that conflate lead-based
paint hazards with ``defective paint''. The current definition
allows lead paint hazards to be treated as a cosmetic defect,
which can be corrected with minimal effort and no safety
precautions. Thus, it is permissible under existing regulations
for workers with no special training, no protective clothing and
no respirators to scrape lead contaminated paint from walls, then
leave the site littered with lead-contaminated dust and paint
chips. Under Title X, paint, dust and soil would be evaluated by
trained and certified inspectors, and risk assessors to determine
whether they constitute ``lead-based paint hazards''. At a
minimum, this would involve a determination of whether sufficient
amounts of lead are present in surface dust to present immediate
exposures. Measures taken in response to a finding of lead
hazards would involve the precautions appropriate to treatment of
a highly toxic substance.

The second important change wrought by the Committee's revision
of the definition of hazard results from exclusion of intact
lead-based paint that is not present in ``accessible  chewable
surfaces, friction surfaces, or impact surfaces.'' The
Committee's decision to exclude this paint, despite its lead
content, was made after much deliberation and consultation. While
it is clear that lead-based paint on a smooth, intact surface
(such as an interior wall) has the potential to become hazardous
(for instance if water damage causes the paint to crack), it
presents no immediate threat to the safety of children in the
home. Limiting the bill's scope to treatment of actual hazards is
expected to reduce the cost of inspection and abatement
considerably. It is hoped that this change will permit resources
to be targeted more cost-effectively resulting in a greater
number of abatements of actual hazards performed with little
additional risk of poisoning.

Lead-based paint hazard evaluation and reduction.-In recognition
of the impracticality (and even wastefulness) of requiring the
immediate, complete, and permanent abatement of lead-based paint
hazards when they are discovered, Title X would establish a
two-track system. Permanent hazard elimination, the only
permissible response under current law, would always be available
within Title X's framework. Temporary measures, which seek to
prevent exposure to lead hazards without necessarily eliminating
the sources of the exposures, would also be available in many
circumstances. Title X would use the term hazard ``evaluation''
to indicate that either or both risk assessments or inspections
are appropriate. The term hazard reduction'' would mean either or
both interim control measures to control lead hazards and
abatement to eliminate hazards.

1. Permanent elimination of lead hazards.-Under Title X's
two-track approach, the first track, inspection and abatement,
would be similar to the current law's scheme. Hazard elimination
would only be required under Title X when pre-1960 housing with
lead hazards is sold by the government to the public, or during
the course of federally funded substantial renovation projects.
Hazard elimination would be permitted in many other contexts,
within the rubric of hazard ``reduction.'' The Committee expects
that affected housing owners who are required or funded to reduce
lead-based paint hazards will choose to abate or partially abate
when they determine that it is cost-effective for them to
permanently eliminate the source of hazards.

Title X would amend the current definition of ``inspection'' in
several respects. It would specify that an inspection must be
accomplished through a surface-by-surface investigation to
determine the lead content of the paint. This change was made to
ensure that prior to disturbing leaded surfaces, workers know the
location and concentration of hazardous lead paint. The new
definition of inspection would also include the provision of a
report explaining the results of the investigation. No inspection
would be complete unless the results are documented. The report
should include a description of the measurements recorded and an
explanation of the import of these measurements. At a minimum,
inspectors should report on whether the measurements are above or
below hazard thresholds established by the EPA.

Changes to the definition of inspection within the body of the
LPPPA bring the inspection requirement into conformity with Title
X's requirement that inspectors be certified. The definition of
lead-based paint would be narrowed by raising the threshold for
lead content in paint to target resources to the most serious
risks. Title X would also retain the LPPPA's caution that
measurement criteria be based on the condition of the housing
rather than the health of the residents within Section 1023 of
the bill. The Committee in no way intends to retreat from the
decision made in the Housing and Community Development Act of
1987 that federal policy should be to prevent poisonings, not to
react once poisonings occur.

Title X would include a detailed definition of the term
``abatement'' to ease compliance with current law and increase
the safety and effectiveness of abatement methods. While the
current law leaves it to HUD to determine the scope and methods
to be used, Title X's definition would include the permanent
elimination of hazards through the removal of lead-based paint
and lead-contaminated dust, the containment or encapsulation of
lead-based paint, the replacement of lead-painted surfaces or
fixtures, and the removal or covering of lead contaminated soil.
The definition of abatement would also specifically incorporate
preparation, cleanup, worker protection, disposal, and
post-abatement clearance testing.

2. Temporary control and reduction of lead hazards.-Title X's
second track, risk assessment and interim controls, is modeled on
an approach being used by HUD for public housing and by the
Enterprise Foundation in its Baltimore City Homes program. While
the Committee recognizes that temporary hazard control is an
evolving concept, it believes that current methods for assessing
risk and temporarily or partially reducing hazards are
sufficiently effective that they should be implemented. It has
pushed back deadlines for implementing changes to the LPPPA until
1995 with the understanding that protocols for the conduct of
these techniques would be further refined by that time.

Title X's definition of risk assessment would involve a snapshot
determination of whether and to what extent lead poisoning
hazards exist in housing units. A risk assessment would be a tool
to target hazard reduction and abatement resources to housing
which poses the greatest risk. Risk assessments would also be
valuable to gauge the level of risk in a single home in order to
determine an appropriate response. Risk assessments would involve
a high degree of judgement and perspective and should be
conducted by professional risk assessors.

Risk assessments would involve an on-site investigation to
determine the existence, nature, severity and location of
lead-based paint hazards. This investigation would include
information-gathering on the age and history of the housing and
the presence of children under age 6. While this information
alone would usually be insufficient to determine whether lead
hazards exist (unless, for example, it is discovered that the
house has been abated), it would help set priorities for the
expenditure of resources. Similarly, visual inspections would
help identify deteriorating paint even though they would not
reveal the content of the paint. Wipe sampling or other
environmental sampling methods would be the critical components
of the assessment. These would be performed by certified risk
assessors who would take a sample of surface dust on a limited
number of painted surfaces, and send the samples to a certified
laboratory for analysis. The Enterprise Foundation has found that
an average of six samples generally suffices for a small, two
story Baltimore rowhouse. Also included in the risk assessment
definition would be the provision of a report explaining the
results of the investigation. The report would not only include
test results from the various types of evaluations made, it would
inform recipients of the applicable dust clearance levels, as
determined by the EPA.

Interim Controls would be measures which temporarily reduce human
exposure or likely exposure to lead-based paint hazards. These
measures would include specialized cleaning, repairs,
maintenance, painting, temporary containment, ongoing monitoring
of lead-based paint hazards or potential hazards, and the
establishment and operation of management and resident education
programs. The level of interim response should be commensurate
with the degree of risk reported by the risk assessment. Thus,
where moderately elevated dust levels exist but there is little
deterioration in the paint, an appropriate interim response might
be limited to supercleaning leaded surfaces. Where children are
present and paint is peeling, interim controls might require a
more substantial effort and expense to prevent exposure from
paint chips and dust.

SUBTITLE A-LEAD-BASED PAINT HAZARD REDUCTION

Sec. 1011-Grants to reduce hazards in low-income private housing

Title X would authorize and expand the $50 million competitive
grant program created by the Fiscal Year 1992 HUD, VA and
Independent Agencies Appropriations Act. That program was
established without the benefit of an existing authorization.
Title X would, therefore, outline in statute for the first time
the program's components including eligible recipients, eligible
activities, selection criteria, reporting requirements and other
elements. Title X would also increase the size of the program to
$250 million per year, and tie it to the planning provisions of
the HOME program.

Hazard reduction.-The primary purpose of Title X's grant program
would be to assist cities and states in addressing the enormous
lead paint poisoning risks posed by private low income housing.
While the Committee recognizes that $250 million a year can only
address a fraction of the lead-based paint risk,\10\(FOOTNOTE) it
believes this level of funding would be of significant help if
targeted where need is greatest. It also believes this level of
funding is justified in light of the proportion of the hazard
reduction infrastructure expected to be in place by the time
grant funds are available to be expended.

(FOOTNOTE)\10\HUD has estimated the cost of inspecting and
abating all homes containing lead in paint and either lead dust
or nonintact paint and with a child present at $7.6-$9.9 billion
per year for 10 years. ``Comprehensive and Workable Plan for the
Abatement of lead-Based Paint in Privately Owned Housing: Report
to Congress,'' Department of Housing and Urban Development,
December 7, 1990, page 4-20.

The Administration has voiced concern that the grants program
does not sufficiently target resources to protecting low-income
children. While the Committee shares this priority, it believes
that competition for grant funds will be sufficient to permit the
Secretary to fully employ the section's selection criteria. The
first item listed would give preference to applicants who plan to
use the grant to ``reduce the risk of lead-based paint poisoning
to children under the age of 6 who reside in  affordable pre-1978
housing ''. This criteria should also be interpreted to favor
applicants which target assistance to housing receiving federal
tenant-based rental assistance.

The remaining selection criteria would be intended to direct
grants funds toward jurisdiction with large numbers of older
housing units with deteriorating lead-based paint which have
demonstrated a commitment to fund lead hazard reduction
activities through other resources. Applicants in states with
training and certification programs in place are favored since
they would have a greater ability to ensure that work is
performed safely and effectively.

The prime purpose of the grants program would be to fund hazard
reduction and other activities, such as inspections, risk
assessments and worker safety measures, needed for an effective
program. The creation of `'safe houses'' for the temporary
relocation of families while their homes are being abated would
be another important element of a comprehensive hazard reduction
effort. It is the Committee's opinion that public education plays
an important, supporting role to other efforts aimed at lead
hazard reduction. In order to focus resources toward actually
reducing lead poisoning risks, the Committee expects that not
more than 5% of available grant funds would be used for public
education purposes.

The Committee's secondary purpose in expanding the grant program
would be to jump start the private market's response to lead
paint hazards. As it now stands, significant levels of activity
to protect children in private housing from lead paint hazards is
occurring in only a handful of states. Responsibility appears to
lie in lack of demand for specialized lead hazard treatment, as
well as fear of liability in unchartered territory. The Committee
intends for the grant program's infusion of resources for
evaluating and reducing lead hazards to encourage entrepreneurs
to enter the business. It also expects the availability of funds
for states and localities with the ability ``to carry out the
proposed activities'' will prompt states to act quickly to enact
worker certification programs and other infrastructure-building
measures.

To encourage the expansion of the lead hazard reduction industry,
and to ensure that high standards for safety and effectiveness
are maintained, Title X would include a set-aside for technical
assistance grants to assist states in establishing training,
certification and licensing programs. The Committee directs the
Secretary to consult and coordinate with the Environmental
Protection Agency in its award of technical assistance and
capacity building grants. The objective of these grants would be
to assist states in establishing training and certification
programs that could garner EPA approval. In order to encourage
states to enact these programs quickly, the Committee plans to
make these grants available for only a limited time, after which
they would be phased out.

Another ancillary purpose of the program would be to serve as a
large demonstration project to develop better, quicker, safer and
cheaper methods to prevent children from being poisoned by
lead-based paint. The Committee directs the Secretary to give
priority, other factors being equal, to grant applications
proposing innovative or improved methods or techniques. The
section's reporting requirements would ensure that knowledge
gained in the course of administering the grants would be
captured for future use and dissemination.

Sec. 1012-Lead-based paint hazard reduction in federally-assisted
and federally-insured housing

The Committee's purpose in amending the Lead-based Paint
Poisoning Prevention Act, as discussed above, is to create a more
workable structure for reducing lead-based paint hazards in
housing assisted by the federal government. While the Committee
acknowledges that in some cases Title X would be less stringent
than current law, it recognizes the sharp diversion of current
law and practice. Title X's changes would be considerably more
effective at preventing poisonings than current federal practice.

Coverage.-Title X would expand the coverage of the LPPPA to
include pre-1978 housing suitable for occupancy by families (see
definition (27) ``target housing'') which is covered by an
application for mortgage insurance or housing assistance payments
under a HUD program or receives more than $5,000 in housing
assistance through another federal program. The $5,000 floor
would be imposed in order to exempt housing with only minimal
ties to the federal government. Housing receiving tenant based
rental assistance would also be exempt from the LPPPA. Due to the
tendency of this housing to pass in and our of federal assistance
programs, the Committee considers it unworkable, and in some
aspects inequitable, to impose greater burdens on owners of this
housing than on private landlords.

Reduction of hazards.-As discussed above, Title X would replace
the LPPPA's vague and expansive program for hazard elimination
and resident notification with a well-defined, workable framework
calibrated to focus resources where federal responsibility and
poisoning risks are greatest. Risk assessments would be performed
in all housing receiving project-based federal assistance in
order to determine the level of risk and notify the residents of
existing hazards. Housing owners would use the risk assessments
to prioritize hazard response. Where federal resources would be
used for inherently dangerous activity which creates paint dust
and debris, a higher standard would be imposed, but again the
response would correspond to the degree of danger and the benefit
to be achieved. Abatement would be required only in the very
limited circumstances where a high degree of hazard is created
and federal rehabilitation funding is directly responsible for
increasing the hazard.

Changes made by Title X would make more specific the mandate to
``establish procedures to eliminate as far as practicable the
hazards of lead-based paint poisoning.'' The assured notification
requirement of current law would be retained, but the brochure to
be provided to purchasers and tenants (discussed below) would be
up-to-date, accurate, and considerably more detailed. All covered
housing units would be assessed for immediate lead hazards within
one year of the effective date of the new provisions. When
indicated by the risk assessments, interim control measures would
be instituted.

When federal assistance is used to fund renovation or
rehabilitation of housing, Title X would require that the work
include precautions and treatment for any lead-based paint
hazards involved. Prior to beginning work likely to disturb
painted surfaces, owners would be required to have an inspection
performed to determine the lead content of the paint. For
projects involving less than $25,000 per unit in federal funds,
owners would be required to reduce lead hazards in the course of
the work. This could involve full or partial abatement, or
interim control measures where this would be appropriate. For
substantial rehabilitation projects involving more than $25,000
per unit, the Committee assumes that full abatement would be more
cost effective than interim measures. Residents of housing
covered by this section would receive notice describing the
nature and scope of evaluation and reduction activities performed
under this section, including evaluation reports.

Elimination of hazards in public housing.-As noted above, the
Committee is aware that HUD is currently undertaking a program,
in response to the existing LPPPA and other Congressional
directives, to test for and abate lead-based paint in public
housing. The Committee is also aware that funding is being made
available to perform risk assessments in public housing units
which are not currently scheduled for abatement through the
public housing modernization program. The Committee supports the
risk assessment and interim control program, and intends the
changes to the LPPPA introduced by Title X to pose no barrier to
ongoing efforts. Changes made by Title X to the public housing
provision of the LPPPA are intended merely to conform the
terminology of Title X's definitions of terms.

Expanded eligibility under housing assistance programs.-Title X
would incorporate a series of amendments to existing housing
programs to clarify that program funds could be used to comply
with LPPPA mandates and otherwise to reduce lead hazards. The
Committee intends to clear up any confusion that may exist by
making these activities explicitly eligible.

Sec. 1013-Requirements for federally owned housing upon
disposition

Title X's amendment to the LPPPA's property disposition
requirements is one of its more controversial provisions. After a
series of negotiation sessions, the Committee accepted an
Administration proposal to limit the abatement requirements to
housing construction prior to 1960. This change reflects a major
concession to the Administration-one that the Committee makes
with grave reservations. While the Committee can justify this
compromise as tending to target federal resources where hazards
can be expected to be greatest, it is aware that it has accepted
a particularly blunt instrument to accomplish the task.

Current law requires the Secretary of HUD to ``establish and
implement procedures to eliminate the hazards of lead-based paint
poisoning in all federally owned properties prior to the sale of
such properties when their use is intended for residential
habitation.'' While the Committee is aware that agencies
including HUD have been known to require purchasers to waive
their rights under this provision,\11\(FOOTNOTE) the Committee
views waivers and other tactics to avoid enforcement of the
provision as contrary to the intent of the LPPPA as written. It
thus originally\12\(FOOTNOTE) included a requirement to inspect
and abate lead-based paint hazards in pre-1978 units. This
requirement was intended merely to clarify and force compliance
with existing law.

(FOOTNOTE)\11\``Addendum to Sales Contract: Lead-Based Paint
Health Hazard. Property Constructed Prior to 1978. Owner-Occupant
Purchaser.'' and form HUD-9552, used in multifamily property
disposition.

(FOOTNOTE)\12\See S. 2341, The Residential Lead-based Paint
Hazard Reduction Act of 1992, introduced by Senator Cranston on
March 11, 1992.

Title X would retain the original requirement that federal
agencies inspect pre-1978 housing suitable for families and
supply inspection reports to potential purchasers. This provision
has two purposes: First, it enables the federal government to
meet its obligation to ensure that housing sold with the
imprimatur of the United States government does not contain
hidden dangers. Second, it provides information necessary to
homebuyers who may have or plan to have children, or may be
planning structural renovation, at a time when they have greater
access to financing for hazard reduction.

The abatement requirement would be retained for pre-1960 housing.
This housing, which contains the majority of lead hazards, and
tends to have higher concentrations of lead in its paint, would
be abated prior to sale. While suggestions have been made that
this requirement should be further restricted to housing to be
sold to families with young children, the Committee finds this
proposal objectionable. While it agrees that priority should be
given whenever possible to reducing immediate hazards to children
and pregnant women, it believes that imposing expensive mandates
selectively based on familial status will invite housing
discrimination. The Committee is unwilling to provide such a
great incentive to federal agencies to violate the Fair Housing
Act.

Sec. 1014-Incorporating lead reduction needs into the CHAS

As HUD data make clear, low-income households are just as likely
to encounter lead-based paint hazards in private housing
(including housing receiving only tenant based assistance) as in
federally-associated units. Since the vast majority of low-income
families receive no housing subsidies at all, and since poor
families are more likely to live in housing containing lead paint
hazards, the Committee considers inclusion of these families as
vital to a comprehensive strategy to reduce lead-based paint
poisoning hazards. The Committee has sought to address lead
hazards in private housing in two ways-first, by creating the
$250 million grant program, and second by requiring jurisdictions
to incorporate consideration of lead into their housing
strategies.

The amendment to the CHAS is expected to impose little
administrative burden on jurisdictions since the required
estimates can be made through statistical analysis, with no need
to actually survey paint in housing. The Committee intends,
however, that jurisdictions take the lead issue into account when
formulating housing strategies. Jurisdictions would be free, of
course, as with other elements of the CHAS, to decide what
priority to give the lead issue. The Committee understands that
many jurisdictions already feel burdened by the demands made upon
scarce HOME dollars. It believes, however, that the additional
burden imposed by Title X will be relatively light, and that its
imposition is justified in view of the long term individual and
societal costs of lead poisoning.

In addition to establishing lead hazard reduction in low income
housing as an eligible use of HOME funding, the amendment to the
CHAS is intended to affect rehabilitation and renovation work
funded by HOME. The Committee intends jurisdictions to use the
CHAS to demonstrate that they intend to incorporate lead hazard
reduction into all work which involves disturbing paint
containing lead-based paint (see discussion above).

Sec. 1015-Private sector task force

The Committee is concerned that the private marketplace has, to
date, failed to respond appropriately to lead hazards in housing.
Insurers, appraisers and lenders have failed to recognize the
value of lead-safe housing, and financing mechanisms and loan
products are not readily available. The Committee hopes and
expects that the task force can redress these issues, as well as
the need for expanding the availability of liability insurance.

The task force would, in particular, consider the efficacy of
adopting measures to reduce the liability of lenders and owners
of multifamily housing by clarifying standards of care or
adopting a statutory ``safe harbor''. The Committee expects that
the task force would consider whether it makes sense to develop a
set of standards that, if followed by owners and lenders, would
adequately protect building residents from exposure to lead-based
paint. Owners or lenders who could demonstrate compliance with
such standards would be exempted from liability for harm that
resulted in spite of their exercise of ``due care''. The task
force is urged to consider the workers' compensation model under
study in the state of Maryland. This model would require lenders
or owners to exercise ``due care'' and contribute to a fund in
exchange for a release from liability. If a resident or worker
were to be harmed by lead-based paint in compliant housing, the
court system could be bypassed in favor of an administrative
award from the fund. While the Committee understands that the
Administration opposes referring this item to the task force, it
believes that these liability issues are worth exploring in
detail.

The Committee notes that representatives of the relevant federal
agencies have been deleted from membership on the task force.
This change was made at the behest of HUD, which argued that
membership in both the task force and the Interagency Lead Task
Force was redundant and staff-intensive. The Committee also notes
that several issues which the task force would consider replace
statutory mandates included in earlier versions of the bill. For
instance, a requirement that landlords evaluate private rental
housing for lead hazards prior to lease was deleted in favor of
further study to determine the effect of such a mandate on
housing affordability. A special provision incorporating hazard
evaluation into the mortgage origination process was also dropped
in favor of further study by the task force.

SUBTITLE B-EVALUATION AND REDUCTION INFRASTRUCTURE

The Committee has imposed a requirement that all federally
supported risk assessments, inspections and abatement of
lead-based paint hazards would be conducted by contractors,
supervisors, and inspectors who are certified by the appropriate
federal agency by a state program which has received federal
approval. A transitional provision has been included in
recognition that very few states will have certification programs
in place by the time grants funds are made available. The
Committee believes that this interim provision will protect the
safety of workers and residents, since it will require, at a
minimum, training through an EPA-sponsored program.

The Committee has not imposed training and certification
requirements on individuals carrying out interim control
measures. These activities typically involve less potential for
generating dangerous levels of dust, and are not much different
from the types of activities routinely carried out by housing
residents and maintenance personnel. The Committee believes that
if certification requirements were imposed, interim measures
would be far more expensive and would be performed less
frequently. At the same time, the Committee wants to make clear
that some interim control activities do disturb painted surfaces
and can result in high exposures and increased risks. Common
sense requires that workers be acquainted with the hazards of
lead and that due care be exercised, with safeguards employed
commensurate with the risk of lead exposure. The Committee urges
HUD to work with other appropriate Federal agencies to develop
educational materials to serve this purpose. Where appropriate,
the Committee would expect HUD regulations to impose additional
certification requirements for hazardous interim control
measures.

Although the Committee is aware that some home remodeling and
renovation projects which have not incorporated lead reduction
measures have aggravated lead-based paint hazards, and caused
poisoning of workers and children, not all such projects are
inherently dangerous. The level of hazards is a function of the
extent to which lead-based paint is disturbed and the amount of
dust lead generated. The Committee recognizes that some federally
funded renovation projects in housing containing lead-based paint
will not require certified workers because it will not involve
significant dust generation or the disturbance of painted
surfaces. For example, the removal of a leaded closet door could
be performed in appropriate circumstances by a non-certified
worker.

The Committee recognizes the need for and fully expects each
state to develop contractor certification programs which will
meet federal approval. Incentives have been included within the
grants program to encourage all states to create programs. The
Committee has chosen not to impose requirements that work be
performed by workers certified in the applicable state, despite
the obvious incentive value of such a mandate. The Committee
believes that such a requirement would unnecessarily restrict the
option for families, owners and jurisdictions in states that have
not yet acted to prevent lead poisonings. The 2-year phase-in
clause provided by this section is not intended to contravene the
requirements of HUD's NOFA published in the June 29, 1992 Federal
Register.

The Committee is aware that 9 months is a relatively stringent
deadline for the preparation of technical guidelines. However, it
believes strongly that the goal is achievable. HUD and EPA have
already made considerable strides in this area, including HUD's
development of guidance for lead-based paint abatement, risk
assessments and interim controls in public housing. The Committee
expects the Department to begin developing these guidelines on a
priority basis, even prior to final enactment of this
legislation.

The Committee understands that an inter-agency National
Clearinghouse on Lead Poisoning is being developed under EPA's
lead. The responsibilities assigned to this Clearinghouse are
significantly less than those described by Title X. While the
Committee has no intention to transfer responsibility among the
involved agencies, it does believe it is important to expand the
functioning of the Clearinghouse.

SUBTITLE C-PUBLIC INFORMATION IN THE PRIVATE REAL ESTATE
TRANSACTION

In formulating the public information and disclosure provisions
of Title X, the Housing Subcommittee consulted and elicited
extensive comments from representatives of the private real
estate industry and consumer groups as well as Members of staff
of the House and Senate Environment Committees. The Subcommittee
attempted to craft a provision which would provide homeowners and
renters with adequate information to enable them to make informed
decisions.

The Committee believes that the public information provisions of
Title X will provide the most effective incentives for building a
lead evaluation and reduction infrastructure and for increasing
the level of hazard reduction activity in the general economy.
Accurate information widely disbursed through the private real
estate market will greatly increase awareness of lead hazards.
The Committee expects parents will exercise greater precautions
to limit exposures to existing hazards, and that they will
implement interim controls and abatements in order to protect the
health of their children.

As with other provisions of the bill, HUD would be directed to
consult relevant federal agencies and the private sector task
force in implementing these provisions. The lead hazard
information pamphlet, which is required to be updated
periodically, would contain considerably more information than is
provided in the lead hazard pamphlets HUD currently distributes.
The contents of the pamphlet would vary by region, since it would
include lists of certified contractors and addresses and phone
numbers of local agencies that can provide information about
local laws and ordinances and available government assistance.
The Committee expects that HUD would make available pamphlets in
Spanish and other languages, and take other actions to assure
that the pamphlets are widely disseminated, and the information
is made accessible to all purchasers and tenants. The Committee
notes that the contents of the pamphlet are irrelevant unless HUD
makes them widely available. The Committee has provided HUD with
the discretion to merge this pamphlet with other Congressionally
mandated environmental hazard information requirements. Thus a
single publication providing information about lead and radon
hazards in housing would be acceptable.

The Committee has also required the inclusion of a Lead Warning
Statement in leases and contracts for the purchase and sale of
private housing. While the Committee is aware that the warning
statement and pamphlet contain some overlapping information, it
believes that both provisions are necessary. The hazard statement
is compact and contains the essential information that the paint
in the housing may constitute a danger to residents of the
housing. It also incorporates into the contract the requirement
that sellers provide any available lead hazard evaluation report
to purchasers.

After considerable discussion, the Committee adopted and modified
a provision providing potential buyers the opportunity to have a
lead evaluation performed. The opportunity period would be 10
days unless the parties mutually agree on a shorter or longer
time. Discretion has been built into the provision in recognition
that some purchasers will not be concerned about potential lead
hazards and would prefer to close the transaction without delay,
and other purchasers may require a longer period in order to
engage an inspector and receive the inspection results. The 10
day provision is not applicable to rental housing since the
Committee considers it unworkable to place the burden to test on
a tenant.

The penalties provisions of the subtitle are modeled on section
102 of the Department of Housing and Urban Development Reform Act
of 1989.

SUBTITLES D AND E-RESEARCH AND DEVELOPMENT AND REPORTS

As a transition bill, an important function of Title X would be
to refine techniques and technologies involved in lead-based
paint hazard treatment. The Committee intends that HUD take
advantage of the reporting requirement of the grants program to
provide data on various techniques.

The Committee notes that HUD has failed to update its Section 8
regulations to reflect the important changes mandated by the 1987
amendments to the Lead-Based Paint Poisoning Prevention Act. As a
result, HUD's regulations and the current implementation of
tenant-based Section 8 programs are directly at odds with the
requirements of current law. To ascertain the magnitude of HUD's
noncompliance, the Committee bill would require GAO to assess the
effectiveness of federal enforcement and compliance with lead
safety laws and regulations. GAO, in particular, would be
required to recommend to Congress whether the annual inspections
governing the section 8 voucher and certificate programs need to
be revised to identify lead-based paint hazards.

The Committee is aware that a shortage of liability insurance is
a major impediment to expanding the market for lead hazard
evaluation and reduction. In addition to the responsibilities
given to the task force on the private side, the Committee would
direct GAO to examine the government's experience with liability
insurance in the area.

The extensive reporting requirements of Title X would be included
in order to assure that this Act is fully implemented and the
goals of the bill are achieved. The reports are intended to
provide guidance to the Committee in passing beyond this
transition bill to the next stage.

                   SECTION-BY-SECTION (P. 124)

Title I-General Provisions and Policies

Sec. 101-CHAS refinements

This section would make two amendments to section 105 of the
National Affordable Housing Act, the provision requiring a
jurisdiction that wants to participate under various federal
housing programs to develop a comprehensive housing affordability
strategy (CHAS). First, this section would attempt to foster
better linkage between a community's housing needs identified in
the planning process and its actual spending decisions. A
jurisdiction would be required to describe how its CHAS will meet
the identified housing needs, describe reasons for its allocation
priorities and identify any obstacles to addressing underserved
needs.

Second, this section would expand the requirement, in existing
law, to identify the incidence of homelessness in the CHAS to
specifically include rural homelessness.

Sec. 102-Performance goals

This section would require the Secretaries of the Department of
Housing and Urban Development and the Department of Agriculture
to establish performance goals for the major programs of HUD and
FmHA. Each year, the Secretary would be required to report to
Congress on the progress made in attaining the performance goals
for each program, citing the actual results achieved in each
program, explaining why any goals were not met, and requesting
any legislative or regulatory changes necessary to achieve the
goals.

Sec. 103-Subsidy layering review

This section would amend section 102(d) of the HUD Reform Act of
1989, the provision limiting the layering of federal housing
subsidies. This section would require HUD to establish guidelines
for housing credit agencies to implement the subsidy layering
requirements for projects receiving assistance under both the low
income housing tax credit and HUD programs. The guidelines would
require that the amount of equity raised for a project through
the tax credit be reasonable relative to general market
conditions and that project costs, including developer fees, be
within a reasonable range, taking into account project size,
project characteristics, project location and project risk
factors. As of January 1, 1993, a housing credit agency would be
delegated the responsibility for carrying out section 102(d) of
the HUD Reform Act if certified to be properly implementing HUD's
guidelines.

Sec. 104-Capacity study

This section would amend section 110 of the National Affordable
Housing Act, the provision requiring HUD to submit annual report
on its staffing capacity and resources. This section would
require HUD to include within the annual report an assessment of
its ability to respond to areas identified by the Inspector
General as ``material weaknesses''.

Sec. 105-Salaries and expenses

This section would authorize salaries and expenses for HUD at
$489 million for fiscal year 1993 and $505.5 million for fiscal
year 1993. Of these totals, not less than $5 million would be set
aside in each fiscal year exclusively to provide on-going
training and capacity building for Department personnel.

Sec. 106-Registration of consultants

This section would amend section 112 of the HUD Reform Act of
1989, the provision requiring consultants to register with the
Department. This section would exempt state and local government
and housing authority employees engaged in official business from
the Act's registration requirements.

TITLE II-INVESTMENT IN AFFORDABLE HOUSING

Sec. 201-HOME authorization

This section would authorize the HOME program at approximately
$2.1 billion for FY93 and $2.2 billion for FY94 and authorize
set-asides of $14 million each year for community housing
partnership activities and $11 million each year for efforts in
support of state and local housing strategies.


Sec. 202-New construction

This section would modify section 212(a)(3) of the National
Affordable Housing Act, the provision limiting the use of HOME
funds for new construction.

Subsection (a) would allow HOME funds to be used for new
construction in rural areas (as defined in section 520 of the
Housing Act of 1949) that certify that new housing is a high
priority need and that there is not an adequate supply of vacant
housing, or housing that could be acquired or rehabilitated to
meet the need.

Subsection (b) would modify the Secretary's authority to provide
a waiver for a jurisdiction to qualify for new construction, by
permitting the waiver to apply for more than one year. This
subsection would also eliminate the incidence of substandard
housing as a formula factor for determining new construction
eligibility.

Subsection (c) would revise the new construction exception for
neighborhood revitalization projects by eliminating the
requirement that the project emphasize rehabilitation
(interpreted by HUD as more than 51% of project); instead, the
project would be required to include rehabilitation.

Sec. 203-Administrative costs

This section would make several amendments to section 212 of the
National Affordable Housing Act to allow jurisdictions to use up
to 7% of their HOME allocation for administrative expenses.
Jurisdictions in fiscal distress (as defined below) could use up
to 10% of their HOME allocation for administrative costs. This
section would also amend section 220 to eliminate the provisions
that allow up to 7% of administrative expenses funded from local
sources or CDBG to count towards the local matching contribution.

Sec. 204-Tenant based rental assistance

This section would amend section 212 of the National Affordable
Housing Act to eliminate the requirement that jurisdictions
providing tenant-based rental assistance with HOME funds draw
tenants from the local public housing authority's waiting lists.
Instead, rental assistance would have to be provided in
accordance with written tenant selection policies and criteria
that are consistent with the purpose of providing housing to very
low and low income persons and are reasonably related to federal
and local public housing authority preference rules.

Sec. 205-Maximum subsidy limits

This section would amend section 212(d) of the National
Affordable Housing Act, the provision requiring HUD to establish
limits on the amount of HOME assistance that may be invested on a
per unit basis. This section would clarify that HUD should not
establish subsidy limits in a manner that requires jurisdictions
to provide a per unit local match or that deducts the amount of
low income housing tax credit proceeds used in a project.

Sec. 206-Rent calculations

This section would make two amendments to section 215(a) of the
National Affordable Housing Act, the provision establishing the
qualifications for rental housing assisted under the HOME
program. First, the rent calculation provisions would be amended
to adjust the maximum rent levels by the number of bedrooms in a
unit rather than by the household size of prospective tenants.
Second, the requirement that tenants be charged at least 30% of
their income for rent if their income rises above 80% of median
income would be eliminated for projects allocated a low income
housing tax credit or in communities that have state or local
rent control laws.

Sec. 207-Homeownership resale restrictions

This section would amend section 215(b) of the National
Affordable Housing Act, the provision establishing the
qualifications for homeownership housing assisted under the HOME
program. The homeownership resale restrictions in existing law
would be amended to permit a jurisdiction to either require a
specific HOME assisted unit to remain affordable to other low
income purchasers or recapture the HOME subsidy provided to the
unit for use by other eligible HOME recipients.

Sec. 208-Rental housing production set-aside

This section would amend section 217 of the National Affordable
Housing Act to eliminate the rental housing production set-aside.
Under current law, this set-aside requires new
construction-eligible jurisdictions to use a certain portion of
their HOME allocation for rental housing construction.

Sec. 209-Matching requirements

This section would make several amendments to section 220 of the
National Affordable Housing Act, the provision defining the HOME
local matching requirements.

Subsection (a) would establish a uniform local match of 25% for
all HOME activities instead of the tiered local match of 25% for
tenant-based rental assistance and moderate rehabilitation, 33%
for substantial rehabilitation and 50% for new construction in
existing law.

The matching requirements would also be amended so that any
locally-funded housing that meets the HOME affordability
requirements, regardless of whether it received HOME funds, could
qualify as a local match.

Subsection (b) would allow up to 25% of public bond financing
issued to support multifamily housing to count as an eligible
local match. Such match credit would be limited to note more than
25% of a jurisdiction's total match. Sweat equity would also be
added as an eligible match.

Subsection (c) would establish a streamlined process to provide
relief from the matching requirements to communities that are in
fiscal distress and would be otherwise unable to participate in
the HOME program. This would replace the case by case match
reduction process in existing law.

The standard matching requirement could be reduced to 15% for a
jurisdiction that is in fiscal distress, 5% for a jurisdiction in
severe fiscal distress, and 0% for a jurisdiction that is in
extreme fiscal distress. For local governments, distress would be
measured on the basis of a jurisdiction's per capita income,
households in poverty, and growth lag in the labor force. For
state governments, distress would be measured on the basis of
fiscal capacity and expenditure needs as determined using indices
developed by the Advisory Commission on Intergovernmental
Relations (ACIR).

Sec. 210-Community housing production set-aside

This section would make two amendments to section 231 of the
National Affordable Housing Act, the provision setting-aside HOME
funds for use by community housing development organizations
(CHDOs). First, the time period for a jurisdiction to identify
CHDOs to utilize its set-aside would be extended from the 18
months in existing law to 24 months; the commitment period would
remain at 24 months. Second, a jurisdiction would be permitted,
in the first two years of its participation under HOME, to use up
to 10% of its CHDO set-aside for technical assistance and
capacity building if a sufficient number of capable CHDOs did not
already exist in the area.

Sec. 211-Redevelopment of blighted urban areas

This section would amend Title II, Subtitle D of the National
Affordable Housing Act, the provisions establishing model
programs for jurisdictions to use under the HOME program. A new
model program would be established to facilitate the
redevelopment of severely blighted inner city areas. Projects
would be eligible for revised income targeting standards if
located in qualified census tracts in which: at least 70% of the
families have income below 80% of area median income; not less
than 30% of the residents have incomes below the poverty level;
and a high incidence of vacant land or land occupied by abandoned
or substandard buildings exists. The housing would have to be
targeted as follows: at least 50% of the units occupied by very
low-income families (<50% of median income); at least 80% of the
units occupied by low-income families (<80% of median income);
and all of the units occupied by families with moderate incomes
below 100% of area median income.
Sec. 212-Transitional housing opportunities

This section would amend section 225 of the National Affordable
Housing Act, the provision providing tenant protections in
housing assisted under the HOME program, to allow a lease to be
terminated after two years if the housing was provided as
short-term transitional housing.

                    TITLE III-HOMEOWNERSHIP

              SUBTITLE A-HOMEOWNERSHIP INITIATIVES

Sec. 301-National homeownership trust

Subsection (a) would authorize the National Homeownership Trust
Demonstration at $25 million for fiscal year 1993 and $26.1
million for fiscal year 1994.

Subsection (b) would amend the National Homeownership Trust
Demonstration to include grants to capitalize local revolving
loan funds as an eligible activity under the program.

Subsection (c) would authorize $5 million for demonstration
programs under the National Homeownership Trust Fund and would
authorize $2.1 million for a demonstration program in Salt Lake
City, Utah.

Sec. 302-Enterprise zone homeownership opportunity grants

This section would establish a homeownership program for
enterprise zones.

Subsection (a) would specify the following purposes of the
section: (1) to encourage homeownership by families in the United
States who are not otherwise able to afford homeownership; (2) to
encourage the redevelopment of economically depressed areas; and
(3) to provide better housing opportunities in federally-approved
and equivalent state-approved enterprise zones.

Subsection (b) would contain definitions for the enterprise zone
homeownership program. The term ``home'' would mean any 1 to 4
family dwelling and would include any dwelling unit in a
condominium or cooperative project as well as any town house, and
any manufactured home.

The term ``metropolitan statistical area'' would mean a
metropolitan statistical area as established by the Office of
Management and Budget.

The term ``nonprofit organization'' would mean a private,
nonprofit corporation, or other private nonprofit legal entity,
approved by the Secretary as to financial responsibility.
The term ``Secretary'' would mean the Secretary of Housing and
Urban Development.

The term ``State'' would mean each of the several States, the
District of Columbia, the Commonwealth of Puerto Rico, the Virgin
Islands, Guam, American Samoa, the Northern Mariana Islands, the
Trust Territory of the Pacific Islands, and any other territory
or possession of the United States.

The term ``unit of general local government'' would mean any
borough, city, county, parish, town, township, village, or other
general purpose political subdivision of a State.

Subsection (c) would allow the Secretary to provide grants to
nonprofit organizations to carry out homeownership opportunity
programs within federal or state enterprise zones.

Subsection (d) would require nonprofit organizations that receive
assistance under the homeownership program to use such assistance
to provide loans to families purchasing homes constructed or
rehabilitated in accordance with an approved enterprise zone
homeownership opportunity program. Each loan made to a family
under this subsection would be required to: (1) be secured by a
second mortgage held by the Secretary on the property involved;
(2) be in an amount not exceeding $15,000; (3) bear no interest;
(4) be repayable to the Secretary upon the sale, lease or other
transfer of such property.

Subsection (e) would specify program requirements and would
require that any assistance provided under this section be used
only in connection with an enterprise zone homeownership
opportunity program for the construction or rehabilitation of
homes. This subsection would also require that any family which
purchases a home under this section to (1) have a family income
(as of the date of the home purchase), which is not more than the
median income for a family of four persons (adjusted for family
size) in the metropolitan statistical area in which a
federally-approved or equivalent state-approved enterprise zone
is located; and (2) not have owned a home during the 3-year
period preceding such purchase. The downpayment requirement for
each participating family would be not less than five percent of
the sale price of such home. Leasing of homes would be
prohibited.

Subsection (f) would require that the Secretary approve proposed
homeownership opportunity programs and each applicant would be
required to demonstrate to the satisfaction of the Secretary
that: (1) the applicant has consulted with and received the
support of residents in the neighborhood where the program is to
be located; and (2) the applicant has the approval of each unit
of general local government in which such program is to be
located. Each applicant for assistance would be required to
submit to the Secretary an estimated schedule for completion of
its homeownership program. All homes constructed or rehabilitated
under the homeownership program would be required to be located
in federally-approved or the equivalent state-approved enterprise
zones. Sales contracts entered into under a homeownership program
would be required to contain provisions which would mandate the
repayment of any loan made under this section upon the sale or
other transfer of the home involved, unless the Secretary
approves a transfer of the home without repayment.

Subsection (g) would specify the selection criteria for the
selection of homeownership opportunity programs by the Secretary.
The Secretary would select programs on the basis of the extent to
which:  (1) non-federal public or private entities will
contribute the land necessary to make each program feasible;  (2)
non-federal public and private financial or other contributions
(including tax abatements, waivers of development fees, waivers
of construction, development or zoning requirements, and direct
contributions) will reduce the cost of homes constructed or
rehabilitated under each program;  (3) each program will produce
the greatest number of units for the least amount of assistance;
and  (4) each program provides for the involvement of local
residents in the planning, and construction or rehabilitation of
homes. The Secretary would not be required to consider the forms
of contribution listed in  (1) and  (2) above if State law
prohibits the non-federal entity from making such contributions.

Subsection (h) would require the Secretary to issue program
regulations within 180 days after the date of enactment of the
Act.

Subsection (i) would authorize $50 million in fiscal year 1993
and $50 million in fiscal year 1994 to carry out this section.

SUBTITLE B-FHA AND SECONDARY MORTGAGE MARKET

Sec. 311-National Interagency Task Force on Multifamily Housing

Subsection (a) would define the purpose of the section, which is
to establish a National Interagency Task Force on Multifamily
Housing to develop recommendations for establishing a national
database on multifamily housing loans.

Subsection (b) would establish the National Interagency Task
Force on Multifamily Housing (hereafter referred to as the ``Task
Force'').

Subsection (c) would detail the membership of the Task Force. The
Task Force would be composed of The Secretary of Housing and
Urban Development; the Chairperson of the Federal Housing Finance
Board; the Comptroller of the Currency; the Chairperson of the
Federal Reserve Board; the Director of the Office of Thrift
Supervision; the Chairperson of the Federal Deposit Insurance
Corporation; the Chairperson of the Federal National Mortgage
Association; and the Chairperson of the Federal Home Loan
Mortgage Corporation or their designees. In addition, the Task
Force would include representatives appointed by both the
Secretary of HUD and the Chairperson of the Federal Housing
Finance Board. The Secretary would appoint a representative of a
State housing finance agency; a representative of a local housing
finance agency; a representative of the building industry with
experience in multifamily housing; and a representative of the
life insurance industry with experience in multifamily loan
performance data. The Chairperson of the Federal Housing Finance
Board would appoint a representative from the financial services
industry with experience in multifamily housing underwriting; a
representative from the nonprofit housing development sector with
experience in subsidized multifamily housing development; and a
representative from a nationally recognized rating agency.

Subsection (d) would provide for the administration of the Task
Force. The Task Force would be jointly chaired by the Secretary
of Housing and Urban Development and the Chairperson of the
Federal Housing Finance Board and would meet no less than four
times yearly, at the call of the Chairpersons. A majority of
members of the Task Force would constitute a quorum for the
transaction of business and each member of the Task Force shall
be entitled to one vote.

Subsection (e) would specify the functions of the Task Force. The
primary function of the Task Force would be to conduct a study on
multifamily housing finance to determine the best approach for
establishing a national database on multifamily loans and to
utilize this database to begin to develop risk standards for
multifamily housing mortgages. The study would also (1) develop
preliminary standards of performance for multifamily housing
loans based on a number of factors which include, but are not
limited to: project credit risk; project underwriting; interest
rate risk; real estate market conditions; public subsidies; tax
policies; borrower characteristics; program management standards
and government policies; (2) develop preliminary standards for a
risk profile of multifamily housing based on an analysis of the
factors listed above; (3) determine whether or not these
standards are applicable to multifamily housing finance for
purposes such as project underwriting; secondary market purchases
and risk assessment of multifamily housing loans; (4) estimate
the costs of developing a national database, including startup
costs and data collection costs; and (5) include any other
recommendations determined by the Task Force.

Subsection (e) would require the Task Force to submit a final
report to the Congress which would contain the information,
evaluations and recommendations of the study.

Subsection (f) would detail the authority of the Task Force,
specifying that the Task Force may adopt any rules and
regulations necessary to establish its procedures and to govern
the manner of its operations, organization and personnel. This
subsection would also authorize members of the Task Force to
request a representative sample of multifamily mortgage loans
from their respective agencies in order to allow the Task Force
to make its findings and recommendations. The sample loan data
would be made available with the stipulation (1) that all
information obtained shall be used only for the purposes
authorized in the section; (2) that the sample loan data shall
remain confidential and not subject to release under the Freedom
of Information Act; and (3) that only aggregate data shall be
publicly released by the Task Force unless it receives the
explicit permission of the mortgage originator.

Subsection (g) would authorize the GAO to conduct an independent
analysis of the findings and recommendations submitted by the
Task Force.

Subsection (h) would authorize $10 million for fiscal years 1993
and 1994 for the Task Force.

Sec. 312-Multifamily finance demonstration

Subsection (a) would authorize the Secretary of HUD to establish
a demonstration program to test the effectiveness of providing
new forms of federal credit enhancement for affordable
multifamily loans. The Secretary would be authorized to explore
the feasibility of entering into partnerships or other
contractual arrangements with state or local housing finance
agencies, the Federal Housing Finance Board, the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage
Corporation (Freddie Mac), and other state or local mortgage
insurance companies or bank lending consortia. In establishing
the demonstration program the Secretary would be required to
consult with the appropriate public or private agencies,
organizations or individuals with experience in multifamily
lending, underwriting, insurance and development. The Secretary
would also be required to consider any recommendations made by
the GAO pursuant to the study on credit enhancement mandated in
the 1990 National Affordable Housing Act.

Subsection (b) would authorize the Secretary to undertake a
specific pilot program that would test the effectiveness of
credit enhancement for affordable multifamily loans through a
system of risk-sharing with qualified state housing finance
agencies.

Agreement terms.-The terms of the agreement entered into between
the Secretary and the participating qualified housing finance
agencies would provide for full federal mortgage insurance
through the Federal Housing Administration (FHA) for the
affordable multifamily loans originated by the housing finance
agencies and for reimbursement to the Secretary by such agencies
for either all or a portion of any losses which may be incurred
on the loans insured. The agreements would specify the percentage
of loss that both the Secretary and the housing finance agency
would be expected to assume in the event of default. Options
available would include: (1) the housing finance agency assuming
the full amount of any loss; (2) the housing finance agency
assuming a fixed percentage of any loss; or (3) HUD assuming a
fixed percentage of any losses and the housing finance agencies
providing reimbursement for any losses which exceed that fixed
percentage.

Reimbursement capacity.-Participating housing finance agencies
would be required to demonstrate their capacity to fulfill any
reimbursement obligations entered into under the pilot program.
Evidence of an agency's reimbursement capacity could take the
form of: (1) agency reserves which are pledged or otherwise
restricted to secure the obligation; (2) funds pledged through a
state or local guarantee fund; (3) a pledge of full faith and
credit by a qualified state or local agency on behalf of the
participating housing finance agency or (4) other forms of
evidence mutually agreed upon by the Secretary and the housing
finance agency. Any state or local housing finance agency which
meets one of the following criteria would be designated
``qualified'' and a would be eligible for participation in the
pilot program. The criteria would include: (1) the agency carries
the designation of `top tier' as evaluated by Standard and Poors
or any other nationally recognized rating agency; (2) the agency
receives a rating of ``A'' for its general obligation bonds from
a nationally recognized rating agency; (3) the agency can
otherwise demonstrate its capacity as a sound agency based on:
years of experience; fund balances; administrative capabilities;
investment policy; internal controls and financial management;
portfolio quality; and state or local support.

The Secretary would be authorized to insure up to 25,000 units in
both fiscal year 1993 and fiscal year 1994.

Subsection (c) would establish the qualifications for
``affordable'' multifamily loans insured under this section. A
multifamily loan would qualify as affordable if, in the housing
secured by the loan, at least 20 percent of the units are
affordable to families whose incomes do not exceed 50 percent of
the median income for the area or at least 40 percent of the
units are affordable to families whose incomes do not exceed 60
percent of the median income for the area. These are the same
qualifying standards used in the low income housing tax credit
program.

Subsection (d) would require the Secretary to submit two reports
to the Congress-an interim report and a comprehensive report. The
interim report would be due one year following the date of
enactment of this section and would summarize the progress of the
Secretary in implementing both the multifamily demonstration
program and the housing finance agency pilot program. The
comprehensive report would be due two years after the date of
enactment of the section and would evaluate the effectiveness of
both the demonstration program and the housing finance agency
pilot program.

Subsection (e) would require the Secretary to issue regulations
not later than 90 days after the enactment of this section.

Sec. 313-Expenditures to correct defects

This section would amend section 518 of the National Housing Act,
which allows the Secretary to reimburse owners of newly
constructed insured single family homes for substantial defects.
This section would extend these homeowner protections to FHA
insured condominiums.

Sec. 314-Repeal of warranty requirement

This section would repeal that portion of section 203(b) of the
National Housing Act which allows HUD to use the existence of 10
year homeowner warranties in lieu of several HUD inspections
prior to, during and upon completion of construction.

                          TITLE IV-HOPE

Sec. 401-Authorization

This section would consolidate authorizations for the four HOPE
programs. The section would authorize these HOPE programs at $895
million for fiscal year 1993 and approximately $937 million for
fiscal year 1994. The section would authorize the individual HOPE
programs at the following levels: HOPE I at $285 million for
fiscal year 1993 and approximately $295 million for fiscal year
1994; HOPE II at $285 million for fiscal year 1993 and
approximately $295 million for fiscal year 1994; HOPE III at $285
million for fiscal year 1993 and approximately $295 million for
fiscal year 1994; and HOPE IV at $40 million for fiscal year 1993
and approximately $80 million for fiscal year 1994. Conforming
amendments would be made to existing law to strike separate
authorizations.

Sec. 402-HOPE amendments

This section would amend section 426 of the National Affordable
Housing Act to add non-federal public housing to the list of
multifamily rental properties eligible for homeownership under
HOPE II.

Sec. 403-HOPE for youth: Youthbuild

The section would establish an innovative federal housing
program-Youthbuild-to help capable nonprofits train low-income
youth in the construction and rehabilitation of affordable
housing. The program would be added as a new subtitle D to the
HOPE title of the National Affordable Housing Act.

Purpose.-Section 451 would state the purpose of the Youthbuild
program: to expand the supply of affordable housing for the
homeless and members of low income families, to provide work
opportunities for disadvantaged young adults, to give these young
adults an opportunity to obtain education and employment skills,
and to foster a commitment to community development in these
young adults.

Program authority.-Section 452 would authorize the Secretary to
make planning grants to enable applicants to develop Youthbuild
programs and implementation grants to enable applicants to carry
out Youthbuild programs.

Planning grants.-Section 453 would limit the amount of a planning
grant to $150,000, however, providing the Secretary with the
authority to approve a grant for a higher amount with good cause.
This section would permit the use of planning grants for
activities to develop Youthbuild programs. Such eligible
activities would include: (1) studies of the feasibility of the
program; (2) establishment of consortia between youth training
and education programs and housing owners or developers which
will participate in the program; (3) identification and selection
of a site for the program; (4) preliminary architectural and
engineering work for the Youthbuild program; (5) identification
and training of staff for the program: (6) planning for
education, job training, and other services that will be provided
as part of the program; (7) other planning, training, or
technical assistance necessary in advance of commencing the
program; and (8) preparation of an application for an
implementation grant under this subtitle.

This section would also require an application for a planning
grant be submitted in accordance with procedures established by
the Secretary. The Secretary would require that each application
contain at a minimum (1) specific activities proposed to be
carried out, the schedule for completing the activities, the
personnel necessary to complete the activities, and the amount of
the grant requested; (2) a thorough description of the applicant
and statement of its qualifications; (3) identification and
description of potential sites for the program and activities
that would be undertaken at such sites; potential methods for
identifying and recruiting youth participants; potential
educational and job training activities; work opportunities and
other services for participants; and potential coordination with
other Federal, State, and local housing and youth education and
employment training activities including activities conducted by
Indian tribes; (4) a certification by the public official
responsible for submitting the comprehensive housing
affordability strategy that the proposed activities are
consistent with the approval housing strategy of the State or
unit of general local government within which the project is
located; and (5) a certification that the applicant will comply
with the requirements of the Fair Housing Act, title VI of the
Civil Right Act of 1964, section 504 of the Rehabilitation Act of
1973, and the Age Discrimination Act of 1975, and will
affirmatively further fair housing.

Finally, this section would require the Secretary to establish
selection criteria for a national competition for assistance. The
criteria must include: the qualifications or potential
capabilities of the applicant, the potential of the applicant to
develop a successful program, and the need for the prospective
program (as determined by the degree of economic distress).

Implementation grants.-Section 454 would authorize the Secretary
to make implementation grants to applicants for the purpose of
carrying out Youthbuild programs. This section defines activities
which are eligible for receiving implementation grants are: (1)
architectural and engineering work; (2) acquisition and/or
rehabilitation, or construction of housing and related facilities
to be used for the purposes of providing homeownership under
subtitles B and C of the HOPE title; residential housing for
homeless individuals, and low- and very low-income families, or
transitional housing for person who are homeless, have
disabilities, are ill, are deinstitutionalized, or have other
special needs; (3) administrative costs of the applicant (which
may not exceed 15% of the amount of assistance or a higher
percentage determined necessary by the Secretary to support
capacity development by a private nonprofit organization); (4)
education and job training services and activities (including
counseling services, opportunities to develop the leadership
skills of participants, activities designed to maximize the value
of the participants as future employees, and support services and
need-based stipends); (5) wage stipends and benefits provided to
participants; (6) funding of operating expenses and replacement
reserves of the property covered by the Youthbuild program; (7)
legal fees; and (8) defraying costs for the ongoing training and
technical assistance needs of the recipient that are related to
developing and carrying out the Youthbuild program.

This section would also require applications for implementation
grants to be submitted in accordance with procedures established
by the Secretary. Each application would contain at a minimum (1)
a request for the grant, specifying the amount requested and its
proposed uses; (2) a description of the applicant and a detailed
statement of its qualifications; (3) a description of the
proposed site for the program; (4) a description of the
educational and job training activities work opportunities, and
other services that will be provided to participants; (5) a
description of the proposed construction or rehabilitation
activities to be undertaken and the anticipated schedule for
accruing out such activities; (6) a description of the manner in
which eligible youths will be recruited and selected; (7) a
description of the special outreach efforts that will be
undertaken to recruit eligible young women; (8) a description of
how the proposed program will be coordinated with other Federal,
State, and local activities and activities conducted by Indian
tribes; (9) assurances that there will be a sufficient number of
adequately trained supervisory personnel in the programs; (10) a
description of the applicant's relationship with local building
trade unions regarding their involvement in training, and the
relationship of the Youthbuild program with established
apprenticeship programs; (11) a description of activities that
will be undertaken to develop the leadership skills of
participants; (12) a detailed budget and a description of the
system of fiscal controls and auditing and accountability
procedures that will be used to ensure fiscal soundness; (13) a
description of the commitments for any additional resources to be
made available to the program from the applicant, from recipients
of other Federal, State or local housing and community
development assistance who will sponsor any part of the
construction, rehabilitation, operation and maintenance, or other
housing and community development activities undertaken as part
of the program, or from other Federal state, or local activities
and activities conducted by Indian tribes, including, but not
limited of, vocational, adult and bilingual education programs,
and job training provided with funds available under the JTPA and
Family Support Act of 1988; (14) identification and description
of the financing proposed for (i) rehabilitation, (ii)
acquisition of the property; or (iii) construction; (15)
identification and description of the entity that will operate
and manage the property; (16) a certification by the public
official responsible for submitting the comprehensive housing
affordability strategy that the proposed activities are
consistent with the approved housing strategy of the State or
unit of general local government within which the project is
located; and (17) a certification that the applicant will comply
with the requirements of the Fair Housing Act, title VI of the
Civil Rights Act of 1964, section 504 of the Rehabilitation Act
of 1973, and the Age Discrimination Act of 1975, and will
affirmatively further fair housing.

This section would also require the Secretary to establish
selection criteria for assistance. The criteria must include: (1)
the qualifications or potential capabilities of the applicant;
(2) the feasibility of the Youthbuild program; (3) the potential
for developing a successful Youthbuild program; (4) the need for
the prospective project, as determined by the degree of economic
distress of the community from which participants would be
recruited and of the community in which the housing proposed to
be constructed or rehabilitated would be located; (5) the
apparent commitment of the applicant to leadership development,
education, and training of participants; (6) the inclusion of
previously homeless tenants in the housing provided; and (7) the
commitment of other resources to the program by the applicant and
by recipients of other Federal, State or local housing and
community development assistance who will sponsor any part of the
construction, rehabilitation, operation and maintenance, or other
housing and community development activities undertaken as part
of the program, or by other Federal, state or local activities
and activities conducted by Indian tribes, including, but not
limited to, vocational, adult and bilingual education programs,
and job training provided with funds available under the Job
Training Partnership Act and the Family Support Act of 1988.

This section would require the Secretary to notify each applicant
as to whether or not the application is approved no later than
four months after submission of the application.

Finally, this section would require the Secretary to develop a
procedure to allow an applicant to request a planning grant and
an implementation grant with one application. In this case, the
receipt of the implementation grant would be conditional on the
successful completion of the activities funded by the planning
grant.

Youthbuild program requirements.-Section 455 would require each
residential rental housing project receiving assistance under
this subtitle to meet certain requirements. At least 90 percent
of the units must be occupied or be available for occupancy by
individuals and families with incomes less than 60 percent of the
area median income and the remaining units must be occupied or
available for occupancy by low-income families. Each lease
between a tenant and an owner must not be for less than one year,
unless by mutual agreement between the tenant and the owner, and
must contain terms and conditions that the Secretary determines
to be appropriate. As well, an owner cannot terminate the tenancy
or refuse to renew the lease of a tenant except for serious or
repeated violation of the terms and conditions of the lease, for
violation of applicable Federal, State, and local law, or for
other good cause. The owner must furnish the tenant with written
notice specifying the grounds for the termination or refusal to
renew with 30 days notice. It would also require the owner to
maintain the premises in compliance will all applicable housing
quality standards and local code requirements. The owner must
also adopt written tenant selection policies and criteria that
are (1) consistent with the purpose of providing housing for
homeless individuals and members of very low-income and
low-income families; (2) are reasonably related to program
eligibility and the applicant's ability to perform the
obligations of the lease; (3) give reasonable consideration to
the housing needs of families that would have a preference under
section 6(c)(4)(A) of the United States Housing Act of 1937; and
(4) provide for the maintenance of a written waiting list in the
chronological order of appropriate sequence, notifying applicants
promptly of the results of their applications.

This section would also require that tenants not pay in excess of
that in accordance with section 3(a) of the Housing Act of 1937.
For every project owned by a nonprofit organization, the
organization must provide a plan for tenant participation in
management decisions.

Every transitional housing project receiving assistance under
this subtitle must adhere to the requirements regarding service
delivery, housing standards, and rent limitations imposed on
comparable housing receiving assistance under title IV of the
Stewart B. McKinney Homeless Assistance Act.

This section would also provide limitations on profits for rental
and transitional housing. Aggregate monthly rental for each
project cannot exceed operating costs of the project plus a 6
percent return on the equity investment of the project owner. As
well, any nonprofit organization that receives assistance under
this subtitle must agree to use any profit received from the
operation, sale, or other disposition of the project for the
purpose of providing housing for low- and moderate-income
families. Profit-motivated partners in a nonprofit partnership
may receive no more than a 6 percent return on their equity
investment from project operations and upon disposition of the
project, no more than an amount equal to their initial equity
investment plus a return on that investment equal to the increase
in the Consumer Price Index for the geographic location of the
project since the time of the initial investment of such partner
in the project.

This section would require that each homeownership project that
receives assistance under this subtitle to comply with the
requirements of either subtitle B or subtitle C of the HOPE
title.

This section would forbid the conveyance of an ownership interest
in a project receiving assistance unless the instrument of
conveyance requires the subsequent owner to comply with the same
restrictions imposed upon the original owner.

The Secretary could waive the requirements of subsection (b) to
allow the conversion of a transitional housing project to a
permanent housing project if such housing would meet the
requirements for residential rental housing specified in this
section.

Finally, any project receiving assistance would have to comply
with the requirements of this section for the remaining useful
life of the property.

Additional program requirements.-Section 456 would set forth the
requirements for an individual to be considered eligible to
participate in a Youthbuild program. The individual must be
between the ages of 16 and 24, inclusive, economically
disadvantaged, and must have dropped out of high school. There
are, however, some exceptions. Instead of being ``economically
disadvantaged,'' participants can be members of low-income
families as long as the number of participants falling into this
category does not exceed 25 percent of the participants receiving
assistance. As well, up to 25 percent of the participants can
have educational needs despite the attainment of a high school
diploma or its equivalent. Any individual selected for full-time
participation must be offered participation for 6 to 24 months.

This section would require that any program receiving assistance
must be structured so that 50 percent of the time spent by
participants in the program be devoted to education services and
activities specified in section 454(b)(4) (B) through (F) of this
subtitle.

This section would make clear that no provision of this subtitle
should be interpreted to authorize any agency, officer or
employer of the U.S. to exercise any direction, supervision, or
control over the curriculum, program of instruction,
administration, or personnel of any educational institution,
school, or school system, or over the selection of library
resources, textbooks, or other printed or published instructional
materials by any educational institution or school system.

This section would require all educational programs and
activities supported with funds under this subtitle, as well as
all standards and procedures with respect to the awarding of
academic credit and certifying educational attainment, to be
consistent with applicable State and local educational standards.

Finally, this section would require that sections 142, 143 and
167 of the Job Training Partnership Act relating to wages and
benefits, labor standards, and nondiscrimination apply to the
programs carried out under this subtitle.

Definitions.-Section 457 would define the following terms used in
this subtitle-``adjusted income'', ``applicant'',
``community-based organization'', ``economically disadvantaged'',
``individual who has dropped out of high school'', ``homeless
individual'', ``housing development agency'', ``income'',
``Indian tribe'', ``institution of higher education'',
``limited-english proficiency'', ``low-income family'', ``very
low-income family'', ``offender'', ``qualified nonprofit
agency'', ``related facilities'', ``Secretary'', ``State'',
``Transitional Housing'', ``Youthbuild Program''.

Management and technical assistance.-Section 458 would permit the
Secretary to enter into contracts with a qualified public or
private nonprofit agency to provide assistance in the management,
supervision, and coordination of programs receiving assistance
under this title. This section allows the Secretary to enter into
contracts to provide appropriate training, information and
technical assistance to sponsors of programs assisted under this
title. Technical assistance may be provided in the development of
program proposals and the preparation of applications for
assistance to eligible entities which intend or desire to submit
applications. Community-based organizations would be given first
priority in the provision of assistance. The Secretary will
reserve 5 percent of the amounts available in each fiscal year to
carry out the assistance mentioned above.

Contracts.-Section 459 would require each Youthbuild program to
carry out the services and activities under this subtitle either
directly or through arrangements or contracts with JTPA
designated administrative entities designated, State and local
educational agencies, institutions of higher education, State and
local housing development agencies, or with other public agencies
(including agencies of Indian tribes) and private organizations.

Regulations.-This section would require HUD to issue any
necessary regulations.

                   TITLE V-HOUSING ASSISTANCE

              SUBTITLE A-PUBLIC AND INDIAN HOUSING

Sec. 501-Authorizations

This section would authorize various public housing programs for
each of the fiscal years 1993 and 1994.

Subsection (a) would authorize public housing operating subsidies
at approximately $2.5 billion for fiscal year 1993 and
approximately $2.6 billion for fiscal year 1994.

Subsecton (b) would authorize the public housing vacancy
reduction program at $25 million for each of fiscal years 1993
and 1994.

Subsection (c) would authorize funds for public housing resident
management at $5 million for each of fiscal years 1993 and 1994.

Subsection (d) would authorize funds for public housing family
investment centers at approximately $26.9 million for fiscal year
1993 and approximately $27.8 million for fiscal year 1994.

Subsection (e) would authorize funds for public housing early
childhood development grants at $15.7 million for fiscal year
1993 and approximately $16.2 million for fiscal year 1994.

Subsection (f) would authorize the Indian public housing early
childhood development demonstration program at $5.2 million for
fiscal year 1993 and approximately $5.4 million for fiscal year
1994.

Sec. 502-Reform of public housing management

This section would amend 6(j) of the United States Housing Act of
1937 to give HUD additional powers, resources and mandates to
reform and, if necessary, take over troubled public housing
agencies.

Subsection (a) would require the Secretary, upon designating a
PHA as troubled, to provide for an immediate, independent
assessment by a team of experts of the management situation of
the PHA. In conducting its review, the assessment team would be
required to consult with the residents as well as with public and
private entities in the jurisdiction in which the public housing
is located. The assessment team would be required to provide the
Secretary and the PHA with a written report containing
recommendations for management improvements that are necessary to
eliminate or remedy existing deficiencies. The section would
require the Secretary to review the assessment team's report and
consult with the assessment team before entering into the HUD/PHA
agreement required under existing law. The section would also
require that such agreements set forth a plan for enhancing
resident involvement in the management of the public housing
agency, including resident representation on the governing body
of the agency.

Subsection (b) would clarify the provision in existing law that
gives HUD the power to select private management agents for
developments administered by a troubled PHA. The subsection would
clarify that such management agents could be selected by existing
public housing tenants through administrative procedures
established by the Secretary. The subsection would also give HUD
a new tool to remedy troubled management-permitting HUD to
solicit competitive proposals from non-troubled PHAs and private
construction management firms to oversee implementation of the
public housing modernization program. Finally, the subsection
would permit residents of public housing administered by a
troubled PHA to petition the Secretary to take one or more of the
remedial actions specified in law. The Secretary would be
required to respond to such petitions in a timely manner with a
written description of the actions (if any) the Secretary plans
to take and, where applicable, the reasons why such actions
differ from the course proposed by the residents.

Subsection (c) would amend existing law to require HUD to take
one or more of the remedial actions specified in law (e.g.
seeking appointment of receiver, hiring management agents)
against troubled PHAs that have (1) been troubled for 3
consecutive years, or (2) are acting in a manner that is
contributing to the substantial deterioration of living
conditions in public housing projects. Residents of a troubled
PHA would be permitted to petition the courts for the appointment
of a receiver if the Secretary fails to take remedial actions
when the conditions described above are present. HUD would also
be permitted to give receivers and other entities selected or
appointed such assistance as is necessary to remedy the
substantial deterioration of living conditions in individual
public housing developments or other related emergencies that
endanger the health, safety and welfare of the residents.

Subsection (d) would permit the Secretary to set-aside
$25,000,000 from the comprehensive grant program for each of
fiscal years 1993 and 1994 to carry out management reform and
other activities in troubled PHAs.

Subsection (e) would expand the reporting requirements under
existing law to include an accounting of funds that have been
expended to support management reform in troubled PHAs.

Sec. 503-Revitalization of Severely Distressed Public Housing

Section 503 would establish a new section 24 of the United States
Housing Act of 1937 to address the housing needs of public
housing projects that are severely distressed or substantially
vacant. Subsections 24(a) through 24(j) would create a new
program to revitalize the most distressed public housing
developments by involving residents and community groups in
comprehensive planning, major reconstruction, supportive service
and management reform efforts. Subsections 24(k) through 24(w)
would create a new program-entitled Take the Boards Off Public
Housing-to transfer vacant developments, or buildings within
these developments, currently owned by troubled public housing
agencies, to other specified entities in order to return this
housing to productive use.

Section 24(a) would authorize the Secretary to make planning
grants to enable applicants to develop revitalization programs
for severely distressed public housing projects and
implementation grants to carry out these programs.

Section 24(b) would require PHAs, not later than 90 days after
the date of enactment of this Act, to identify those public
housing projects that they consider to be severely distressed.
The Secretary would review the projects identified by PHAs to
ascertain whether the projects meet the statutory definition of
``severely distressed''. The subsection would require the
Secretary to publish a list of severely distressed public housing
not later than 180 days after the date of enactment of this Act.
The subsection would also require the Secretary to establish
procedures for PHAs to appeal the Secretary's determination that
a project identified by a PHA is not severely distressed.

Section 24(c) would authorize the Secretary to make planning
grants to applicants to help develop revitalization programs for
severely distressed public housing. Planning grants would
generally be limited to $200,000 per project; the Secretary could
approve a grant in a higher amount for good cause. Planning
grants could be used for: (1) studies of the different options
for revitalization, including the feasibility, costs and
neighborhood impact of such options; (2) the provision of
technical or organizational support to ensure resident
involvement in all phases of the planning and implementation
processes; (3) improvements to stabilize the development,
including security investments; (4) the conducting of workshops
to determine the attitudes and concerns of the neighboring
community; (5) preliminary architectural and engineering work;
(6) planning for economic development, job training, and
self-sufficiency activities that promote economic
self-sufficiency of residents; (7) designing a suitable
replacement housing plan where applicable; and (8) planning for
necessary management improvements; and (9) preparation of an
application for an implementation grant.

Section 24(c) would also require applications for planning grants
to be submitted in such form and in accordance with such
procedures as the Secretary establishes. Applications would be
required to contain at a minimum: (1) a request for the grant;
(2) a description of the applicant and its qualifications; (3) a
description of the project involved, and a description of the
tenants; (4) a certification that the proposed activities are
consistent with a housing affordability strategy; and (5) a
certification that the applicant will comply with the
requirements of the Fair Housing Act, title VI of the Civil
Rights Act of 1964, section 504 of the Rehabilitation Act of
1973, and the Age Discrimination Act of 1975, and will
affirmatively further fair housing.

Finally, Section 24(c) would require the Secretary to establish
selection criteria for a national competition which would
include: (1) the qualifications or potential capabilities of the
applicant; (2) the extent of tenant interest and involvement in
the development of a revitalization program; (3) the extent of
involvement of local public and private entities in the
development of the revitalization program and in the provision of
supportive services to project residents; (4) the potential for
developing a successful and affordable revitalization program and
the suitability of the project for such a program; (5) national
geographic diversity among selected applications; (6) whether the
development is located in a federally designated enterprise zone;
(7) the extent of the need for and potential impact of the
revitalization program; and (8) such other factors which the
Secretary determines to be appropriate. The subsection would
require the Secretary to notify each applicant as to the
disposition of an application not later than 6 months after an
application is submitted.

Section 24(d) would authorize the Secretary to make
implementation grants to applicants to carry out revitalization
programs for severely distressed public housing. Implementation
grants could be used for the following eligible activities: (1)
architectural and engineering work; (2) the redesign,
reconstruction or redevelopment of the severely distressed
project, including the site on which the project is located; (3)
administrative costs of the applicant; (4) any necessary
temporary relocation of tenants; (5) legal fees; (6) economic
development activities; (7) necessary management improvements;
and (8) transitional security activities.

Section 24(d) would also require applications for implementation
grants to be submitted in such form and in accordance with such
procedures as the Secretary establishes. Applications would be
required to contain at a minimum: (1) a request for the grant,
specifying its amount and proposed uses; (2) a description of the
applicant and a statement of its qualifications; (3)
identification and description of project involved and a
description of the composition of its tenants; (4) a
certification that the proposed activities are consistent with
the housing strategy under section 105 of this Act; and (5) a
certification that the applicant will comply with the
requirements of the Fair Housing Act, title VI of the Civil
Rights Act of 1964, section 504 of the Rehabilitation Act of
1973, and the Age Discrimination Act of 1975, and will
affirmatively further fair housing.

Finally, Section 24(d) would require the Secretary to establish
selection criteria for a national competition which would
include: (1) the qualities or potential capabilities of the
applicant; (2) the extent of tenant interest and involvement in
the development of a revitalization program; (3) the extent of
involvement of local public and private entities in the
development of the revitalization program and in the provision of
supportive services to project residents; (4) the potential for
developing a successful and affordable revitalization program and
the suitability of the project for such a program; (5) national
geographic diversity among selected applications; (6) whether the
development is located in a federally designated enterprise zone;
(7) the extent of the need for and potential impact of the
revitalization program; and (8) such other factors which the
Secretary determines to be appropriate. The subsection would
require the Secretary to notify each applicant as to the
disposition of an application not later than 6 months after an
application is submitted.

Section 24(e) would permit the Secretary to waive or revise rules
governing rents, income eligibility and other areas of public
housing management to enhance the long-term viability of severely
distressed public housing that is revitalized. The subsection
would also permit a PHA to select tenants in accordance with a
local system of preferences, instead of the existing system which
establishes a 70/30 split between federal and local preferences.
A local preference system would need to be established in writing
and respond to local housing needs and priorities as determined
by the PHA. Finally, the subsection would require the PHA to hold
one or more public hearings to obtain the views of low-income
tenants and other interested parties.

Section 24(f) would require the Secretary to establish cost
limitations on eligible activities and would cap at $250,000 the
amount that could be expended on economic development activities.

Section 24(g) would modify the replacement housing requirements
government housing units that are demolished in connection with a
revitalization program. Applicants would be required to provide 1
replacement unit for every 2 public housing units demolished
instead of the one-for-one requirement generally applicable under
section 18 of the United States Housing Act of 1937.

Section 24(h) would require the Secretary to establish an Office
of Severely Distressed Public Housing Revitalization.

Section 24(i) would define the key terms of the program.

An ``applicant'' would mean: (1) a PHA that has not been
designated as troubled; (2) a PHA, private management agent or
receiver that has been appointed to manage all or a portion of a
troubled PHA's inventory; (3) a troubled PHA, if such agency acts
in concert with a private nonprofit organization, resident
management corporation or other approved entity.

The term ``private nonprofit organization'' would have the same
general meaning as it does in the HOME and HOPE programs. It
would mean any private nonprofit organization (including State or
locally chartered nonprofit organizations) that is incorporated
under State or local law; has no part of its net earnings inuring
to the benefit of its members; complies with HUD-established
standards of financial accountability; and has among its purposes
significant activities related to the provision of decent housing
that is affordable to low-income families.
The term ``public housing agency'' would have the same meaning as
it does in the 1937 Act, except that it would not include Indian
Housing Authorities.

The term ``resident management corporation'' would mean a
resident management corporation that has been established in
accordance with section 20 of the 1937 Act.

The term ``severely distressed public housing'' means a public
housing project that either (1) meets several statutory criteria
(e.g. requires major redesign, reconstruction or redevelopment,
is occupied predominantly by distressed families, is a location
for recurrent criminal activity, has suffered from severe
management deficiencies); or (2) meets the definition of eligible
housing under section 24(l).

Section 24(j) would require the Secretary to submit an annual
report to the Congress. The report would set forth: (1) the
number, type and cost of public housing units revitalized under
this section; (2) the status of projects identified as severely
distressed under this section; (3) the amount and type of
financial assistance provided under and in conjunction with this
section; and (4) the recommendations of the Secretary for
statutory and regulatory improvements to the program established
by this section.

Section 24(k) would provide the basic program and funding
authority for the Take the Boards Off Public Housing program. The
subsection would authorize the Secretary to transfer vacant or
substantially vacant developments or buildings currently owned by
troubled PHAs to two classes of applicants. First, private
nonprofit organizations representing public housing residents
could own the housing and use it as assisted housing. Second,
States, units of general local government, and other PHAs could
own the housing or transfer it to a private nonprofit for use as
affordable rental or homeownership housing. The subsection would
also authorize the Secretary to make redevelopment grants to
eligible applicants.

Section 24(l) would define housing eligible for transfer under
this program. The subsection would limit housing which could be
transferred under the program to developments or buildings within
developments owned by troubled PHAs that had a vacancy rate of
50% or more. Individual buildings could only be transferred if
the Secretary determined that they were sufficiently separable
from the rest of the development to be operated independently.
For example, separate or separable utilities would be necessary.
Housing that was vacant because it was being modernized would not
be eligible for this program. In order for the housing to be
exempt, the Secretary would have to determine that not only has
it received modernization funding, but also that the
modernization is on schedule and would result in full occupancy
when completed. The subsection would also require the Secretary
to prepare periodically a list of developments that have vacancy
rates of 20% or more and make it available to potential
applicants. The list would be for information purposes, so that
potential applicants know the identity of possibly eligible
housing, since developments with a vacancy rate of 20% may well
have individual buildings with vacancy rates of 50% or more.
Applicants could propose other developments or buildings as long
as the housing were otherwise eligible.

Section 24(m) would define the entities eligible to acquire
housing under the Take the Boards Off Program and the conditions
under which they could acquire ownership. The subsection would
allow priority and other applicants to submit application for
housing transfers and redevelopment grants. The subsection would
permit another applicant to apply for a property only if that
applicant had provided adequate public notice of its intention to
do so. The applicant would not be able to apply for a six month
period from the date this notice is provided. The subsection
would give resident councils seeking transfer of the management
of this housing under Choice of Management-and priority
applicants seeking transfer of the housing under the Take the
Boards Off program-a preference over other applicants to manage
or acquire the housing. This preference would be retained as long
as the resident council or priority applicant continued to have
an approved application, as determined by the Secretary. However,
if there were no resident council or priority applicant, and an
other applicant submitted an application which was approved but
not funded, a resident council or priority applicant would lose
its preference if it applied in subsequent funding rounds.

Section 24(n) would authorize the Secretary to make redevelopment
grants to eligible applicants as part of the transfer of a
property to an ownership entity under the program. The subsection
would require HUD to establish, through regulation, eligible
activities for these grants and the requirements governing their
use. The requirements of section 14 of the United States Housing
Act of 1937 concerning modernization of public housing would not
apply to redevelopment grants. However, the per-unit cost
limitations for rehabilitation under the Comprehensive Grant
program would apply to these development activities. In addition,
eligible activities could not include any activity not currently
eligible under section 14. HUD would be able to determine that
certain activities currently eligible under section 14 (such as
PHA-wide activities) would not be appropriate for eligibility
under this program. Finally, the subsection would require each
other applicant that applies for redevelopment funding to assure
that contributions equal to not less than 25% of the cost of
eligible activities from sources other than redevelopment grants.
Contributions would be in such form as HUD approves.

Section 24(o) would describe the application procedures, minimum
application requirements, and selection criteria for applications
submitted by priority applicants and other applicants. The
subsection would require applicants to submit an application to
HUD for the acquisition of eligible housing and for redevelopment
grants to be used in conjunction with the acquisition. Priority
applicants would be required to request a redevelopment grant.
Other applicants could apply, without such a request, as long as
they could demonstrate that they had secured all funding needed
to redevelop the housing. The Secretary, would establish, by
regulation, specific application requirements and the procedure
for approving applications.

Section 24(o) would require the Secretary to establish rating
criteria for a national competition for applications from
priority applicants and other applicants. While priority
applications would be rated separately from other applications,
using rating criteria tailored to each kind of application,
selections would be made based on the rank order with both kinds
of applications ranked together.

Section 24(o) would establish the minimum application
requirements and rating criteria for applications for priority
applicants. Priority applicants would have to submit applications
that contained, at a minimum: (1) a description of the applicant
demonstrating that it qualifies as a priority applicant; (2)
documentation that the applicant has the capacity to own and
operate the property (or if an entity other than the applicant
will operate the property, its capacity to do so must be shown);
(3) documentation that the applicant has the capacity to carry
out the proposed redevelopment (or if an entity other than the
applicant will carry out the redevelopment, its capacity to do so
must be shown; (4) documentation of support by the affected
residents for the program; (5) evidence that the property is
eligible for transfer under this program; (6) a plan for carrying
out the proposed redevelopment; (7) a plan for the continued
management and operation of the property; (8) the basis for the
redevelopment funding request, including an estimate of the
housing's need for modernization under the PHA's comprehensive
plan and explanation, if necessary, of why a higher amount than
shown in the comprehensive plan is being requested; (9) if the
applicant proposes to administer a self-sufficiency program for
the residents, a description of the program and evidence of
commitment of resources to it; (10) an analysis showing that the
proposed redevelopment is feasible and will result in full
occupancy of the redevelopment in three years or such shorter
time proposed by the applicant; (11) if funds from other sources
will be used, evidence of commitment of these funds; and (12) a
certification that the applicant will comply with the Fair
Housing Act, title VI of the Civil Rights Act of 1964, section
504 of the Rehabilitation Act of 1973, and the Age Discrimination
Act of 1975, and will affirmatively further fair housing.
Section 24(o) would also require the Secretary to establish
rating criteria for the award of these grants to priority
applicants. At a minimum, rating criteria would include: (1) the
extent of resident support for the program; (2) the extent of the
capacity of the applicant (or other relevant entity) to own and
operate the housing; (3) the extent of the capacity of the
applicant (or other relevant entity) to carry out the proposed
redevelopment; (4) the quality of the proposed redevelopment; (5)
the quality of the plan for operating the housing; (6) the extent
to which the proposed redevelopment will result in the long-term
viability of the housing at a reasonable cost; (7) the extent to
which an economic self-sufficiency program is proposed for the
residents; and (8) the extent to which funds from other sources
will be provided for eligible redevelopment activities.

Section 24(o) would also establish minimum application
requirements and rating criteria for applicants from other
applicants. Other applicants would have to submit applications
that contained, at a minimum: (1) a description of the entity
that would own the housing; (2) documentation that the applicant
has the capacity to own and operate the property (or if an entity
other than the applicant will operate the property, its capacity
to do so must be shown); (3) documentation that the applicant has
the capacity to carry out the proposed reoccupancy or
homeownership plan (or if an entity other than the applicant will
carry out the plan, its capacity to do so must be shown); (4)
documentation for support by the affected residents for the
program; (5) evidence that the property is eligible for transfer
under this program; (6) if the applicant requests a redevelopment
grant: documentation of the capacity of the ownership entity (or
other relevant entity) to carry out the redevelopment and the
basis for the redevelopment funding request, including an
estimate of the housing's need for modernization under the PHA's
comprehensive plan, an explanation, if necessary, of why a higher
amount than shown in the comprehensive plan is being requested,
and an analysis that the proposed redevelopment is feasible; (7)
if the applicant will provide all the funding for redevelopment
from other sources: evidence of the commitments of the other
funds proposed to be used in conjunction with the transfer, an
analysis that the proposed redevelopment is feasible, and
documentation of the capacity of the ownership entity (or other
relevant entity) to carry out the redevelopment; (8) a
description of the proposed use of the housing and the
composition of prospective residents or homeowners; (9) for
housing to be used as rental housing, a reoccupancy plan,
including a schedule for full reoccupancy within three years
after the ownership entity acquires the housing; (10) for housing
proposed for homeownership for low-income families, a
homeownership program, including a schedule for transfer of all
units (other than those occupied by families who resided in the
housing when ownership was transferred and who do not choose to
or are not qualified to purchase) within three years after the
ownership entity acquires the housing; (11) for housing proposed
for homeownership, a description of the financing for families to
purchase their ownership interests; (12) the basis of the request
for section 8 vouchers for replacement housing and for
transitional operating subsidies; (13) if the applicant proposes
to administer a self-sufficiency program for the residents, a
description of the program and evidence of commitment or
resources to it; (14) an analysis showing that the proposed
reoccupancy plan for homeownership program are feasible and will
result in full occupancy of the development in three years or
such shorter time proposed by the applicant; (15) if the
applicant proposed to use funds other than under this subtitle,
evidence of commitment of those funds; (16) a certification that
the activities are consistent with the appropriate approved
Comprehensive Housing Affordable Strategy; (17) a certification
that the applicant will comply with the Fair Housing Act, title
VI of the Civil Rights Act of 1964, section 504 of the
Rehabilitation Act of 1973, and the Age Discrimination Act of
1975, and will affirmatively further fair housing; and (r) a
description of and commitment for the resources that are expected
to be made available to provide the matching funding required
under subsection (n).

Section 24(o) would require the Secretary to establish rating
criteria for the award of these grants to nonpriority applicants.
At a minimum, rating criteria would include: (1) the extent of
resident support for the program; (2) the extent of the capacity
of the applicant (or other relevant entity) to own and operate
the housing; (3) the extent of the capacity of the applicant (or
other relevant entity) to carry out the proposed redevelopment;
(4) the quality of the redevelopment plan; (5) the extent to
which the proposed redevelopment will result in the long-term
viability of the housing at a reasonable cost; (6) the quality of
the proposed reoccupancy plan or homeownership program; (7) if
special needs populations, such as the homeless, are proposed as
the new residents, the extent to which proposed services are
appropriate to meet the needs of these populations; (8) the
extent to which funding for redevelopment activities will be
provided by other sources; and (9) the extent to which an
economic self-sufficiency program is proposed for the residents.

Section 24(p) would establish the requirements for operation of
housing acquired by priority applicants. The subsection would
create a right to acquire the property from the public housing
agency. It would also create a contractual relationship between
HUD and the ownership entity under which the entity would receive
redevelopment funding, operating subsidies and capital
improvement funding (the accrual portion of the Comprehensive
Grant formula) and be required to carry out its responsibilities
according to the terms of the contract. While many of the
requirements that apply to public housing would apply to this
housing as well, the subsection would eliminate the application
of any public housing requirements to developments transferred to
priority purchasers unless these requirements were specifically
contained in this subtitle. These responsibilities include: (1)
maintaining the units in decent, safe, and sanitary condition,
based on standards established by the Secretary; (2) applying the
same income eligibility rules that generally are applicable to
public housing; (3) determining the amount of rent families must
pay in accordance with the regular public housing rent rules; (4)
using a tenant selection plan that is consistent with applicable
fair housing and civil rights laws; (5) selecting families based
on the preferences that generally apply to the public housing
program; and (6) terminating tenancy based on procedures similar
to those used in the Section 8 New Construction program which,
unlike the procedures for public housing, do not require a
hearing administered by the PHA before pursuing termination in
court.

Section 24(p) would also authorize the Secretary to make
operating subsidies for the housing available directly to the
ownership entity. The amount to be made available would be based
on the share of the operating subsidy that the housing would
receive if it were not transferred (including the share of any
reserves established by the PHA). The operating subsidy would be
reduced following the method currently in law governing a project
that leaves a PHA's inventory, which would reduce the amount
payable to the PHA by essentially the same amount that is paid to
the ownership entity. Utilities reimbursements and income
calculations for these projects would be handled as they are
under the Performance Funding System.

Section 24(p) would also authorize the Secretary to make capital
improvements funding directly available to the ownership entity.
The amount to be made available would be based on the share that
the housing would receive under the accrual portion of the
Comprehensive Grant formula if it were not transferred. The PHA's
Comprehensive Grant allocation beginning in the year following
the transfer would be reduced following the method currently in
law governing a project that leaves a PHA's inventory. These
provisions establish a three-year phase-down of the amount of
Comprehensive Grant formula funding attributable to the housing.
The subsection would require the Secretary to establish
requirements for the use of redevelopment grants and capital
improvement funding. The requirements of section 14, such as the
preparation of five-year plans, would not apply to housing
transferred under this program. However, eligible activities
could not include any activity nor currently eligible under
section 14.

Section 24(p) would also establish that replacement housing would
not be required in connection with transfers to priority
applicants.

Section 24(p) would also require the ownership entity to operate
the housing as assisted housing unless the Secretary approved a
request for an alternative use. Such a request could only be
approved if the Secretary determines that the housing is no
longer suitable or not needed as housing for low-income families
and that the alternate use would principally benefit low-income
families. While the provisions governing demolition and
disposition of public housing would not apply to these requests,
the Secretary would still be required to provide to the PHA
one-for-one replacement housing in the form of section 8 vouchers
if this housing subsequently left the assisted housing stock. A
request for a subsequent alternative use could not be approved
unless HUD provided the replacement housing.

Section 24(p) would also establish that housing transferred to
priority applicants would continue to be eligible for
homeownership opportunities under the HOPE for Public and Indian
Housing program and section 5(h). This subsection would also
allow applicants who would carry our approved self-sufficiency
programs to adopt the policies on maximum rents, escrow savings
accounts, and the phasing-in of increases in family income that
apply to the Family Self-Sufficiency program.

Section 24(p) would also require the ownership entity to obtain
acceptable fidelity bonding and insurance to protect HUD from
loss, theft, embezzlement, and fraudulent actions by the
ownership entity or its employees.

Finally, Section 24(p) would prohibit the PHA from involuntarily
displacing residents of the housing from the date on which the
application for the program is submitted through the date of
transfer or disapproval of the application. Involuntary
displacement would not include temporary relocation of residents
by the PHA due to modernization activities.

Section 24(q) would establish the requirements for operation of
housing acquired by other applicants. The subsection would create
a right to acquire the property from the public housing agency.
The subsection would create a contractual relationship between
HUD and the ownership entity under which the entity would receive
redevelopment funding and transitional operating subsidies and be
required to carry out its responsibilities in accordance with
subsection (r) (for rental projects) or subsection (s) (for
homeownership programs) and to fulfill the terms of the contract
for operating the housing as affordable housing. In those cases
in which the applicant and the ownership entity would be
different, this subsection would establish a contract between HUD
and the applicant under which the applicant would receive
operating subsidy and redevelopment funding and promptly transfer
the amounts to the ownership entity and which would require the
applicant to have a contract with the ownership entity with the
same terms and conditions as HUD would have if there were a
direct contract between HUD and the ownership entity. This
subsection would also require the applicant to monitor the
obligations of the ownership entity and take any necessary
sanctions if the entity is in violation of its contract.

Section 24(q) would also eliminate the application of any public
housing requirements to developments funded under this program.
Current residents would be protected through non-displacement
provisions and through transitional operating subsidies or
vouchers to subsidize their rents so that they would be able to
remain in the housing and pay no more than 30% of their adjusted
income for rent, even if this housing would no longer serve as
deeply targeted assisted housing.

Section 24(q) would authorize the Secretary to provide
transitional operating subsidies to housing transferred to other
applicants for a period approved by HUD, which may generally not
exceed three years from the date of transfer. The transitional
operating subsidy would be phased out generally in accordance
with the reoccupancy plan or homeownership program. The amount
provided would be based on the share that the housing would
receive if it were not transferred (including the share of any
reserves established by the PHA), and the amount of the PHA's
operating subsidy would be reduced by essentially the same amount
that is paid to the other applicant. However, no subsidies would
be provided for units that were occupied at transfer but later
became vacant, or were vacant at transfer but later became
occupied. In the latter case, reoccupied units would be covered
by the rents or homeownership charges governed by subsections (r)
and (s), respectively, and would no longer need operating
subsidy. The Secretary would also be able to terminate subsidies
on vacant units if the units remained vacant for periods longer
than specified in the reoccupancy plan or homeownership program.

Section 24(q) would require the provision of replacement housing
in connection with transfers to other applicants. Upon transfer,
the housing would no longer be considered deeply targeted
assisted housing. Thus, because there could be a diminution in
the deeply targeted assisted housing stock in the locality, all
units transferred would have to be replaced with section 8
vouchers.

Section 24(q) would define how these replacements vouchers could
be used. The PHA would be required to make these vouchers
available to existing eligible residents after the period when
the development received transitional operating subsidies for use
in that development or to move elsewhere. Vouchers for these
families would be provided in accordance with the reoccupancy
plan. The PHA would also be able to condition the initial use of
vouchers for units in this housing, to make the units affordable
to families that agree to move into them. This conditional use
would be similar to that applied to the section 8 certificates
that were awarded in conjunction with the Rental Rehabilitation
Grant program when that program began.

Finally, Section 24(g) would prohibit the PHA from involuntarily
displacing residents of housing for which an application for
transfer has been submitted. This prohibition would continue
through either the date of actual transfer or the date of
disapproval of an application. Involuntary displacement would not
include temporary relocation by the PHA due to modernization
activities.

Section 24(r) would establish the basic requirements under which
housing transferred to other applicants could be operated as
rental housing. The subsection would require that these
requirements apply for a 15-year period from the date of
transfer. The subsection would require that residents of the
housing on the date of the transfer pay rent in accordance with
rent and income rules in section 3(a) during the period that
transitional operating subsidies were provided. At the end of
this period, these families would receive vouchers from the PHA
that previously owned the housing to enable them to afford to
remain in the housing or move to other housing.

Section 24(r) would also govern income limits for admissions and
rents charged for families housed after the transfer. These
families would not be permitted to have incomes, at initial
occupancy, above 60% of the median income for the area, with
adjustments for family size. (The subsection would allow the
Secretary to permit higher or lower income ceilings if these
variations were necessary because of high construction costs or
Fair Market Rents, or unusually high or low family incomes, as is
generally the case for HUD income limits.)

Section 24(r) would prohibit the ownership entity from refusing
to accept section 8 certificate or voucher holders as residents
solely because they receive this assistance. The subsection would
also require that a resident and an ownership entity execute a
lease for the dwelling that shall be for at least a one-year
period. The terms and conditions of the lease would be prescribed
by the Secretary through regulations.

Section 24(r) would also establish the conditions and procedures
for termination of tenancy. An ownership entity could not
terminate or refuse to renew a lease except for serious and
repeated violations of the terms and conditions of the lease, or
for violation of applicable Federal, State, or local law, or for
good cause. A resident would have to be provided with a written
notice at least 30 days before the proposed termination.

Section 24(r) would also require the ownership entity to adopt
written resident selection policies for selecting families that
give reasonable consideration to the housing needs of families
that qualify for the Federal (and local) preferences in section
6(c)(4)(A). Residents would have to be selected based on their
chronological place on a waiting list, to the extent practicable.

Finally, Section 24(r) would require the housing to be maintained
in compliance with all applicable housing quality standards and
local codes, as determined by HUD.

Section 24(s) would establish the basic requirements under which
housing could be converted to homeownership. The subsection would
require these requirements to apply for a 10-year period from the
date of transfer. The homeownership program would cover all units
in the property except those occupied by residents who were
living there before and at the time of transfer who have not
chosen, or are not qualified, to purchase their units. These
families would be allowed to remain in their units as renters and
the ownership entity would receive transitional operating subsidy
to subsidize their rents. The families would also be able to
receive vouchers to permit them to remain in the development
after transitional operating subsidies had ceased. Sales to
individual eligible families could be through any arrangement
determined by the Secretary to be appropriate, such as
cooperative ownership (including limited equity cooperatives) or
fee simple ownership (including condominiums).

Section 24(s) would also require that all sales be affordable,
with families not required to pay more than 30% of their adjusted
monthly income for principal, interest, taxes, and insurance. The
subsection would enable eligible families to purchase units with
any source of financing, including conventional mortgage loans
and FHA-insured mortgages. The subsection would prevent
non-purchasing residents who resided in the housing at the time
of transfer from being evicted because of a homeownership
program.

Section 24(s) would also limit any undue profit which the initial
purchaser could receive upon selling the unit. Ownership entities
would be given flexibility to structure the recapture provisions
in a variety of ways. The legislation would permit: (1) a family
to retain a portion of the net proceeds of the sale on a sliding
scale over a 10-year period; (2) a plan consistent with section
21(a)(4)(D) of the 1937 Act, which limits the amount received by
a family to the total of the downpayment, the value of
improvements paid for by the family (plus contributions made
through ``sweat equity''), and an allowance for inflation applied
to the downpayment; (3) a loan (promissory note secured by a
mortgage) for the difference between the fair market value and
the purchase price, which the family must pay at the time of
resale to the ownership entity; and (4) any other arrangement
approved by the Secretary that prevents undue profits from
accruing to the homeowner for at least 10 years.
Finally, Section 24(s) would require the housing to comply with
all applicable housing quality standards and local codes, as
determined by the Secretary, at the time of transfer to the
homeowners.

Section 24(t) would define the eligibility of resident management
corporations and resident councils to become ownership entities.
The section would require that resident management corporations
and resident councils demonstrate, in a manner determined by the
Secretary, their ability to effectively and efficiently operate
public housing or arrange for operation by a qualified management
entity in order to be eligible as ownership entities. This
demonstration would have to include, as part of the evidence, the
most recent financial audit of the Resident Management
Corporation or resident council.

Section 24(u) would establish monitoring and enforcement
requirements for the program. The subsection would require the
Secretary to monitor priority applicants and other applicants
that directly own the housing and enforce the contracts between
HUD and these entities. The subsection would also require other
applicants that do not directly own the housing to monitor the
activities of the ownership entities that actually do own the
housing and enforce the contracts between themselves and these
entities. These applicants would be required to undertake, at
least annually, on-site compliance reviews of their ownership
entities' activities. The Secretary would also be authorized to
take any necessary actions to enforce these contracts. Finally,
the subsection would establish requirements for records, reports,
and audits for the ownership entity and the applicant, including
access to these records by the Secretary and the Comptroller
General and submission of any reports required by HUD, including
annual financial audits.

Section 24(v) would contain standard nondiscrimination
provisions. These provisions would be similar to those which
apply to the public housing program.

Section 24(w) would require HUD to continue to pay the debt
service on any housing transferred under this program.

Section 24(x) would define the key terms of the program.

An ``applicant'' would mean both priority applicants and other
applicants.

The term ``eligible family'' would apply only to families
purchasing under a homeownership program and would mean a family
that resides in the housing on the date of transfer or a family
with an adjusted income of less than 80% of the median income for
the area.

The term ``eligible housing'' would mean a public housing
project, or one or more buildings within a project, owned by a
troubled PHA.

The term ``other applicant'' would mean a State, unit of general
local government, or other public housing agency that proposed to
use the housing to provide affordable rental or homeownership
opportunities to low-income families.

The term ``ownership entity'' would mean either a priority
applicant that assumes ownership of the housing for its continued
use as assisted housing or an other applicant that assumes
ownership of the housing for its use as affordable rental or
homeownership housing.

The term ``priority applicant'' would mean a private non-profit
organization that represents the current residents of the housing
and proposed to retain the housing as assisted housing. A
priority applicant could also represent former residents of the
development or current residents of any development owned or
operated by the PHA.

The term ``private nonprofit organization'' would have the same
general meaning as it does in the HOME and HOPE programs. It
would mean any private nonprofit organization (including State or
locally chartered nonprofit organizations) that is incorporated
under State or local law; has no part of its net earnings inuring
to the benefit of its members; complies with HUD-established
standards of financial accountability; and has among its purposes
significant activities related to the provision of decent housing
that is affordable to low-income families. Resident management
corporations and project-level resident councils would be
considered private nonprofit organizations.

The term ``public housing agency'' would have the same meaning as
it does in the 1937 Act, except that it would not include Indian
Housing Authorities.

The term ``public nonprofit organization'' would mean any public
nonprofit organization, except the PHA that owns the housing.

The terms ``resident council'' and ``resident management
corporation'' would have the same general meanings as they do
under the title III of the 1937 Act (the HOPE I program).

The term ``State'' would have the same meaning as it does in the
HOME program, except that it would not include territories and
possessions of the United States, the Trust Territory of the
Pacific Islands, and Indian tribes.

The term ``troubled public housing agency'' would mean a PHA that
owns or operates 250 or more units of public housing and has been
designated by HUD as a troubled PHA for the Federal current
fiscal year and the past two Federal fiscal years. This
designation could have been made either under the Public Housing
Management Assessment program or, before implementation of that
program, through any other procedure HUD used to designate
troubled PHAs.

The term ``unit of general local government'' would have the same
meaning as it does in the HOME program.

Sec. 504-Choice in management

Section 504 would establish a new section 25 of the United States
Housing Act of 1937 entitled ``Choice in Management''. The new
section would create a program to provide residents of distressed
developments that are owned by troubled public housing agencies
with the choice to have their housing managed by an entity other
than the PHA.

Section 25(a) would title the new section the ``Choice in
Management Act of 1992''.

Section 25(b) would authorize funding for the new program. The
section would permit the Secretary to reserve not more than $50
million from the public housing modernization program to carry
out Choice in Management. The section would also permit the
Secretary to provide technical assistance to public housing
residents and resident councils to help them make informed
choices about their options for alternative management.

Section 25(c) would authorize the Secretary to approve not more
than 15 applications for fiscal years 1993 and 1994 from resident
councils residing in developments or buildings owned by troubled
public housing agencies for the transfer of management functions
from these PHAs to other managers. The section would authorize
the Secretary to make rehabilitation grants and capital
improvements funding to managers under the Choice in Management.

Section 25(d) would authorize the Secretary to make operating
subsidies for the housing directly to the alternative manager.
The amount to be made available would be based on the share of
the operating subsidy that the housing would receive if it
continued to be managed by the PHA (including the share of any
reserves established by the PHA). The operating subsidy would be
reduced following the method currently in law governing a project
payable to the PHA by essentially the same amount that is paid to
the alternative manager. Utilities reimbursements and income
calculation for these projects would be handled as they are under
the Performance Funding System.

Section 25(e) would enable the Secretary to provide
rehabilitation grants as part of the transfer process. These
grants would be awarded through a competitive application
process. The Secretary and the manager for the housing would
enter into a contract governing the use of the funds. The section
would also authorize the Secretary to make ongoing annual capital
improvements funding directly to the manager. The amount to be
made available would be based on the share that the housing would
receive (for both backlog and accrual needs) under the
Comprehensive Grant formula if it were not transferred. The
section would limit the amount of capital improvements funding to
be made available to housing that has been modernized within the
last three years or would be modernized with a rehabilitation
grant as part of the transfer to only the accrual portion of the
Comprehensive Grant formula. Housing that has been recently
modernized would not need to receive the backlog portion of the
formula. This section would reduce the PHA's Comprehensive Grant
allocation beginning in the year following the transfer, using
the method currently in law governing a project that leaves a
PHA's inventory.

Finally, section 25(e) would require the Secretary to establish
requirements for the use of rehabilitation grants and capital
improvements funding. The requirements of section 14, such as the
preparation of five-year plans, would not apply to housing
transferred to alternative managers under this program. However,
eligible activities could not include any activity not currently
eligible under section 14. HUD would be able to determine that
certain activities currently eligible under section 14 (such as
PHA-wide activities) would not be appropriate for eligibility
under this program.

Section 25(f) would describe the procedures and minimum
requirements for applications submitted by resident councils for
transfers of management and for rehabilitation grants. This
section would require resident councils to submit an application
to HUD for the transfer of management and for rehabilitation
grants to be used in conjunction with these transfers. The
Secretary would establish, by regulation, specific application
requirements and the procedure for approving applications. This
section would also require applicant resident councils to give
the PHA a reasonable opportunity to comment on the application
and to present a proposal for continued management by the PHA.
The resident council would be required to give reasonable
consideration to such a proposal.

Section 25(f) would also establish the minimum application
requirements and rating criteria for applications. Resident
councils would have to submit applications that contained, at a
minimum: (1) a description of the resident council and
documentation of its authority; (2) evidence that a majority of
the members of the board of the resident council and a majority
of the residents voted in favor of the transfer (with resident
interest demonstrated through an election supervised by a
disinterested third party); (3) a description of the proposed
ownership entity and documentation that it has the capacity to
manage the property; (4) a plan for carrying out the manager's
responsibilities for managing the housing; (5) evidence that the
property is eligible housing; (6) documentation that the PHA has
been given a reasonable opportunity to comment on the proposed
program and submit a proposal for continued management of the
housing and that the resident council has given reasonable
consideration to such a proposal; (7) if an application is also
requesting a rehabilitation grant, the basis for the
rehabilitation funding request, including the estimate of the
housing's need for modernization under the PHA's comprehensive
plan and an explanation, if necessary, of why a higher amount
than shown in the comprehensive plan is being requested; (8) if
an application does not request a rehabilitation grant, a
demonstration that the housing's need for capital improvements
and replacements can be adequately addressed through the ongoing
capital improvements funding which the housing would receive; (9)
if the applicant proposes to administer a self-sufficiency
program for the residents, a description of the program and
evidence of commitment of resources to it; (10) an analysis
showing that the proposed program will result in the long-term
viability of the housing at a reasonable cost; and (11) a
certification that the applicant will comply with the Fair
Housing Act, title VI of the Civil Rights Act of 1964, section
504 of the Rehabilitation Act of 1973, and the Age Discrimination
Act of 1975, and will affirmatively further fair housing. An
application for a transfer of management for housing that was
more than 50% vacant would have to include a request for
rehabilitation funding.

Section 25(g) would establish the procedures for review and
approval of applications for transfers of management and for
rehabilitation grants. This section would allow the Secretary to
approve applications for transfers that did not request
rehabilitation funds at any time, as long as they met HUD
requirements. The section would also require the Secretary to
hold a national competition for applications that request
rehabilitation grants and establish rating criteria for the award
of these grants. At a minimum, selection criteria would include:
(1) the quality of the plan for rehabilitating the housing; (2)
the extent of the capacity or potential capacity of the proposed
manager to manage the housing and carry out the rehabilitation
plan; (3) the extent to which an economic self-sufficiency
program is proposed for the residents; and (4) the extent to
which the planned rehabilitation will result in the long-term
viability of the housing at a reasonable cost.

Section 25(h) would state the requirements of the contract
between the Secretary and the alternative manager. This section
would require that when the Secretary approves an application for
transfer, the PHA shall permit the manager to carry out all
management responsibilities. The section would require the
Secretary, upon approval of an application for the transfer of
management, to enter into a contract with the new manager. The
contract would give the manager the right to receive operating
subsidies and capital improvements funding for the housing. In
return, it would require the manager to carry out all management
responsibilities for the housing, as required by the Secretary,
as well as the specific requirements enumerated below.

Section 25(h) would also require the manager to carry out the
management responsibilities for public housing that the Secretary
determines would apply to this housing. These responsibilities
would include: (1) maintaining the units in decent, safe, and
sanitary condition, based on standards established by the
Secretary; (2) applying the same income eligibility rules that
generally are applicable to public housing; (3) determining the
amount of rent families must pay in accordance with the regular
public housing rent rules; (4) using a tenant selection plan that
is consistent with applicable fair housing and civil rights laws;
(5) selecting families based on the preferences that generally
apply to the public housing program; and (6) terminating tenancy
based on procedures similar to those used in the Section 8 New
Construction program which, unlike the procedures for public
housing, do not require a hearing termination administered by the
PHA before pursuing termination in court. The contract would also
allow, but not require, the manager to select families using the
PHA's waiting list.

Section 25(h) would also require the resident council
periodically to approve the renewal of this contract or
disapprove its renewal and submit another application for
transfer to another manager, which could be the PHA. This section
would also allow the Secretary to require the resident council to
submit another application for transfer if HUD determined that
the current manager had defaulted on the contract.

Finally, section 25(h) would establish that, where a PHA
reassumed management of the housing, all public housing operating
requirements would again apply.

Section 25(i) would contain the other general program
requirements that would apply to housing transferred to
alternative managers. This section would set the cost limitation
for rehabilitation at the per unit cost limits set under the
Comprehensive Grant program. The section would prohibit the
manager from demolishing or disposing of the housing. Section 18,
which established the system under which a PHA may request
approval for demolition or disposition, would continue to apply
to this housing.

Section 25(i) would define the eligibility of resident management
corporations to become managers under this program. This section
would require that resident management corporations demonstrate,
in a manner determined by the Secretary, their ability to
effectively and efficiently manage public housing or arrange for
management by a qualified management entity in order to be
eligible to become managers of the housing. This demonstration
would have to include, as part of the evidence, the most recent
financial audit of the Resident Management Corporation.

Section 25(i) would prevent the PHA from being held liable for
any actions or failures to act by the manager or the resident
council. The section would also require the manager to obtain
acceptable fidelity bonding and insurance to protect HUD and the
PHA from loss, theft, embezzlement, or fraudulent actions by the
manager or its employees.

Finally, section 25(i) would prohibit the PHA from involuntarily
displacing residents of the housing from the date that an
application for transfer of management is submitted through the
date of transfer or disapproval of the application. Involuntary
displacement would not include temporary relocation by the PHA
due to modernization activities.

Section 25(j) would establish monitoring and enforcement
requirements for the program. The Secretary would be required to
monitor the performance of managers and would be authorized to
take any necessary actions to enforce these contracts. This
section would also establish requirements for records, reports,
and audits for the manager and the resident council, including
access to these records by the Secretary and the Comptroller
General and submission of any reports required by HUD, including
annual financial audits. Finally, the section would require the
Secretary to submit an annual report to the Congress evaluating
the Choice in Management program and comparing the program with
other methods of dealing with severely distressed public housing.

Section 25(k) would contain standard nondiscrimination
provisions. These provisions are similar to those which apply to
the public housing program.

Section 25(l) would clarify the relationship of housing
transferred to alternative managers to two other programs that
can be implemented in conjunction with the public housing
program. This section would retain for this housing its
eligibility for homeownership conversion under HOPE for Public
and Indian Housing and section 5(h) of the U.S. Housing Act. The
section would also note that any such participation would have to
be consistent with the contract between the owner and the
Secretary. In other words, such a contract could not be
peremptorily canceled, but, rather, the conversion would have to
wait until the end of the contract term. Finally, this section
would allow managers who were carrying out approved
self-sufficiency programs to adopt the policies on maximum rents,
escrow accounts, and the phasing-in of increases in family income
that apply to the Family Self-Sufficiency program.

Section 25(m) would define the key terms of the program.

The term ``eligible housing'' would mean a public housing
project, or one or more buildings within a project, that is less
than 50% vacant, owned by a troubled PHA and has been identified
as severely distressed.

The term ``manager'' would mean a public or private nonprofit
organization (including an organization sponsored by the PHA that
owns the housing, if that organization was determined by HUD to
be eligible); a for-profit entity if it has a proven track record
of providing low income housing and is participating in a joint
venture with a private nonprofit organization; a public body,
including an agency of that body; or a PHA that would manage the
housing. The term would not include the PHA that owns the
housing, nor a resident council. Resident councils that would
want to manage their housing would be able to become resident
management corporations.

The term ``private nonprofit organization'' would have the same
general meaning as it does in the HOME and HOPE programs. It
would mean any private nonprofit organization (including a State
or locally chartered nonprofit organization) that is incorporated
under the State or local law; has no part of its net earnings
inuring to the benefit of its members; complies with HUD
established standards of financial accountability; and has among
its purposes significant activities related to the provision of
decent housing that is affordable to low-income families.
Resident management corporations would be considered private
nonprofit organizations.

The term ``public housing agency'' would have the same meaning as
it does in the 1937 Act, except that it would not include Indian
Housing Authorities.

The term ``public nonprofit organization'' would mean any public
nonprofit organization, except the PHA that owns the housing.

The term ``resident council'' and ``resident management
corporation'' would have the same general meaning as they do
under title III of the 1937 Act (the HOPE 1 program).

The term ``troubled public housing agency'' would mean a PHA that
owns or operates 250 or more units of public housing and (1) has
been designated by HUD as a troubled PHA for the current Federal
fiscal year and the past two Federal fiscal years and (1) has not
met targets for improved performance. The troubled designation
could have been made either under the Public Housing Management
Assessment program or, before implementation of that program,
through any other procedure HUD used to designate troubled PHAs.

Sec. 505-Directive to relieve regulatory burden

This section would direct the Secretary to review and streamline
regulations, administrative procedures and recordkeeping and
documentation requirements that govern compliance with the public
and Indian housing programs. The Secretary would be required to
submit a report to Congress within 9 months of the date of
enactment of this Act describing the results of the review and
the revisions that have been undertaken to reduce unnecessary
burdens. The Secretary would also be required to carry out this
directive in consultation with organizations and individuals
representing public and Indian housing agencies, tenants,
management experts, academics and other interested parties.

Sec. 506-Ceiling rents

This section would amend section 3(a)(2) of the United States
Housing Act of 1937 to remove the five year limitation on ceiling
rents in public housing.

Sec. 507-Replacement housing

This section would amend section 18 of the United States Housing
Act of 1937, the provision requiring PHSs to replace public
housing that is sold or demolished on a one-for-one basis. First,
this section would establish a de minimis exception to the
replacement rules, covering situations where the units demolished
or disposed of do not exceed the lesser of (1) five units; or (2)
five percent of the total number of units in the PHA's public
housing inventory. A PHA could only use this exception once in a
five year period. Second, PHSs would be permitted to locate some
or all of the replacement units outside of their jurisdiction,
but within the same housing market.

Sec. 508-Income eligibility

This section would amend section 16 of the United States Housing
Act of 1937 to exempt the public housing homeownership program
from inappropriate income restrictions that apply to the general
public housing program.

Sec. 509-Applicability of definitions to Indian housing

This section would apply a series of definitions contained in the
National Affordable Housing Act to the Indian Housing program.

Sec. 510-Preference rules

Subsection (a) would amend section 6(c)(4)(a) of the United
States Housing Act of 1937 to revise the preference rules
governing tenant selection in public housing. PHAs would be
required to give preference, for not less than 50 percent of the
public housing units that are made available for occupancy in a
given fiscal year, to families that meet the current federal
preferences.

Subsection (b) would direct the Secretary to issue final
regulations implementing changes to the preference rules made in
the National Affordable Housing Act not later than 30 days after
the date of enactment of the Act.

SUBTITLE B-LOW INCOME RENTAL ASSISTANCE

Sec. 521-Voucher and certificate homeownership

This section would allow voucher and certificate recipients who
are first-time homebuyers to use their vouchers and certificates
to become homeowners.

Subsection (a) would amend section 8(o) of the United States
Housing Act of 1937-the provision authorizing the voucher
program-to clarify that vouchers can support homeownership for
families which are first time homebuyers.

Subsection (b) would establish a new section 8(y) of the United
States Housing Act of 1937 entitled ``Homeownership Option:
Vouchers and Certificates''.

In general.-Section 8(y)(1) would permit a family assisted under
the voucher or certificate program to use its certificate or
voucher for homeownership if the family (1) is a first-time
homeowner; (2) either participates in the PHA's Family
Self-Sufficiency program or demonstrates that it has income from
employment or other sources (other than public assistance), as
determined in accordance with HUD requirements, that is at least
equal to twice the payment standard established by the PHA (or to
another amount established by HUD); (3) at the time it initially
receives assistance under this subsection, demonstrates that one
or more members of the family, except as determined by HUD, have
achieved employment for such period as HUD shall require; (4)
participates in a homeownership and fair housing counseling
program provided by the PHA; and (5) meets any other initial or
continuing requirements established by the PHA in accordance with
HUD requirements.

Amount of assistance.-Section 8(y)(2) would govern the amount of
assistance received by families wishing to exercise the
homeownership option. For such families, the subsidy usually
would be the difference between the payment standard established
by the PHA and 30% of the family's adjusted income, which is the
income contribution that the family would ordinarily make if
receiving rental assistance. In no case could the assistance
payment exceed the amount by which the monthly homeownership
expenses, as determined in accordance with HUD requirements,
exceed 10% of the family's income (without adjustments).

Excess subsidy recapture.-Section 8(y)(3) would establish rules
governing the recapture of excess subsidies. Upon sale of the
dwelling the family would, in general, be able to retain any
increases in owner equity. There would be no requirement that the
housing have a resale structure designed to maintain
affordability of such housing for low-income families. However,
to the degree that the section 8 assistance in the past would
have been reduced because of the imputed income on owner's equity
in the dwelling (but was not), the excess subsidy would have to
be repaid. At the time of sale, the net proceeds of the sale
would be considered to have accrued at an even arithmetic rate
since the time of the purchase. The recapture amount would be
considered a loan with a lien being placed on the family's
dwelling, but no interest would be charged on the loan.

Downpayment requirement.-Section 8(y)(4) would establish rules
governing the downpayment. Families electing to use vouchers and
certificates for homeownership would be responsible for obtaining
their own financing. At the request of a lender, all or a portion
of the monthly assistance payment could be paid directly to the
lender for mortgage principal and interest, as well as property
taxes and insurance. PHAs would be required to assure that each
family provided from its own resources at least 80% of any down
payment required. Up to 20% of the down payment could be provided
from other sources, such as from nonprofit entities and State and
local assistance programs. A family could count amounts applied
from its Family Self-Sufficiency Escrow Account towards the 80%
requirement.

Ineligibility under other programs.-Section 8(y)(5) would specify
that a family could not be assisted under the homeownership
option during any period when assistance is being provided for
the family under other Federal homeownership assistance programs,
as determined by HUD.

Inapplicability of certain provisions.-Section 8(y)(6) would
specify certain sections in section 8 that would not apply to
exercise of the homeownership option under section 8(y). In
addition to the provisions specified, other provisions HUD
determines are inconsistent would also be inapplicable. Section
8(h) contains a comparable provision for the section 8 program in
general.

Reversion to rental status.-Section 8(y)(7) would establish rules
to govern the situation where a family defaults under an
FHA-insured mortgage. In such circumstances, the family could not
continue to receive voucher or certificate assistance unless it
transferred the dwelling to HUD, moved from the dwelling within
the deadlines established or approved by HUD, agreed that any
amounts the family is required to pay to reimburse the Family
Self-Sufficiency program escrow account, as required by section
23(d)(3), may be deducted by the public housing agency from the
assistance payment otherwise payable on behalf of the family (the
family would have to make up any difference with additional
payments to the owner) and meet other requirements established or
approved by HUD. In this way, unsuccessful families would have an
incentive to minimize the loss to HUD that occurs through the
often lengthy process of foreclosure.

Families would, of course, be eligible for the Assignment
program. In that case, the family would retain ownership as
provided under the Assignment program and would only be required
to assign title to HUD and move if the family has been unable to
resume its mortgage obligations (a) at the end of three years, or
(b) at such time as HUD determines the family is no longer
eligible for continued participation under the Assignment
program.

If a family defaulted under a non-FHA-insured mortgage, it could
not continue to receive assistance unless it complied with HUD
requirements.

A family that defaulted under a mortgage (whether or not insured
by HUD) could not again exercise the homeownership option under
the Voucher or Certificate programs.

Definition of first time homeowner.-For purposes of the proposed
homeownership authority, the term ``first-time homeowner'' would
be defined to mean-(1) a family, no remember of which has had a
present ownership interest in a principal residence during the
three years preceding the date on which the family initially
receives assistance for homeownership; and (2) any other family,
as HUD may prescribe.

Subsection (c) would make a conforming amendment to section 3 of
the 1937 Act to exempt families assisted under section 8(y) from
the 30% ``rent-to-income'' rule governing public and assisted
housing.

Subsection (d) would modify the rules governing use of escrow
account under the Family Self Sufficiency program. Families
electing to use vouchers and certificates for homeownership could
use up to 50% of the escrow account for a down payment and the
remainder to cover the costs of major repair and replacement
needs of the dwelling that arise after the family become a
homeowner. If a family's mortgage is foreclosed, the remaining
amounts of the escrow account would be paid to HUD, and the
family could be required to reimburse the escrow account for some
or all of the amounts used in connection with homeownership.

Subsection (e) would amend the National Housing Act to make FHA
insured mortgages provided to section 8 recipients selecting the
homeownership option obligations of the General Insurance (GI)
Fund, instead of the Mutual Mortgage Insurance (MMI) Fund.

Sec. 522-Moving to opportunity for fair housing

Section 512 would extend the Moving to Opportunity (MTO)
demonstration program established under HUD's FY 1992
appropriations Act for two additional years.

Subsection (a) would provide the general authority for the MTO
demonstration program. The subsection would direct the Secretary
to carry out a demonstration to help minority families with
children to move out of areas with high concentrations of persons
living in poverty to areas with low concentrations. The program
would demonstrate the extent to which mobility initiatives: (1)
further objectives of the Fair Housing Act; (2) enhance the
short- and long-term employment opportunities of adult
participants; and (3) enhance the short- and long-term
educational and employment opportunities of child participants.
Finally, the program would compare and contrast the costs
associated with implementing a mobility program with the costs
associated with the routine implementation of the voucher and
certificate programs.

Subsection (b) would authorize HUD to reserve, from amounts made
available for the certificate program for fiscal years 1993 and
1994, budget authority to fund up to 1,500 certificates each year
for purposes of carrying out the MTO demonstration.

Subsection (c) would target the program to cities with
populations exceeding 350,000 that are in consolidated
metropolitan statistical areas (CMSAs), as established by the
Office of Management and Budget, with populations exceeding
1,500,000.

Subsection (d) would require the Secretary to enter into
contracts with nonprofit organizations for counseling and other
services in connection with the MTO demonstration program. The
subsection would also require the Secretary to enter into annual
contributions contracts with PHAs for the administration of the
certificates.

Subsection (e) would require the Secretary to submit interim
reports to Congress starting 2 years after the date of enactment
of this Act. The interim reports would include information on the
number of persons served, the level of counseling and the types
of services provided, the cost of providing such counseling and
services, updates on the employment record of assisted families
and any other appropriate information. The subsection would
require the Secretary to submit a final report to the Congress by
September 30, 2004. The final report would describe the long-term
housing, employment, and educational achievements of the families
assisted under the demonstration.

Subsection (f) would require the Secretary to: (1) review and
comment upon the section 8 study contained in the National
Affordable Housing Act; (2) review and comment on existing
programs that help minority families with children to move out of
area with high concentrations of persons living in poverty to
areas with low concentrations; (3) independently assess factors
that may impede the geographic dispersion of families receiving
vouchers and certificates; (4) identify and implement any
administrative revisions that would enhance geographic dispersion
and tenant choice and incorporate the positive elements of any
existing programs; and (5) submit a report to the Congress
describing its findings, administrative actions and
recommendations for further legislative action. The report would
be due not later than 1 year following the date of enactment of
this Act. The Secretary would be required, in preparing the
report, to consult with individuals representing fair housing
organizations, low income tenants, PHAs and other interested
parties.

Sec. 523-Family unification assistance

This section would authorize funding for family unification
assistance at $100 million for fiscal year 1993 and approximately
$103.2 million for fiscal year 1994.

Sec. 524-Housing assistance in Jefferson County, Texas

This section would amend section 213(e) of the Housing and
Community Development Act of 1974 to enable families receiving
special certificates for use in the Park Central New Community
Project to use such certificates in Jefferson County, Texas.

Sec. 525-Applicability of amendment to McKinney Act

This amendment would permit State and local housing agencies that
have refinanced certain section 8 projects since November 7, 1988
to retain 50 percent of the savings for use in providing
affordable housing to very low income families.

SUBTITLE C-GENERAL PROVISIONS AND OTHER ASSISTANCE PROGRAMS

Sec. 531-Authorizations

Subsection (a) would increase authorized funding for a range of
public and assisted housing programs by approximately $16.1
billion for fiscal year 1993 and approximately $16.4 billion for
fiscal year 1994. This increase in aggregate budget authority
would be distributed among various programs as described below.

Subsection (b) would distribute the increase in authorized
funding described in subsection (a) among various public and
assisted housing programs.

The subsection would authorize funding for public housing
development at approximately $542 million for fiscal year 1993
and approximately $559 million for fiscal year 1994. The
subsection would authorized set-aside funding for Indian housing
development at approximately $245 million for fiscal year 1993
and approximately $253 million for fiscal year 1994.

The subsection would authorize funding for the revitalization of
severely distressed public housing at $400 million for fiscal
year 1993 and $412.8 million for fiscal year 1994.

The subsection would authorize funding for vouchers and
certificates at approximately $1.659 billion for fiscal year 1993
and $1.712 billion for fiscal year 1994. The subsection would
require HUD to set-aside 1000 certificates in each fiscal year
for purposes of providing replacement assistance under the HOPE
program. The subsection would also mandate that not more than 50
percent of the amounts appropriated pursuant to this
authorization be used for vouchers.

The subsection would authorize funding for public housing
modernization at $3 billion for fiscal year 1993 and
approximately $3.1 billion for fiscal year 1994. The subsection
would also set-aside $3 million in each fiscal year for purposes
of funding training and technical assistance activities under the
section 21 homeownership program.

The subsection would authorize funding for the section 8 property
disposition certificates at approximately $91.7 million for
fiscal year 1993 and approximately $94.7 million for fiscal year
1994.

The subsection would authorize funding for the section 8 loan
management assistance at approximately $265 million for fiscal
year 1993 and approximately $274 million for fiscal year 1994.

The subsection would authorize funding for the renewal of
expiring section 8 contracts at approximately $7.262 billion for
fiscal year 1993 and approximately $7.262 billion for fiscal year
1994.

The subsection would authorize funding for the amendments to
existing section 8 contracts at approximately $1.919 billion for
fiscal year 1993 and approximately $1.919 billion for fiscal year
1994.

The subsection would authorize funding for public housing lease
adjustments and amendments at approximately $21.8 million for
fiscal year 1993 and approximately $21.8 million for fiscal year
1994.

Finally, the subsection would authorize funding for public
housing replacement activities at $82.5 million for fiscal year
1993 and approximately $85.1 million for fiscal year 1994.

Sec. 532-Housing counseling

The section would authorize various housing counseling programs
for each of the fiscal years 1993 and 1994.

Subsection (a) would authorize funding for housing counseling at
$5.2 million for fiscal year 1993 and approximately $5.3 million
for fiscal year 1994. The subsection would also set-aside $1.5
million for use in connection with the MTO demonstration program
authorized under section 512 of this Act.

Subsection (b) would authorize funding for emergency
homeownership counseling at $7 million for fiscal year 1993 and
approximately $7.2 million for fiscal year 1994.

Subsection (c) would authorize the prepurchase and foreclosure
prevention counseling demonstration at $365,000 for each of
fiscal year 1993 and 1994.

Sec. 533-Public and assisted housing drug elimination

Subsection (a) would authorize the public and assisted housing
drug elimination program at approximately $172 million for fiscal
year 1993 and approximately $178 million for fiscal year 1994.

Subsection (b) would direct the Secretary to issue final
regulations implementing the assisted housing component of the
drug elimination program not later than 30 days after the date of
enactment of this Act.

Subsection (c) would allow public housing drug elimination grants
to be made for non-federally funded public housing (i.e. housing
that is owned by a PHA but is not assisted under federal housing
programs) if the housing is located in a high intensity drug
trafficking area and the PHA demonstrates that drug-related
activity at the housing has a detrimental effect on public and
other federally assisted housing.

                      TITLE VI-PRESERVATION

               SUBTITLE A-PREPAYMENT OF MORTGAGES
             INSURED UNDER THE NATIONAL HOUSING ACT

Sec. 601-Authorization

This section would authorize the Title VI preservation program at
approximately $638 million for fiscal year 1993 and approximately
$659 million for fiscal year 1994. The section would set-aside
$50 million in each of the fiscal years to assist in the
completion of transfers under the mandatory sales program.

Sec. 602-Prepayment amendments

Subsection (a) would amend section 241 of the National Housing
Act to require loans insured under that section to have a 40 year
maturity and amortization period.

Subsection (b) would amend section 241(f) of the National Housing
Act to enable loans insured under that section to cover the
amount of rehabilitation costs required by the preservation plan
of action and related charges. The provision in existing law
permitting the Secretary to combine section 241(d) and 241(f)
loans would be stricken.

Subsection (c) would amend section 213(c) of the Low-Income
Housing Preservation and Resident Homeownership Act of 1990 to
require that HUD's appraisal guidelines and instructions be
amended to provide as an additional assumption that the existing
section 8 contracts are terminated when the mortgage is prepaid.

Subsection (d) would make two changes to section 216(d) of the
Low-Income Housing Preservation and Resident Homeownership Act of
1990-the provision requiring owners who wish to sell their
properties to file a second notice of intent. First, the
subsection would require that owners file a copy of their second
notices of intent to sell with the State or local government and
the mortgagee and inform the tenants of the filing. Second, the
subsection would penalize owners who fail to market the property
or reject bona fide offers after submitting a second notice of
intent to sell. Such owners would be barred from filing a new
plan of action or notice of intent to receive incentives for two
years and would be required to reimburse the reasonable expenses
incurred by priority purchasers who filed an expression of
interest.

Subsection (d) would also amend section 217 of the Low-Income
Housing Preservation and Resident Homeownership Act of 1990 to
give tenants and the relevant state and local government access
to the documentation supporting the plan of action. Finally, the
subsection would amend the preservation law's transition
provisions to require owners electing proceed under the 1987 Act
provisions to comply with the notification provisions contained
in the 1990 Act.

Subsection (e) would make a number of revisions of the Low-Income
Housing Preservation and Resident Homeownership Act of 1990
(primarily section 220(d)(2)) that are designed to facilitate the
purchase of federally assisted projects by priority purchasers.
First, the subsection would emphasize that priority purchasers
are able to receive the same incentives made available to other
qualified purchasers. Second, the subsection would require that a
priority purchaser receive an 8 percent return on any actual cash
invested in a project-treating them on an equitable basis with
owners and for-profit purchasers. Third, the subsection would
require that priority purchasers receive reimbursement of all
reasonable expenses associated with the acquisition, loan closing
and implementation of an approved plan of action. Finally, the
subsection would recognize, in the case of priority purchasers,
sponsor project oversight expenses as an eligible expense in
establishing rents under the Plan of Action, and for purposes of
future rent increases.

Subsection (f) would amend section 232 of the Low-Income Housing
Preservation and Resident Homeownership Act of 1990 to clarify
that existing law does not contain an exhaustive list of laws of
general applicability that are not preempted.

Subsection (g) would establish a new section 235 under the
Low-Income Housing Preservation and Resident Homeownership Act of
1990 to authorize various technical assistance and capacity
building efforts.

Section 235(a) would authorize the Secretary to provide technical
assistance and capacity building in furtherance of the Title VI
preservation program.

Section 235(b) would outline the purposes of technical assistance
and capacity building: (1) to promote the ability of residents of
eligible housing to meaningfully participate in the preservation
process and affect decisions about the future of their housing;
(2) to promote the ability of community based nonprofit housing
developers and resident organizations to acquire, rehabilitate,
and competently own and manage eligible housing as rental or
cooperative housing for low and moderate income people; and (3)
to assist the Secretary in discharging his obligation to notify
potential qualified purchasers of the availability of properties
for sale and to otherwise facilitate the coordination and
oversight of the preservation program.

Section 235(c) would authorize a $25 million set-aside from
preservation funds for each of fiscal years 1993 and 1994 to
support technical assistance and capacity building efforts. 90
percent of these set-aside funds would be used for building
resident capacity and funding predevelopment costs in accordance
with subsection (d); 10 percent would be used for other purposes
in accordance with subsection (e).

Section 235(d) would authorize the provision of ``direct
assistance grants'' to resident organizations and community based
nonprofit housing development organizations and resident councils
in connection with the acquisition of specific projects. Direct
assistance grants would include the payment of reasonable
administrative expenses to participating intermediaries.

Subsection (d) would require 30 percent of the set-aside funds to
be used for resident capacity grants; the remaining funds would
be used for predevelopment grants in connection with specific
projects. Resident capacity grants would be capped at $30,000 per
project; predevelopment grants would be capped at $200,000 per
project. These limits would be exclusive of any fees paid to a
participating intermediary by the Secretary for administering the
program.

Under subsection (d), resident capacity grants would be made
available to eligible applicants to cover expenses for resident
outreach, incorporation of a resident organization, conducting
democratic elections, training, leadership development, legal and
other technical assistance to the board of directors, staff and
members of the resident organization. Such grants would be
provided with respect to eligible housing for which an owner has
filed (1) a Notice of Intent under the Low-Income Housing
Preservation and Resident Homeownership Act of 1990; or (2)
pursuant to transition provisions, the Emergency Low Income
Housing Preservation Act of 1987. Eligible applicants would be
resident groups or organizations designated by the residents
through a democratic and representative process, to be defined by
the Secretary.

Under subsection (d), predevelopment grants would be made
available to community-based nonprofit housing development
organizations and resident councils to cover the cost of
organizing a purchasing entity and pursuing an acquisition,
including third party costs for training, development consulting,
legal, appraisal, accounting, environmental, architectural and
engineering, application fees and sponsor's staff and overhead
costs. Such grants could be made available with respect to any
eligible housing project if the owner has filed an initial Notice
of Intent to transfer the housing to a qualified purchaser in
accordance with the Low-Income Housing Preservation and Resident
Homeownership Act of 1990; or a Notice of Intent and entered a
binding agreement to sell the housing to a resident or
community-based nonprofit organization under the Emergency
Low-Income Housing Preservation Act of 1987. Grants payments
would be made in phases, based on performance benchmarks
established by the Secretary in consultation with approved
intermediaries.

Subsection (d) would require that applications for direct
assistance grants be received monthly on a rolling basis and
approved or rejected by approved intermediaries of the Secretary
on at least a quarterly basis.

Finally, subsection (d) would give applicants the right to appeal
to the Secretary the denial of an application by an approved
intermediary. Such applicants would be entitled to receive from
the Secretary a binding determination within 30 days of appeal.

Section 235(e) would authorize the provision of grant assistance
to State and local government agencies and nonprofit
intermediaries for the purpose of carrying out such activities
that the Secretary deems to be in furtherance of the preservation
program.

Section 235(f) would require the Secretary to approve and
disburse direct grant assistance made available under subsection
(d) through eligible intermediaries. Intermediaries would be
selected by the Secretary through a competitive process, which
shall include provision for a reasonable administrative fee. The
Secretary would administer the program directly in the event the
Secretary does not receive an acceptable proposal from an
intermediary offering to administer direct grant assistance under
subsection (d) in a given state,

Section 235(g) would define the term ``eligible intermediary'' to
mean a State, regional, or national organization (including a
quasi-public organization) or a State and local housing agency
that meets the following eligibility criteria: (1) has as a
central purpose the preservation of existing affordable housing
and prevention of displacement; (2) does not receive direct
federal appropriations for operating support; (3) in the case of
a national nonprofit organization, has been in existence for at
least five years prior to the date of application and has
received a ruling under section 501(c)(3) of the Internal Revenue
Code; (4) in the case of a regional or state nonprofit
organization, has been in existence for at least three years
prior to the date of application and has received a ruling under
section 501(c)(3) of the Internal Revenue Code or is otherwise a
tax-exempt entity; (5) has a track record of service to low
income individuals or community based nonprofit housing
developments organizations in multiple communities and, with
respect to direct grant assistance made available under
subsection (d), has experience with the allocation or
administration of grant or loan funds; and (6) meets standards of
fiscal responsibility determined by the Secretary.

Section 235(h) would require the Secretary to develop criteria to
select intermediaries through a competitive process. HUD
guidelines would need to afford a priority to applications from
intermediaries with demonstrated expertise or experience with the
program established under the Low-Income Housing Preservation and
Resident Homeownership Act of 1990 or under the Emergency
Low-Income Housing Preservation Act of 1987. The guidelines would
(1) not assign any preference or priority to applications from
intermediaries based on their previous participation in
administering or receiving federal grants or loans (but may
exclude applicants who have failed to perform under prior
contracts of a similar nature); (2) require intermediary
applicants to prepare proposals which demonstrate adequate
staffing, qualifications, prior experience and a plan for
participation; and (3) permit an intermediary applicant to serve
as the administrator of resident capacity grants, predevelopment
grants, or both, based on the applicant's suitability and
interest.

Section 235(h) would also permit the Secretary to select more
than one state or regional intermediary for a single state or
region. The number of intermediaries chosen for each state or
region could be based on the number of eligible projects in the
jurisdiction, provided there is no duplication of geographic
coverage by intermediaries in the administration of the direct
assistance grant program. National nonprofit intermediaries would
be selected to administer the direct assistance grant program
only with respect to those states or regions where no other
eligible intermediary, acceptable to the Secretary, has submitted
a proposal to participate. With respect to grants made available
for other purposes under subsection (e), preference would be
given to eligible regional, state and local intermediaries, over
national nonprofit organizations.

Section 235(i) would establish various conflict of interest
provisions. Intermediaries approved for the disbursement of
direct assistance grants would be required to certify that they
will serve only as delegated program administrators, charged with
the responsibility for reviewing and approving grant applications
on behalf of the Secretary. Intermediaries would need to
establish appropriate procedures for grant administration and
fiscal management, pursuant to standards established by the
Secretary. Intermediaries would also receive a reasonable
administrative fee; they would be barred, however from providing
other services to grant recipients with respect to properties
that are the subject of the grant application and from receiving
payment, directly or indirectly, from the proceeds of grants they
have approved.

Section 235(j) would define the term ``community-based nonprofit
housing developer'' to mean a nonprofit community development
corporation which (1) has received a ruling under section
501(c)(3) of the Internal Revenue Code of 1986; (2) has been in
existence for at least two years prior to the date of the grant
application; (3) has a record of service to low- and
moderate-income people in the community in which the project is
located; (4) is organized at the neighborhood, city, county or
multi-county level; and (5) agrees to form a purchaser entity
that conforms to the Title VI regulatory definition of a
community based nonprofit organization and agrees to use its best
efforts to secure majority tenant consent to the acquisition of
the project for which grant assistance is requested.

Subsection (h) would amend section 229 of the Low-Income Housing
Preservation and Resident Homeownership Act of 1990 and section
233 of the Emergency Low Income Housing Preservation Act of 1987
to correct a drafting error in the definition of ``eligible low
income housing''. The amendment would clarify that the statutory
definition does not include Section 221(d)(3) Market Rate
projects that have Section 8 New Construction and Substantial
Rehabilitation set-asides.

Subsection (i) would amend section 222(e) of the Low-Income
Housing Preservation and Resident Homeownership Act of 1990 to
require HUD to notify the tenants of a preliminary windfall
profits determination at the same time that the owner is
informed. Tenants would be given 60 days to comment on the
preliminary determination. Following the comment period, and
based on the record developed, the Secretary would make a final
determination.

            SUBTITLE B-OTHER PRESERVATION PROVISIONS

Sec. 611-RESTORE for troubled multifamily housing

This section 611 would incorporate key elements of the
Administration's RESTORE proposal.

Subsection (a) would rename section 201 of the Housing and
Community Development Amendments of 1978 ``RESTORE for Troubled
Multifamily Housing.''

Subsection (b) would amend Section 201(d) of the Housing and
Community Development Amendments of 1978 to require the following
additional elements before an owner can receive funding: (1) all
reasonable attempts have been made to take all appropriate
actions within the power of the owner or manager of the project
and provide suitable housing for project residents; (2) the
project has a feasible plan to involve the residents in project
decisions; (3) the affirmative fair housing marketing plan meets
applicable requirements; and (4) the owner certifies that it will
comply with various equal opportunity statutes.

Subsection (c) would provide selection criteria for the
allocation of assistance under the RESTORE program. The
subsection would repeal section 201(k)(4) of the Housing and
Community Development Amendments of 1978, which currently
provides selection criteria for the allocation of capital
improvement loans. The subsection would then add a new section
201(n). This new section would require the Secretary to award
assistance under the RESTORE program on the basis of the
following selection criteria: (1) the extent to which the project
presents an imminent threat to the life, health, and safety of
the residents, (2) the extent to which the project is physically
or financially troubled; (3) the extent to which there is
evidence that there will be significant opportunities for the
residents to become involved in management of the project; (4)
the extent to which there is evidence that the owner has provided
competent management and complied with all regulatory and
administrative instructions; and (5) other criteria specified by
HUD. In addition, HUD would be required to select eligible
projects that have federally insured mortgages in force before
any other eligible project.

Subsection (d) would amend section 201(l) of the Housing and
Community Development Amendments of 1978 to permit the Secretary
to require owners receiving assistance under the RESTORE program
to maintain the affordability of the housing for its ``remaining
useful life''. The term ``remaining useful life'' would mean the
period during which the physical characteristics of the assisted
housing remain in a condition suitable for occupancy, assuming
normal maintenance and repairs are made and major systems and
capital components are replaced as becomes necessary.

Subsection (e) would amend section 201 of the Housing and
Community Development Amendments of 1978 to add a new subsection
(o). This new subsection would make projects receiving assistance
under the RESTORE program ineligible for prepayment incentives
under the Emergency Low Income Housing preservation Act of 1987
or the Low-Income Housing Preservation and Resident Homeownership
Act of 1990. In addition, projects receiving financial assistance
under such Acts would be ineligible for assistance under the
RESTORE program.

Subsection (f) would amend section 201(k)(2) of the Housing and
Community Development Amendments of 1978, which requires owner to
make certain contributions in exchange for receiving assistance
for capital improvements. The amendment would require HUD to give
owners credit for advances made to the project during a three
year period prior to the application for assistance.

Subsection (g) would amend section 201 of the Housing and
Community Development Amendments of 1978 to add a new subsection
(p). This new subsection would require HUD to coordinate the
allocation of assistance under the RESTORE program with section 8
loan management assistance as well as with assistance provided in
connection with the disposition of HUD-held and HUD-owned
mortgages. Such coordination would be designed to enhance the
cost effectiveness of the federal response to troubled
multifamily housing.

Subsection (h) would authorize the RESTORE program at $52.2
million for fiscal year 1993 and $53.9 million for fiscal year
1994.

Subsection (i) would establish a comprehensive planning process
for the older assisted inventory. The subsection would require
the owner of each ``covered multifamily housing property'' to
submit to HUD a comprehensive needs assessment of the property.
The subsection would stagger the submission of these needs
assessments, requiring owners of \1/3\ of the covered properties
to submit their needs assessments in each of fiscal years 1993,
1994 and 1995.

The subsection would require each needs assessment to contain the
following information: (1) a description of any financial or
other assistance currently needed to ensure that the property is
maintained in a livable condition and to ensure the financial
viability of the project; (2) a description of any financial or
other assistance that will be needed to ensure that the property
is maintained in a living condition and to ensure the financial
viability of the project during the remaining useful life of the
property; (3) a description of the resources available for
meeting the current and future needs of the property and the
likelihood of obtaining such resources; and (4) a description of
any HUD assistance needed for the property.

The subsection would required HUD to establish the form and
manner of the submission of the comprehensive needs assessments.
HUD would require each owner of a covered property to make
available to the residents the assessment that is to be submitted
and to provide residents with the opportunity to submit comments
and opinions before the assessment is submitted. The subsection
would also require owners of covered properties that are financed
or assisted by a state housing finance agency to simultaneously
submit their needs assessments to the state agency. HUD, in turn,
would be required to review each needs assessment and to approve
the assessment within 90 days of receiving it unless HUD
determines that the assessment has not been provided in a
substantially complete manner. HUD would also be required to
notify each owner (and the State agency, where applicable) of its
decision to approve or disapprove the owners needs assessment.
Specifically, HUD would be required to inform the owner in
writing of the reasons for disapproval within 30 days after
making its determination. HUD would require any owner whose
assessment is disapproved to resubmit an amendment assessment
within 30 days of receiving a written notice of disapproval.
Finally the subsection would define the term ``covered
multifamily housing property''.

                     TITLE VII-RURAL HOUSING

Sec. 701-Program authorizations

This section would amend section 513 of the Housing Act of 1949,
the provision authorizing FmHA rural housing programs. The
various insurance and guarantee programs would be authorized at
approximately $2.5 billion for FY93 and FY94 and the various
grant programs would be authorized at approximately $500 million
for FY93 and FY94

Sec. 702-Deferred mortgage demonstration

This section would amend section 502(g)(3) of the Housing Act of
1949 to reauthorize the section 502 deferred mortgage
demonstration program for FY93 and FY94

Sec. 703-Set-aside for underserved areas and colonias

This section would make two amendments to section 509(f)(4) of
the Housing Act of 1949. First, the funding set-asides for
underserved rural areas and colonias would reauthorized for FY93
and FY94. Second, the colonias provisions would be amended to
allow housing provided outside of, but serving the residents of,
a colonias to be eligible for set-aside funds.

Sec. 704-Permanent authority for section 523

This section would make two amendments to section 523 of the
Housing Act of 1949, the mutual and self-help housing program.
First, the program would be permanently authorized. Second, the
program would be amended to add the repair of section 502
inventory properties as an activity eligible for assistance.

Sec. 705-Non-profit set-aside

This section would make several amendments to section 515(w) of
the Housing Act of 1949, the provision setting-aside section 515
rural rental housing development funds for use by non-profits.
First, the 9% non-profit set-aside of section 515 would be
reauthorized for F93 and FY94.

Second, the nonprofit set-aside would be amended to allow the low
income housing tax credit to be used with projects financed under
the set-aside. Third, eligible non-profit entities would be
defined to prevent ``shell'' non-profits from accessing the
set-aside funds. A non-profit would have to own an interest in
and materially participate in the development and operation of
the project; have non-profit tax-exempt status under sections
501(c)(3) or 501(c)(4) of the IRC; have among its purposes the
planning, development or management of low income housing or
community development; and not be affiliated with or controlled
by a for-profit organization.

Fourth, the process for reallocating a state's unused set-aside
funds would be amended to make funds available for eligible
non-profits nationwide before reallocating the unused funds on a
proportional basis to the states for use by for-profit
developers.

Finally, the small state minimum non-profit set-aside would also
be amended to allow FmHA to provide more than $750,000 to a state
if such amounts were necessary to finance a project.

Sec. 706-Housing preservation grants

This section would amend section 533 of the Housing Act of 1949,
the housing preservation grant program. The program would be
amended to allow grants to be used for replacement housing when
rehabilitation is not practical and the owner could not otherwise
qualify for replacement assistance under the section 502 loan
program. Replacement costs provided under this program would be
capped at $15,000 per unit.

Sec. 707-Use of FmHA inventory for transitional housing
opportunities for homeless persons and turnkey housing

This section would amend Title V of the Housing Act of 1949. The
FmHA property disposition program would be amended to make it
easier to obtain property for transitional housing and for
homeless persons to eventually qualify for lease or ownership of
FmHA homes.

FmHA would be required to add as a priority the lease or sale of
program and nonprogram inventory property to non-profits for
transitional housing or turnkey housing opportunities for
homeless persons. Non-profits would be eligible to lease property
for up to 10 years for $1 or purchase property at a 10% discount
off of the fair market value. This section would be subject to
the availability of appropriations.

Sec. 708-Preservation

This section would make several amendments to section 502(c) of
the Housing Act of 1949, the provision establishing preservation
requirements for rural rental housing financed under the section
515 program.

Subsection (a) would extend the 1987 Act rural housing
preservation provisions to section 515 projects financed between
1979 and 1989.
Subsection (b) would amend the preservation provisions to allow
project owners to tap excess section 8 reserves in exchange for
extending the long term use restrictions on the project.

Subsection (c) would establish an Office of Rural Rental Housing
Preservation in FmHA National headquarters to evaluate and
process prepayment applications in a uniform fashion and to
monitor implementation of the preservation program.

Sec. 709-Disaster assistance

This section would amend section 541 of the Housing Act of 1949,
the provision authorizing Farmer's Home to provide housing
assistance in the event of a disaster. The disaster assistance
provisions in existing law would be amended to draw funds from
FEMA appropriations rather than rural housing program funds. This
section would also limit the waiver of the rural area definition
in existing law, for the purposes of providing disaster
assistance to areas that have high concentrations of farmworkers.

Sec. 710-Administrative appeals process

This section would amend section 510 of the Housing Act of 1949
to restore an administrative appeals process for FmHA programs.

Sec. 711-Prohibition on transfer of rural housing programs

This section would prohibit the Secretary of Agriculture from
folding housing programs into the newly-created Rural Development
Administration, established in the 1990 Farm Bill.

Sec. 712-FmHA reform provisions

This section would make several amendments to sections 515 and
517 of the Housing Act of 1949 to make reforms to the section 515
rural rental housing program.

Subsection (a) would increase the equity contribution required by
borrowers under the section 515 rural rental housing program from
3% to 6%, except for projects developed in areas of extreme
poverty and substandard housing or projects not using the low
income housing tax credit. The option of using a letter of
credit, instead of cash, to cover the 2% operating reserve
required in existing law would be eliminated.

Subsection (b) would allow FmHA to obtain independent
certifications of project costs. These could be paid for out of
the insurance fund as a program cost.

Subsection (c) would require FmHA to undertake a demonstration
program in several states comparing negotiated bid prices to
competitively bid prices and report to Congress on its findings
within 18 months.

Subsection (d) would require FmHA to establish standard
guidelines for allowable project costs among state offices.

Subsection (e) would require FmHA to develop uniform procedures
for identifying and sharing information on projects costs,
builder profit, identity of interests relationships, and other
factors with housing credit agencies allocating low income
housing tax credits to section 515 projects.

Subsection (f) would require FmHA to establish a process for
coordinating the selection of projects under the Section 515
rural rental housing program with the housing needs and
priorities as established in a state Comprehensive Housing
Affordability Strategy and Low Income Housing Tax Credit
allocation plan.

Subsection (g) would require FmHA to promulgate regulations to
implement this section and to implement cost containment and
vulnerability measures to address identity of interest
relationships, reserve account abuses and program enforcement
authorities not later than 60 days after enactment of this Act.

Sec. 713-Rural voucher program

This section would establish a rural housing voucher program
under the Farmers Home Administration to provide rental
assistance to very low income families. The Secretary of
Agriculture would establish payment standards based upon the fair
market rent for the area. The voucher would cover the difference
between the rental payment standard and 30% of a family's
adjusted monthly income.

FmHA would be required to coordinate the voucher program with the
section 515 rural rental housing program and the section 533
housing preservation grants program.

The rural voucher program would be authorized at $140 million for
FY93.

Sec. 714-Site acquisition and development

This section would amend section 524 of the Housing Act of 1949,
the site acquisition and development program. The program would
be amended to enable FmHA to make grants to non-profits to
capitalize revolving loan funds to carry out eligible program
activities.

Sec. 715-Subdivision approval

This section would amend section 535 of the Housing Act of 1949
to require FmHA to accept subdivision approvals made by local,
county or state agencies.

       TITLE VIII-HOUSING FOR PERSONS WITH SPECIAL NEEDS

          SUBTITLE A-SUPPORTIVE HOUSING FOR THE ELDERLY

Sec. 801-Administration

This section would authorize federal housing programs that serve
low-income elderly persons.

Subsection (a) would authorize funding for the section 202
program. Specifically, the section would authorize funding for
capital advances at approximately $566 million for fiscal year
1993 and approximately $574 million for fiscal year 1994. The
section would also authorize funding for project rental
assistance at approximately $466 million for fiscal year 1993 and
approximately $481 million for fiscal year 1994.

Subsection (b) would authorize the revised congregate housing
services program at approximately $35 million for fiscal year
1993 and approximately $36 million for fiscal year 1994.

Subsection (c) would authorize the HOPE for Elderly Independence
program. Specifically, the section would authorize funding for
rental assistance at $35.5 million for fiscal year 1993 and
approximately $36.6 million for fiscal year 1994. The section
would also authorize funding for supportive services at $10.4
million for fiscal year 1993 and approximately $10.7 million for
fiscal year 1994.

Sec. 802-Supportive housing for the elderly

This section would amend section 202(f)(2) of the Housing Act of
1959, the provision establishing the need for supportive housing
for the elderly in the area to be served as one of the selection
criteria for the allocation of section 202 funds. This section
would modify this selection criterion by requiring HUD to take
into consideration the availability of public housing for the
elderly and the vacancy rates for such facilities.

SUBTITLE B-SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES

Sec. 811-Authorization

This section would authorize funding for the section 811 program.
Specifically, the section would authorize funding for capital
advances at approximately $106.2 million for fiscal year 1993 and
approximately $109.5 million for fiscal year 1994. The section
would also authorize funding for project rental assistance at
approximately $103.4 million for fiscal year 1993 and
approximately $106.7 million for fiscal year 1994.

SUBTITLE C-SUPPORTIVE HOUSING FOR THE HOMELESS

Sec. 821-Authorization

Subsection (a) would authorize appropriations for the Emergency
Shelter Grants Program at approximately $99.2 million for fiscal
year 1993 and approximately $102.4 million for fiscal year 1994.

Subsection (b) would authorize the Supportive Housing
Demonstration Program at approximately $203.5 million for fiscal
year 1993 and approximately $210 million for fiscal year 1994.

Subsection (c) would authorize the Supplemental Assistance for
Facilities to Assist the Homeless program at approximately $15.3
million for fiscal year 1993 and approximately $15.8 million for
fiscal year 1994.

Subsection (d) would increase budget authority for section 8
assistance for single room occupancy dwellings by approximately
$108.4 million for fiscal year 1993 and approximately $111.8
million for fiscal year 1994.

Subsection (e) would authorize approximately $42.5 million for
fiscal year 1993 and approximately $43.8 million for fiscal year
1994 for Shelter Plus Care: Homeless Rental Housing Assistance;
increase budget authority by approximately $83.7 million for
fiscal year 1993 and approximately $86.4 million for fiscal year
1994 for Shelter Plus Care: Section 8 Moderate Rehabilitation
Assistance for Single Room Occupancy Dwellings; authorize
approximately $132.4 million for fiscal year 1993 and $136.7
million for fiscal year 1994 for Shelter Plus Care: Section 202
Rental Assistance; and provide that funds available under the
Shelter Plus Care provision would remain available until
expended.

Sec. 822-Safe havens for the homeless

This section would add a new subtitle within Title IV of the
Stewart B. McKinney Homeless Assistance Act to create a
demonstration program to provide shelter, support and
stabilization for shelter-resistant people living on the street.
The program would be Subtitle G-Safe Havens for the Homeless.
(References are to sections of new subtitle).

Establishment of demonstration program.-Section 491 would
establish the Safe Havens program. Subsection (a) would direct
HUD to carry out a program to demonstrate the desirability and
feasibility of providing very low-cost housing, to be known as
Safe Havens. Safe Havens would be for seriously mentally ill
homeless persons who are unwilling or unable to participate in
mental health treatment programs or to receive other supportive
services.

Subsection (b) would set forth the purposes of the Safe Havens
program. The program would be designed to demonstrate: whether
Safe Havens are attractive to seriously mentally ill homeless
persons; the extent to which residents are eventually willing to
be engaged in treatment programs and to move toward a more
traditional form of housing after a period of residence in a Safe
Haven; whether Safe Havens are cost-effective in comparison with
other alternatives for seriously mentally ill homeless persons;
and the various ways in which Safe Havens could be arranged to
provide accommodations and low-demand, full-time mental health
case management for seriously mentally ill homeless persons.

Definitions.-Section 492 would set forth relevant definitions.
These would include definitions of ``applicant'', ``eligible
person'', ``facility'',``low-demand mental health care
management'', ``operating costs'', ``private nonprofit
organization'', ``recipient'', ``Safe Haven'', ``Secretary'',
``seriously mentally ill'', ``State'', and ``unit of general
local government''.

An ``eligible person'' would be an individual who (A) is
seriously mentally ill and resides primarily in a place not
designed for sleeping, although such a person could occasionally
reside in an emergency shelter; and (B) is currently unwilling or
unable to participate in mental health treatment programs or
receive other supportive services.

``Low-demand mental health case management'' would be the
provision, on a 40-hour per week basis, of mental health case
management in a non-coercive manner.

``Operating costs'' would include the cost of 24-hour management,
and maintenance, repair, and security; utilities, fuel,
furnishings, and equipment; and other reasonable costs.

A ``Safe Haven'' would be a facility that provides a residence
for an unspecified period of time for seriously mentally ill
homeless persons. A Safe Haven would provide private or
semi-private accommodations and could provide common kitchens,
dining rooms and bathrooms. Occupancy would be limited to 25
persons.

Program assistance.-Section 493 would set forth the program
assistance that HUD could provide under the Safe Haven program.
Subsection (a) would set forth the following eligible activities:
rehabilitation and/or acquisition, leasing, operating costs,
costs for administration, outreach, low demand mental health case
management, and other activities including the modification of an
existing facility to create a Safe Haven. Costs for administering
the Safe Havens program could not exceed 10% of the amount made
available for rehabilitation, leasing, and operating costs. Safe
Havens grants could cover no more than 50 percent of the cost of
low demand mental health case management. The subsection would
also limit the period of assistance to five years with the
exception of rehabilitation, acquisition and modification
expenses. HUD could, however, authorize assistance for up to an
additional five years, subject to HUD's finding that the
recipient's performance was satisfactory and subject to HUD's
finding that the recipient's performance was satisfactory and
subject to the availability of appropriations. Finally, the
subsection would authorize the Secretary to impose a cap on
grants through regulation.

Subsection (b) would establish matching requirements. It would
require that the total assistance under subsection (a) be matched
on a dollar-for-dollar basis. The value of leases, staff salary,
and time and services contributed by volunteers would count
toward the match.

Requirements.-Section 494 would set forth the program
requirements. Subsection (a) would set forth minimum requirements
for an application. The application would be required to contain
a description of the proposed facility, a description of the
number and characteristics of the expected occupants, a plan for
identifying and selecting eligible persons, a program plan, a
plan for adequate security, an estimate of program costs, a
description of matching resources, assurances that the facility
will have 24-hour, on-site management when practicable,
assurances that the facility will be operated for the intended
purposes, a certification that the proposal is consistent with
the applicable jurisdiction's CHAS, a certification that the
applicant will comply with applicable civil rights and
non-discrimination law, a plan for program evaluation, and other
information as required by the Secretary. The program plan would
include a description of how the facility will operate, how
low-demand mental health case management will be provided, how
the applicant will monitor resident's willingness to participate
in treatment and services programs, how access to supportive
services will be secured for participating residents, how access
to permanent housing with services will be sought, and how
outreach activities will be conducted. The application would also
have to provide assurances that the applicant will have control
of a site for the proposed project within one year after
notification of an award for grant assistance. If the applicant
failed to obtain such control within that year, the grant would
be recaptured and reallocated.

Subsection (b) would direct HUD to establish selection criteria
for a national competition for assistance under the program.
Criteria would include the ability of the applicant to develop
and operate a Safe Haven, the need for a Safe Haven in the
jurisdiction involved, the extent to which the program would
offer opportunities for permanent housing and supportive services
after stabilization in a Safe Haven, the cost-effectiveness of
the proposed program.

Subsection (c) would set forth matters concerning the operation
of the Safe Haven to which the applicant would have to agree.

Occupancy charge.-Section 495 would require residents of a Safe
Haven to pay an occupancy charge not in excess of the amount set
forth in section 3(a) of the United States Housing Act of 1937
(30 percent of adjusted income), except that the recipient would
be permitted to phase in or set a lower occupancy charge based on
the type of living accommodations provided, and would be
permitted to reserve payments to assist residents in moving to
permanent housing.

Removal of residents.-Section 496 would authorize a recipient of
assistance to remove a resident who endangers the safety,
welfare, or health of other residents or repeatedly violates a
condition of occupancy contained in the rules for the Safe Haven
(as set forth in the application, or as later amended). State and
local laws that would affect the recipient's ability to so remove
residents would be preempted.

Evaluation and report.-Section 497 would require the Secretary to
conduct an evaluation of the Safe Haven program and to submit to
Congress no later than December 31, 1994 a report setting forth
the findings of the Secretary as a result of the evaluation.

Regulations.-Section 498 would require the Secretary to establish
requirements as necessary to carry out the program by notice in
the Federal Register. It would require the Secretary to consult
with officials of the appropriate agencies of the Department of
Health and Human Services and representative provider and public
interest groups in establishing requirements to carry out the
provisions for the program and in selecting applicants for
assistance under the program. These agencies would include the
Alcohol, Drug Abuse, and Mental Health Administration and the
Office of Programs for the Homeless Mentally Ill. It would
clarify that the supplemental security income program applies to
participants in the Safe Havens program, except that residents
would not be considered inmates of public institutions or have
their benefits reduced or terminated due to participation in Safe
Havens. Safe Havens would not be considered a hospital, nursing
facility, institution for mental disease or other inpatient
facility for purposes of the Social Security Act, and would not
be denied Medicaid due to participation in the program.

Authorization of appropriations.-Section 499 would authorize the
Safe Havens program at $50 million for fiscal year 1993 and $51.6
million for fiscal year 1994.

Sec. 823-Applicability of Shelter Plus Care

This section would amend the Shelter Plus Care program to permit
public nonprofit organizations to participate.

SUBTITLE D-HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

Sec. 831-Authorizations

This section would authorize the Housing Opportunities for
Persons with AIDS program at $100 million for fiscal year 1993
and $103.2 million for fiscal year 1994.

Sec. 832-Program amendments

This section would amend the grant allocation formula to specify
that the incidence of AIDS, for purposes of allocating funds,
shall be determined by the Centers for Disease Control; and would
amend the additional requirements for metropolitan areas to
require that metropolitan areas designate their chief elected
official to receive grant funds.

Sec. 833-Housing opportunities for persons with AIDS

This section would direct the Secretary to issue final
regulations implementing the Housing Opportunities for Persons
with AIDS program not later than 30 days after the date of
enactment of this Act.

TITLE IX-COMMUNITY DEVELOPMENT AND MISCELLANEOUS PROGRAMS

SUBTITLE A-COMMUNITY AND NEIGHBORHOOD DEVELOPMENT AND
PRESERVATION

Sec. 901-Community development authorizations

This section would amend section 103 of the Housing and Community
Development Act of 1974 to provide authorizations for the CDBG
program of $3.9 billion in FY93 and $4 billion in FY94.
Set-asides for work-study, historically black colleges, and
insular areas would also be authorized. This section would also
amend section 108 of the Housing and Community Development Act of
1974 to authorize the section 108 loan guarantee program at $300
million in each of FY93 and FY94.

Sec. 902-Homeownership assistance under CDBG

This section would amend section 907(b) of the National
Affordable Housing Act to make direct homeownership assistance
(such as interest subsidies, downpayment assistance, closing
costs assistance) a permanently eligible activity under CDBG. The
sunset provision in existing law would be eliminated.

Sec. 903-Set-aside for state technical assistance

This section would amend section 106(d) of the Housing and
Community Development Act of 1974 to allow states to set-aside 1%
of program funds for technical assistance to local governments
and non-profit program recipients.

Sec. 904-Elimination of nonhousing community development plan

This section would amend section 104 of the Housing and Community
Development Act of 1974 to eliminate the non-housing community
development plan-required of all CDBG grantees in addition to
their basic community development plan and their comprehensive
housing strategy (CHAS).

Sec. 905-Loans of CDBG funds

This section would amend section 105(a)(14) of the Housing and
Community Development Act of 1974 to clarify that CDBG grantees
could make loans to any entity and for any eligible activities
for which they can now make a direct grant.

Sec. 906-CDBG code enforcement

This section would amend section 105(a)(3) of the Housing and
Community Development Act of 1974, the provision authorizing code
enforcement to arrest the decline of deteriorated or
deteriorating areas as an allowable activity under the CDBG
program. Communities would be permitted to use private, as well
as public, funds to make necessary improvements in undertaking
code enforcement with CDBG funds.

Sec. 907-CDGB set-aside for colonias

This section would amend section 916 of the National Affordable
Housing Act, the provision setting-aside CDBG funds in US-Mexico
border states for use in colonias. The set-aside would be
reauthorized and amended to allow grants to be made for any
CDBG-eligible activity that serves the needs of the residents of
the colonias-particularly those related to housing and water and
sewage facilities.

Sec. 908-Approval of multi-jurisdictional agreements

This section would amend section 102(a)(1) of the Housing and
Community Development Act of 1974 to allow states to approve
multi-jurisdictional agreements among non-entitlement
communities, instead of the HUD Secretary.

Sec. 909-Neighborhood-based nonprofit organizations

This section would amend section 105(a)(15) of the Housing and
Community Development Act of 1974, the provision defining
non-profit entities eligible for participation under the CDBG
program. The definition of eligible non-profits would be expanded
beyond ``neighborhood-based non-profits'' to ensure that
broader-based non-profits serving rural areas would be eligible.

Sec. 910-Economic development

This section would make several amendments to section 105 of the
Housing and Community Development Act of 1974 designed to provide
additional flexibility to, and ease the regulatory burdens on,
CDBG grantees undertaking economic development activities.

Subsection (a) would exempt funds spent on technical assistance
to public and non-profit entities for capacity building
activities from the administrative expenses cap in existing law.

Subsection (b) would ease the regulatory documentation burden for
job creation or retention activities carried out under CDBG. All
jobs created in low-income census tracts meeting specified
distress criteria would be presumed to meet the national
objective of benefiting low- and moderate-income persons.

Subsection (c) would ensure that CDBG grantees and HUD have
sufficient flexibility in determining the amount of assistance
that is appropriate for economic development projects. HUD could
not limit assistance to only businesses for which no other
assistance is available or which would not go forward without the
assistance.

This subsection would also direct HUD to ensure that grantees
have effective mechanisms in place to determine that an assisted
activity is financially viable and assistance is appropriate
relative to the public benefit to be created.

Subsection (d) would require the Secretary to minimize paperwork
and regulatory burden on small and micro-businesses receiving
CDBG assistance and to provide additional flexibility in
determining the appropriateness of assistance to small and
micro-businesses. This subsection would also exempt funds spent
on training, technical assistance, and other support services to
improve assistance to small and micro-businesses from the
administrative expenses cap in existing law.

Subsection (e) would define ``small business'' and
``micro-business''.
Subsection (f) would direct the Secretary to implement an
on-going training program for Department staff involved in
economic development activities to ensure regulations and
guidelines are implemented in a consistent manner.

Subsection (g) would direct GAO to conduct a study on the types
and quality of jobs created through CDBG assistance and the
extent to which these projects enhance the upward mobility of
low- and moderate-income persons.

Sec. 911-Neighborhood Development Program

This section would make several amendments to section 123 of the
Housing and Urban-Rural Recovery Act of 1983, the provision
authorizing the Neighborhood Development Demonstration Program.
First, the program would be authorized on a permanent, rather
than demonstration, basis at $2.5 million in FY93 and $3 million
in FY94. Second, the program would be amended to increase the
limitation on the number of grants that could be awarded to
multiyear grantees from the 30% in existing law to 50%. Third,
the maximum grant award under the program would be increased from
$50,000 to $75,000, but only if appropriations for the program
exceed $3 million. Finally, the program would be renamed as the
Honorable John Heinz Neighborhood Development Program to
commemorate the late Senator Heinz's support and interest in this
program.

Sec. 912-Neighborhood Reinvestment Corporation Act

This section would amend section 608(a) of the Neighborhood
Reinvestment Corporation Act to authorize the Neighborhood
Reinvestment Corporation at $40 million in FY93 and $41 million
in FY94.

                 SUBTITLE B-REGULATORY PROGRAMS

Sec. 921-National Commissions

Subsection (a) would permit appropriations for the Manufactured
Housing Commission to remain available until expended.

Subsection (b) would extend the life of the National Commission
on American Indian, Alaska Native, and Native Hawaiian Housing
for an additional 12 months and would authorize $500,000 for the
Commission to complete its work.

Subsection (c) would extend the life of the National Commission
on Severely Distressed Public Housing for an additional 6 months
and would authorize $250,000 for the Commission to complete its
work.

               SUBTITLE C-MISCELLANEOUS PROGRAMS
Sec. 931-HUD research and development

This section would authorize funding for HUD Research and
Development at $27.3 million for fiscal year 1993 and
approximately $28.2 million for fiscal year 1994.

Sec. 932-Fair Housing Initiatives Program

This section would reauthorize and revise the Fair Housing
Initiatives Program, the primary vehicle for private and
nonprofit fair housing enforcement.

Subsection (a) would establish findings which support changes to
the Fair Housing Initiatives Program and which reflect recent
changes in fair housing and fair lending laws. These findings
would recognize that: (1) in the past half decade, there have
been major legislative and administrative changes in federal fair
housing and fair lending laws and substantial improvements in the
nation's understanding of discrimination; (2) in response to
evidence of continuing housing discrimination, the Congress
passed the Fair Housing Act Amendments of 1988, to provide for
more effective enforcement of fair housing rights through
judicial and administrative avenues and to expand the number of
protected classes covered under federal fair housing laws; (3) in
the Financial Institutions Reform, Recovery and Enforcement Act
of 1989, the Congress expanded the disclosure provisions under
the Home Mortgage Disclosure Act to provide increased information
on the mortgage lending patterns of financial institutions; (4)
in the Americans with Disabilities Act of 1990 the Congress
provided a clear and comprehensive national mandate for the
elimination of discrimination against individuals with
disabilities; (5) in 1991, data collected under the Home Mortgage
Disclosure Act disclosed evidence of pervasive discrimination in
the Nation's mortgage lending markets; (6) the Housing
Discrimination Survey, released by the Department of Housing and
Urban Development in 1991, found that Hispanic and
African-American homeseekers experience some form of
discrimination in at least half of their encounters with sales
and rental agents; (7) the Fair Housing Initiatives Program
should be revised and expanded to reflect the significant changes
in the fair housing and fair lending area that have taken place
since the Program's initial authorization in the Housing and
Community Development Act of 1987; (8) continuing educational
efforts by the real estate industry are a useful way to increase
the understanding of the public of their fair housing rights and
responsibilities; and (9) the proven efficacy of private
nonprofit fair housing enforcement organizations and
community-based efforts makes support for these organizations a
necessary component of the fair housing enforcement system.

Subsection (b) would make a number of amendments to section 561
of the Housing and Community Development Act of 1987-the original
provision authorizing the Fair Housing Initiatives program.

The new subsection 561(b) would authorize enforcement initiatives
by private nonprofit fair housing enforcement organizations. The
Secretary would enter into contracts with fair housing
enforcement organizations to conduct investigations and
enforcement of violations of the 1968 Fair Housing Act. The
Secretary would be authorized to enter into multiyear contracts
with fair housing enforcement organizations or to take other
appropriate actions to enhance the effectiveness of the
investigation and enforcement activities.

The investigation and enforcement activities authorized would be
designed to: (1) carry out testing and other investigative
activities and to build the capacity for housing investigative
activities in unserved or underserved areas; (2) discover and
remedy discrimination in the public and private real estate
markets and real estate-related transactions, including, but not
limited to, the making or purchasing of loans or the provision of
other financial assistance, sales and rentals of housing and
housing advertising; (3) carry out special projects including the
development of prototypes to respond to new or sophisticated
forms of discrimination against persons protected under the 1968
Fair Housing Act and the 1988 Amendments to the Fair Housing Act;
(4) provide technical assistance to local fair housing
organizations, and assist in the formation and development of new
fair housing organizations; and (5) provide funds for the costs
and expenses of litigation, including expert witness fees.

The new subsection 561(c) would authorize funding for qualified
fair housing enforcement organizations to support enforcement
activities as well as the continued development and
implementation of fair housing initiatives. Funding would also be
authorized to support capacity enhancement-to help establish,
organize and build the capacity of fair housing enforcement
organizations, particularly in those areas of the country which
are currently unserved by fair housing enforcement organizations
as well as those areas where large concentrations of protected
classes exist. Funding provided to fair housing organizations
under this section could not provide more than 50 percent of the
operating budget of the recipient organization for any one year.

The new subsection 561(d) would authorize fair housing education
and outreach activities at the national, regional and local
levels. The Secretary would be required to establish a national
education and outreach program through consultation with one or
more qualified fair housing enforcement organizations. The
national program would be designed to provide a centralized,
coordinated effort for the development and dissemination of fair
housing media products, including public service announcements;
television, radio and print advertisements; posters, pamphlets
and brochures. In addition, the Secretary would be required to
designated a portion of the funds authorized under this section
specifically for activities related to the annual national fair
housing month.

The revised subsection 561(g) would authorize $21 million in
fiscal year 1993 and $26 million in fiscal year 1994 for the fair
housing initiatives program.

The new subsection 561(h) would define the terms ``qualified fair
housing enforcement organization'' and ``fair housing enforcement
organization''. A ``qualified fair housing enforcement
organization'' would be any organization that (1) is organized as
a private, tax-exempt nonprofit, charitable organization; (2) has
at least 2 years experience in complaint intake, investigation,
testing for fair housing violations and enforcement of
meritorious claims; and (3) is engaged in these activities at the
time of application for assistance under the FHIP program. Any
organization which is not solely engaged in fair housing
enforcement activities would also qualify as a qualified fair
housing enforcement organization, provided that the organization
is actively engaged in each of the activities specified above.

The term ``fair housing enforcement organization'' would be any
organization that (1) meets the requirements specified for a
qualified fair housing enforcement organization in (1) above; (2)
is either currently engaged in fair housing enforcement
activities or will become engaged in those activities upon
receipt of funding under this section; and (3) has at least one
year of experience in fair housing activities.

The new subsection 561(i) would prohibit the Secretary from using
funds authorized under this section to settle claims, satisfy
judgments, fulfill court orders in any litigation action
involving either the Department or housing providers funded by
the Department or for administrative costs.

The new subsection 561(j) would require the Secretary to submit a
comprehensive report to the Congress within 180 days after the
close of each fiscal year in which assistance under this section
is provided.

Sec. 933-Economic opportunities for low- and very low-income
persons

This section would amend Section 3 of the Housing and Urban
Development Act of 1968 to update the language of that section to
reflect changes in housing and community development laws and to
increase enforceability.

Subsection (a) of the new Section 3 would contain findings that:
(1) Federal housing and community development programs provide
recipients of Federal assistance with substantial funds for
projects and activities that produce significant employment and
other economic opportunities; (2) low- and very low-income
persons often have restricted access to employment and other
economic opportunities; (3) employment and other economic
opportunities generated by federal housing and community
development assistance offer a means to empower low- and very
low-income persons; and (4) prior Federal efforts to direct such
opportunities to such persons have not been fully effective and
should be intensified.

Subsection (b) of the new Section 3 would state that it is the
policy of the Congress and the purpose of Section 3 to ensure
that the employment and other economic opportunities generated by
Federal financial assistance for housing and community
development shall, to the greatest extent feasible, be directed
to low- and very low-income persons, particularly recipients of
government housing assistance.

Subsection (c) of the new Section 3 would provide for the manner
in which employment opportunities should be directed to low- and
very low-income persons. The subsection would provide that the
Secretary of Housing and Urban Development shall require that
public and Indian housing agencies, their contractors and
subcontractors make their best efforts consistent with existing
laws and regulations to give low- and very low-income persons the
training and employment opportunities generated by development,
operating or modernization assistance. These efforts are to be
directed first to residents of the developments for which the
assistance is expended, next to residents of other developments
managed by the agency, third to participants in Youthbuild
programs assisted under Subtitle D of Title IV of the
Cranston-Gonzalez National Affordable Housing Act, and finally to
low- or very low-income persons residing within the metropolitan
area or nonmetropolitan county.

The subsection would also provide that, in other programs
providing housing and community development assistance, the
Secretary is required to ensure that, to the greatest extent
feasible, consistent with existing laws and regulations,
opportunities for training and employment arising in connection
with housing rehabilitation, housing construction, or other
public construction projects are given to low- or very low-income
persons residing within the metropolitan area or nonmetropolitan
county, with priority, where feasible, to residents of
neighborhoods in which the projects are located and to
participants in Youthbuild programs assisted under Subtitle D of
the Title IV of the Cranston-Gonzalez National Affordable Housing
Act.

Subsection (d) of the new Section 3 would provide similar
requirements for contracts in connection with such assistance and
projects. The subsection would require that contracts arising out
of public housing development, operating and modernization
assistance are to be directed to business concerns that provide
economic opportunities for residents of the development for which
the assistance is expended, residents of other developments
managed by the agency expending the assistance, Youthbuild
programs receiving assistance under Subtitle D of Title IV of the
Cranston-Gonzalez National Affordable Housing Act, and low- or
very low-income residents of the metropolitan area or
nonmetropolitan counties in that order of priority.

The subsection would also provide that contracts arising out of
housing rehabilitation, housing construction, and other public
construction projects in other housing and community development
programs are to be directed to business concerns that provide
economic opportunities for low- and very low-income persons
within the metropolitan area or nonmetropolitan county, with
priority, where feasible, to business concerns which provide such
opportunities for low- and very low-income residents of the
neighborhoods in which the projects are located and to Youthbuild
programs receiving assistance under Subtitle D of Title IV of the
Cranston-Gonzalez National Affordable Housing Act.

Subsection (e) of the new Section 3 would define low- and very
low-income persons and business concerns that provide economic
opportunities.

Subsection (f) of the new Section 3 would require the Secretary
to consult with the Secretary of Labor, the Secretary of Health
and Human Services, the Secretary of Commerce, the Administrator
of the Small Business Administration, and other necessary Federal
agencies to carry out the Section.

Subsection (g) of the new Section 3 would require the Secretary
to promulgate regulations to implement the Section within 180
days of the date of enactment of the National Affordable Housing
Act Amendments of 1992.

Sec. 934-Study of section 3 of the Housing and Urban Development
Act of 1968

Subsection (a) would require the Secretary of Housing and Urban
Development to submit to the Congress, not later than one year
after the date of enactment of this Act, a report describing the
Secretary's efforts to enforce Section 3 of the Housing and Urban
Development Act of 1968, external factors affecting
implementation of Section 3, and recommendations for legislative
changes to improve the effectiveness of Section 3.

Subsection (b) would specify that the discussion of external
factors affecting implementation of Section 3 shall include, at a
minimum, a discussion of training needs of targeted employees and
technical assistance needs of targeted businesses, barriers
created by procurement regulations, coordination difficulties
with labor unions, and resource limitations of recipients of
federal assistance who must comply with Section 3.

Subsection (c) would require the Secretary, in preparing the
report, to consult with the Secretary of Labor, the Secretary of
Commerce, the Secretary of Health and Human Resources, the
Administrator of the Small Business Administration, other
appropriate federal officials and recipients of Federal housing
and community development assistance.

Sec. 935-Study on the housing impact of military base expansion

This section would require HUD to study the availability of
housing in areas designated for military expansion or
redeployment. The study would examine the ability of the public
and private sector to meet the housing demand in selected
communities and the impact of increased demand on housing
availability and affordability for both homeowners and renters.

Sec. 936-Nehemiah housing opportunity grants

This section would amend the Nehemiah homeownership program's
recapture provisions to allow the homeowner, when the property is
sold or transferred, to recover his or her original downpayment
from any proceeds remaining after the first mortgage is paid off.
Any proceeds beyond that would be split equally between the
homeowner and the repayment of the second mortgage. Any remaining
amounts available after the second mortgage is completely repaid
would accrue exclusively to the homeowner. If the second mortgage
is not completely repaid, the second mortgage would remain on the
property until the loan is paid in full upon later transfer or
sale.

Sec. 937-Sense of the Senate

This section would establish a sense of the Senate that federal
mandates involve often-substantial costs to implement, that many
states and localities are suffering from economic recession, and
that the federal government should provide either explicit
guidance on how these mandates can be funded through existing
resources or appropriate additional federal funds to assist in
compliance.

Sec. 938-Improved coordination of urban policy

This section would amend Title VII of the Housing and Urban
Development Act of 1970 to add as a goal of national urban policy
coordination among federal programs designed to aid urban areas.

The section would also accelerate the due date of the next
National Urban Policy report to June 1, 1993, and would require
that the report contain specific recommendations to promote
coordination among Federal programs to assist urban areas; to
enhance the fiscal capacity of fiscally-distressed urban areas;
to promote job opportunities in and enhance the job skills of
residents of economically-distressed urban areas; to generate
decent and affordable housing; to reduce racial tensions and to
combat racial and ethnic violence in urban areas; to combat urban
drug abuse and drug-related crime and violence; to promote the
delivery of health care to low-income urban communities; to
expand educational opportunities in urban areas; and to achieve
other goals of the national urban policy.

Finally, the section would provide that the National Urban Policy
Report, when transmitted to Congress, shall be referred in the
Senate to the Committee on Banking, Housing, and Urban Affairs,
and in the House to the Committee on Banking, Finance, and Urban
Affairs.

Sec. 939-Community Outreach Act

This new section would authorize a Community Outreach Partnership
demonstration.

Subsection (a) would entitle the section ``The Community Outreach
Partnership Act of 1992.''

Subsection (b) would authorize a five year demonstration program
to facilitate the creation of partnerships between insitutitions
of higher education and local communities to solve urban problems
through research, outreach, and exchange of information.

Subsection (c) would establish a grant program to provide funds
for research and outreach activities.

Subsection (d) would permit any public or nonprofit institutions
of higher education to submit an application.

Subsection (e) would establish selection criteria for
applications submitted by institutions of higher education.
Selection of applications would be based on the resources
contributed by the institutions, the capacity to provide
leadership in solving community problems, commitment as
demonstrated by the provision of matching funds, the ability to
disseminate information on the results of research and outreach
activities, the proposed activities to be carried out, and other
criteria deemed appropriate by the Secretary.
Subsection (f) would establish the maximum federal share for
research activities at 75 percent of total project costs and for
outreach activities at 50 percent of total project costs.

Subsection (g) would provide that the non-federal share of
project costs could include cash, non-cash contributions,
equipment, or other in-kind contributions.

Subsection (h) would establish the responsibilities of
institutions of higher education selected to participate in the
program including conducting research and outreach activities,
disseminating information, establishing a community advisory
committee, and the development of training and other
instructional programs for community leaders.

Subsection (i) would direct the Secretary to establish a national
advisory council comprised of state and local officials,
institutions of higher education receiving assistance,
representatives of local community advisory committees and
experts on urban issues. The council would advise the Secretary
on implementation of the program.

Subsection (i) would establish a national clearinghouse to
facilitate the exchange of information on research and successful
outreach activities.

Subsection (k) would authorize $15 million in FY 1993 and $15.6
million in FY 1994 for grants for research and outreach
activities, and $500,000 in FY 1993 and $520,000 in FY 1994 to
establish and operate the national clearinghouse.

Subsection (l) would require the Secretary to submit an annual
report to Congress on the activities of the demonstration
program.

Sec. 940-Report on community development lending

This provision would direct the Board of Governors, in
consultation with other federal regulators, to submit a report
comparing lending activities in low income neighborhoods to other
neighborhoods. The report would compare the risks and returns
associated with lending in each type of neighborhood.

Sec. 941-Report on community development banking

This provision would direct the Board of Governors of the Federal
Reserve System and the Secretary of HUD to jointly submit a
report on insured depository institutions that focus on community
development in distressed communities. These entities, often
referred to as ``community development banks'', have been very
successful in generating revitalization in distressed areas. The
report would focus on the accomplishments of such institutions
and make recommendations for a pilot program to facilitate the
formation of new ``community development banks''.

Sec. 942-Flood restoration zone

This section would establish a new flood zone for areas in which
a major flood control project-that had previously provided 100
year flood protection-has been decertified by the Army Corps of
Engineers. In the new ``restoration zone'', interim flood
insurance rates and building restrictions would be in effect
until the flood protection could be restored. Flood protection
would have to be restored within a designated time period in
accordance with a timetable negotiated and developed by the
community and FEMA.

Sec. 943-Energy Efficient Mortgages Pilot Program

This section would require HUD to establish a pilot program in
five states to promote the purchase of new and existing energy
efficient residential buildings and the installation of
cost-effective improvements in existing residential buildings.
This section would allow FHA applicants that meet minimum
criteria to be eligible for additional financing not to exceed 5%
of the property value (not to exceed $8000) or $4,000, whichever
is less, for cost-effective energy efficiency improvements. This
section would require the Secretary of HUD to encourage
participation in the program by providing information to lenders
and other appropriate parties and by requiring FHA applicants to
sign a statement indicating that they have been informed of the
energy efficient mortgage pilot program. In addition, this
section would require the Secretary to establish a training
program for appropriate organizations regarding the benefits of
energy efficient mortgages and the operation of the program. The
Secretary would be required to submit a report to Congress
describing the effectiveness of the pilot program within 18
months of enactment. The report also would assess the potential
for expanding the pilot program nationwide. This section would
extend the program nationwide within two years of enactment
unless the Secretary could demonstrate to Congress that extending
the program would not be practical. This section also would
authorize the appropriation ``such sums as may be necessary'' to
carry out the demonstration program.

Sec. 944-Prohibition of lump sum payments

This section would prohibit the provision of relocation
assistance to tenants in lump sum payments except if the payment
is to be used for the purchase of a home.

Sec. 945-Smoke detectors

This section would require HUD to promulgate regulations to
require installation of smoke detectors in all federally assisted
housing.

Sec. 946-The National Cities in Schools Community Development
Program

This section would authorize the Secretary to make grants to
expand the National Cities in Schools Program and operations of
the National Center for Partnership Development to: (1) develop
and support projects to strengthen local community dropout
prevention programs in elementary and secondary schools; (2)
train community leaders responsible for the implementation of
local Cities in Schools dropout prevention programs; and (3)
disseminate to, and support replication by, states and
communities of effective dropout prevention strategies. $10
million would be authorized for each of the fiscal years 1993 and
1994 to carry out this section.

Sec. 947-Economic independence

This section would urge the HUD Secretary to implement section
957 of the National Affordable Housing Act, a provision limiting
annual rent increases for families residing in federally assisted
housing who become employed. Other federal agencies would also be
encouraged to take similar steps to encourage economic
independence and the accumulation of assets.

TITLE X-RESIDENTIAL LEAD-BASED PAINT HAZARD REDUCTION ACT OF 1992

Sec. 1001-Short title

This section would establish the short title of the title as the
``Residential Lead-based Paint Hazard Reduction Act of 1992.''

Sec. 1002-Findings

This section would contain findings that (1) low-level lead
poisoning afflicts as many as 3 million children under age 6,
many of whom are from minority or low-income communities; (2)
low-level lead poisoning in children reduces IQ, causes reading
and learning disabilities, impairs hearing, reduces attention
span, and causes hyperactivity and behavioral problems; (3) more
than 3 million tons of lead in the form of lead-based paint
remain in American homes, with the vast majority of homes built
before 1950 containing substantial amounts of lead-based paint;
(4) the most common cause of lead poisoning in children is the
ingestion of lead-contaminated household dust from deteriorating
or abraded paint; (5) the health and development of children
living in as many as 3.8 million American homes is endangered by
chipping or peeling lead paint, or excessive amounts of
lead-contaminated dust; (6) interim controls and abatement of
lead-based paint hazards can reduce the danger posed to children
and limit children's exposure to lead dust and chips; (7) despite
the enactment of laws in the early 1970's requiring the Federal
Government to eliminate as far as practicable lead-based paint
hazards in federally owned, assisted, and insured housing, the
Federal response to this national crisis remains severely
limited; and (8) the Federal Government must take a leadership
role in building the infrastructure-including an informed public,
State and local delivery systems, certified inspectors,
contractors, and laboratories, trained workers, and available
financing and insurance-necessary to ensure that the national
goal of eliminating lead-based paint hazards in housing can be
achieved as expeditiously as possible.

Sec. 1003-Purposes

This section would describe the purposes of the Title, including:
(1) the development of a national strategy to build the
infrastructure necessary to eliminate lead-based paint hazards in
all housing as expeditiously as possible; (2) the reorientation
of the nation's approach to the problem of lead-based paint in
housing in order to implement, on a priority basis, a broad
program to evaluate and reduce lead-based paint hazards in the
nation's housing stock; (3) encouraging effective action to
prevent childhood lead poisoning by establishing a workable
framework for lead-based paint hazard evaluation and reduction
and by ending the current confusion over reasonable standards of
care; (4) ensuring that the government considers lead-based paint
hazards when developing housing policies and in connection with
the sale, rental, and renovation of homes and apartments; (5)
mobilizing national resources expeditiously, through a
partnership among all levels of government and the private
sector, to develop the most promising, cost-effective methods for
evaluating and reducing lead-based paint hazards; (6) reducing
the threat of childhood lead poisoning in housing owned,
assisted, or transferred by the Federal Government; and (7)
educating the public to the hazards of lead and sources of lead
poisoning and providing information on methods for reducing and
eliminating such hazards.

Sec. 1004-Definitions

This section would define the terms ``abatement,'' ``accessible
surface,'' ``certified contractor,'' ``contract for the purchase
and sale of residential real property,'' ``deteriorated paint,''
``evaluation,'' ``federally assisted housing,'' ``federally
chartered secondary mortgage institution,'' ``federally owned
housing,'' ``federally supported work,'' ``friction surface,''
``impact surface,'' ``inspection,'' ``interim controls,''
``lead-based paint,'' ``lead-based paint hazard,''
``lead-contaminated dust,'' ``lead-contaminated soil,''
``mortgage loan,'' ``originating mortgage institution,''
``priority housing,'' ``public housing,'' ``reduction,''
``residential dwelling,'' ``residential real property,'' ``risk
assessment,'' ``Secretary,'' and ``target housing.''

          SUBTITLE A-LEAD-BASED PAINT HAZARD REDUCTION

Sec. 1011-Grants for lead-based paint hazard reduction in target
housing

This section would expand HUD's competitive grant program to
state and local governments for lead-based paint hazard reduction
in private, low-income housing. Subsection (a) would authorize a
grant program to evaluate and reduce lead-based paint hazards in
private and Section 8 pre-1978 low-income housing.

Subsection (b) would define eligible applicants as states and
units of local government with approved comprehensive housing
affordability strategies (CHAS's).

Subsection (c) would describe the documents to be included in a
grant application, including (1) that portion of the CHAS
addressing lead hazard reduction in low-income housing; (2) the
amount requested; (3) a description of the activities to be
undertaken; (4) a description of the forms of financial
assistance to be provided with grant funds; (5) assurances of the
applicant's capacity to carry out the activities.

Subsection (d) would describe selection criteria for awarding
grants. These would include (1) the extent to which the proposed
activities would reduce lead poisoning risks to children under 6
living in pre-1978 low-income housing; (2) the degree and
severity of lead-based paint hazards in the jurisdiction to be
served; (3) the applicant's ability to leverage other funds to
supplement the grant; (4) the applicant's ability to carry out
the proposed activities; and (5) other factors that the Secretary
determines will ensure the grants are used effectively and to
promote the purposes of the Act.

Subsection (e) would describe eligible activities. These would
include: (1) performing risk assessments and inspections in
priority housing; (2) instituting interim controls; (3)
conducting abatements; (4) funding the additional cost of
reducing lead-based paint hazards in lead-contaminated housing
undergoing renovation; (5) ensuring that risk assessments,
inspections, and abatements are carried out by certified
contractors; (6) monitoring the health of lead reduction workers;
(7) relocating families during lead-hazard reduction; (8) public
education on the nature and causes of lead poisoning and measure
to reduce exposure to hazards; (9) post-reduction soil, dust and
children's blood-lead level testing; and (10) other appropriate
activities.

Subsection (f) would permit recipients to provide services
through a variety of programs including grants, loans, equity
investments, revolving loan funds, loan funds, loan guarantees,
interest write-downs, and other forms of assistance.

Subsection (g) would provide technical assistance to increase the
capacity of eligible applicants, including grants of up to
$200,000 to establish state training, certification or licensing
programs for lead reduction specialists. $3 million of the grant
program appropriation would be set aside for this purpose.

Subsection (h) would require recipients of rants to provide at
least 10 percent matching funds.

Subsection (i) would prohibit grantees from using these funds to
replace state or local funds available or designated for
activities eligible under the grant program.

Subsection (j) would limit administrative expenses to 10 percent.

Subsection (k) would require applicants to maintain financial
records sufficient to ensure proper accounting and disbursing of
amounts received.

Subsection (l) would require grantees to report to the Secretary:
(1) how they used granted funds; (2) the number of risk
assessments and inspections performed; (3) the number of
dwellings in which interim controls were instituted; (4) the
number of abatements conducted; and (5) other information as
required by the Secretary.

Subsection (m) would require the publication of a notice of
funding availability within 120 days from the date funds are
appropriated for the grant program.

Subsection (n) would authorize $250 million for each of fiscal
years 1993 and 1994 for the grants program.

Sec. 1012-Evaluation and reduction of lead-based paint hazards in
federally assisted housing

This section would amend existing law to improve federal
responsiveness to lead-based paint hazards in housing receiving
direct federal assistance, federal loans, and federal mortgage
insurance.

Subsection (a) would amend section 302(a) of the Lead-Based Paint
Poisoning Prevention Act to (1) extend coverage to all housing
receiving more than $5000 in project-based federal assistance,
including housing assisted through agencies such as the Farmers'
Home Administration and the Veterans Administration; and (2)
replace the second sentence with a more detailed and workable
scheme for reducing lead hazards. Beginning in January. 1995, all
purchasers and tenants of covered housing would receive lead
hazard information pamphlets. Risk assessments and interim
controls would be performed periodically, with the first
conducted not later than January, 1996. Housing receiving federal
renovation or rehabilitation assistance would be inspected for
the presence of lead-based paint prior to any work likely to
disturb paint surfaces. Lead-based paint hazards would be reduced
through abatement or interim controls in the course of
rehabilitations projects receiving less than $25,000 per unit in
federal assistance, and hazards would be abated during
substantial rehabilitation projects receiving more than $25,000
per unit in federal assistance. Notice of activities taken under
this section would be provided to occupants, including a
description of the nature and scope of the activities and copies
of the risk assessment or inspection reports, which among other
information, identify the location of remaining lead-contaminated
surfaces. The Secretary would have the discretion to impose other
requirements.

Subsection (b) would amend section 302(b) of the Lead-Based Paint
Poisoning Prevention Act by specifying that risk assessments,
interim controls, inspections, and abatement of lead-based paint
hazards in housing covered by this section must be performed in
accordance with guidelines issued or approved by the Secretary.

Subsection (c) would amend section 302(c) of the Lead-Based Paint
Poisoning Prevention Act to (1) require that inspections
performed under this section be performed by certified
contractors; and (2) raise the threshold for lead content prior
to requiring notice to occupants.

Subsection (d) would amend section 302(d)(1) of the Lead-Base
Paint Poisoning Prevention Act to update the terminology
employed.

Subsection (e) would clarify that a participating HOME
jurisdiction would be permitted to use HOME funds lead-based
paint hazard evaluation and reduction activities.

Subsection (f) would clarify that lead-based paint hazard
evaluation and reduction are eligible activities under the
Community Development Block Grant program.

Subsection (g) would amend section 8 of the United States Housing
Act of 1937 to permit the Secretary to provide adjustments to the
maximum monthly rents in certain projects to cover the costs of
evaluating and reducing lead-based paint hazards in housing
receiving section 8 project-based assistance.

Subsection (h) would amend HOPE for Public and Indian Housing
Homeownership to (1) make inspection for lead-based paint hazards
eligible for funding through planning grants and (2) make
abatement of lead-based paint hazards an eligible activity for
funding through implementation grants. Since HOPE I is a property
disposition program, inspection and abatement of lead-based paint
hazards would be required.

Subsection (i) would amend HOPE for Homeownership of Multifamily
Units to (1) make inspection for lead-based paint hazards
eligible for funding through planning grants and (2) make
abatement of lead-based paint hazards an eligible activity for
funding through implementation grants. Since HOPE II is a
property disposition program, inspection and abatement of
lead.based paint hazards would be required.

Subsection (k) would clarify that lead-based paint hazard
evaluation and reduction are eligible activities under (1) the
home improvement loan program contained in section 2(a) of the
National Housing Act; and (2) the rehabilitation loan program
contained in section 203(k)(2)(B) of the National Housing Act.

Subsection (l) would clarify that the cost of evaluating and
reducing lead-based paint hazards may be covered through a loan
insured under section 221(d)(4)(iv) of the National Housing Act
insurance for multifamily housing.

Subsection (m) would clarify that the terms ``repair'',
``repairs'', ``rehabilitate'', and ``rehabilitation'' include
measures to evaluate and reduce lead-based paint hazards, under
the Housing Act of 1949 section 501(a) rural housing program.

Sec. 1013-Disposition of federally owned housing

This section would further amend section 302(a) of the Lead-Based
Paint Poisoning Prevention Act to clarify the responsibility of
federal agencies with regard to lead-based paint hazards in
housing sold or transferred to private owners. It would require
that, beginning January, 1995, all pre-1978 federally owned
housing would be inspected for lead-based paint and lead-based
paint hazards prior to disposition and inspection reports would
be made available to prospective purchasers. Abatement of
lead-based paint hazards would be required prior to disposition
in housing constructed prior to 1960. This section would be
subject to appropriations.

Sec. 1014-Comprehensive housing affordability strategy

This section would amend section 105 of the National Affordable
Housing Act, the provision requiring a jurisdiction that wants to
participate under various federal housing programs to develop a
comprehensive housing affordability strategy (CHAS). The section
would add a new item to the CHAS which would require
participating jurisdictions to estimate the number of housing
units within the jurisdiction that are occupied by low-income
families or very low-income families that contain lead-based
paint hazards, and to outline the jurisdiction's plan for
evaluating and reducing these hazards, and to describe how
lead-based paint hazard reduction will be integrated into housing
policies and programs.

Sec. 1015-Private sector task force on lead-based paint hazard
reduction and financing

Subsection (a) would require the Secretary to establish a task
force to make recommendations for expanding resources and efforts
to evaluate and reduce lead-based paint hazards in private
housing.

Subsection (b) would define membership to include individuals
representing landlords, tenants, primary lending institutions,
private mortgage insurers, federally chartered financial
institutions, single-family and multifamily real estate
interests, nonprofit housing developers, property liability
insurers, public housing agencies, low-income housing advocacy
organizations, national, State and local lead-poisoning
prevention advocates and experts, and community-based
organizations located in areas with substantial rental housing.

Subsection (c) would outline the task force's responsibilities.
These would include making recommendations concerning (1)
incorporating the need to finance lead-based paint hazard
reduction into underwriting standards; (2) developing new loan
products and procedures for financing lead-based paint hazard
evaluation and reduction activities; (3) adjusting appraisal
guidelines to address lead safety; (4) incorporating risk
assessments or inspections for lead-based paint as a routine
procedure in the origination of new residential mortgages; (5)
revising guidelines, regulations, and educational pamphlets
issued by the Department of Housing and Urban Development
relating to lead poisoning prevention; (6) reducing the current
uncertainties of liability related to lead-based paint in rental
housing by clarifying standards of care for landlords and
lenders, and by exploring the ``safe harbor'' concept; (7)
increasing the availability of liability insurance for owners of
rental housing and certified contractors and establishing
alternative systems to compensate victims of lead-based paint
poisoning; and (8) evaluating the utility and appropriateness of
requiring risk assessments or inspections and notification to
prospective lessees of rental housing.

Subsection (d) would specify that members of the task force will
not be compensated by the government for their participation.

Sec. 1016-National consultation on lead-based paint hazard
reduction
This section would require the Secretary to consult on an ongoing
basis with EPA, the Centers for Disease Control, other Federal
agencies concerned with lead poisoning prevention, and the
private sector task force.

SUBTITLE B-EVALUATION AND REDUCTION INFRASTRUCTURE

Sec. 1021-Contractor training and certification

This section would require that all federally supported risk
assessments, inspections and abatement of lead-based paint
hazards be conducted by certified contractors. It would contain
an interim provision which would allow contractors who have
successfully completed a federally sponsored training course to
perform this work during the first two years. It would also
require the establishment of federally approved training and
certification programs in every State.

Sec. 1022-Certification of laboratories

This section would require that all federally supported
laboratory tests and analyses of lead in paint film, dust, soil,
and other media be conducted by federally certified laboratories.

Sec. 1023-Guidelines for lead-based paint hazard evaluation and
reduction activities

Subsection (a) would require that within 9 months, HUD, in
consultation with EPA, the Labor Department, and the Centers for
Disease Control, issue guidelines for the conduct of federally
supported risk assessments, inspections, interim controls, and
abatement of lead-based paint hazards. As under existing law,
these guidelines would be required to be based on criteria that
measure the condition of the housing, not the health of the
residents of the housing. For the purposes of providing guidance
in the performance of risk assessments, the presence of children
under age 6 could be taken into consideration.

Subsection (b) would state that the guidelines preempt state and
local regulations except where state or local regulations impose
more stringent standards or requirements than the federal
guidelines.

Sec. 1024-Contractor quality control

This section would outline penalties for noncompliance.
Subsection (a) would subject to the penalty provision contractors
who fail to comply with the certification requirements of this
subtitle, or who substantially fail to comply with applicable
Federal regulations or guidelines or applicable State or local
regulations or guidelines.

Subsection (b) would describe the procedure for penalizing
noncompliant contractors. It would require the Secretary to
provide contractors with notice concerning the nature of the
noncompliance and an opportunity to respond and then to determine
whether the contractor should be declared ineligible to
participate in HUD programs. The Secretary is given discretion to
establish appeals procedures within the agency, but the
Secretary's decision is otherwise final and nonreviewable by the
courts.

Subsection (c) would clarify that action under this section does
not preclude HUD or other aggrieved parties from seeking other
forms of redress.

Sec. 1025-National clearinghouse on residential lead poisoning

Subsection (a) would require the Secretary, in consultation with
EPA, and the Centers for Disease Control, to establish a National
Clearinghouse on Residential Lead Poisoning.

Subsection (b) would describe the mission of the Clearinghouse.
Responsibilities would include: (1) collecting, evaluating, and
disseminating current information concerning the evaluation and
reduction of lead hazards in housing; (2) maintaining a
rapid-alert system to inform certified contractors and grant
recipients of significant developments in research related to the
evaluation and reduction of lead hazards; and (3) performing
other duties as determined by the Secretary to be necessary to
carry out the Title.

Subsection (c) would set aside $1 million from the FY 1993 and
1994 appropriations for the grants program to operate the
Clearinghouse.

subtitle c-public information and technical assistance

Sec. 1031-Disclosure of information concerning lead upon transfer
of residential property

Subsection (a) would require the Secretary to issue regulations
within 2 years for the disclosure of lead-based paint hazards in
pre-1978 housing which is offered for sale. The regulations would
require sellers to: (1) provide purchasers with lead hazard
information pamphlets; (2) disclose any known lead-based paint or
lead-based paint hazards and provide to the purchaser any lead
hazard evaluation report available to the seller; and (3) permit
the purchaser a 10-day period (unless the parties mutually agree
upon a different period of time) to conduct a risk assessment or
inspection for the presence of lead-based paint hazards.
Regulations would also require that contracts contain Lead
Warning Statements and a statement signed by the purchaser
stating that the purchaser has (1) read the Lead Warning
Statement and understands its contents, (2) received a lead
hazard information pamphlet, and (3) had a 10-day opportunity
(unless the parties mutually agreed upon a different period of
time) before becoming obligated under the contract to purchase
the premises to conduct a risk assessment or inspection for the
presence of lead-based paint hazards. The lead warning statement
would contain the following text printed in large type on a
separate sheet of paper attached to the contract:

 Every purchaser of any interest in residential real property on
which a residential dwelling was built prior to 1978 is notified
that such property may present exposure to lead from lead-based
paint that may place young children at risk of developing lead
poisoning. Lead poisoning in young children may produce permanent
neurological damage, including learning disabilities, reduced
intelligence quotient, behavioral problems, and impaired memory.
Lead poisoning also poses a particular risk to pregnant women.
The seller of any interest in residential real property is
required to provide the buyer with any information on lead-based
paint hazards from risk assessments or inspections in the
seller's possession and notify the buyer of any known lead-based
paint hazards. A risk assessment or inspection for possible
lead-based paint hazards is recommended prior to purchase.

Finally, the regulations would require the seller's agent to
ensure compliance with the requirements of this subsection.

Subsection (b) would require the Secretary to issue regulations
within 2 years for the disclosure of lead-based paint hazards in
pre-1978 private rental housing. The regulations would require
lessors to provide prospective tenants with a lead hazard
information pamphlet and disclose any lead-based paint or
lead-based paint hazards known to the lessor, including copies of
lead evaluation reports. The regulations would also require
written leases of one year or more to contain the following Lead
Warning Statement:

 Every lessee of any residential dwelling built prior to 1978 is
notified that such dwelling may present exposure to lead from
lead-based paint that may place young children at risk of
developing lead poisoning. Lead poisoning in young children may
produce permanent neurological damage, including learning
disabilities, reduced intelligence quotient, behavioral problems,
and impaired memory. Lead poisoning also poses a particular risk
to pregnant women. The lessor of a residential dwelling is
required to provide the lessee with any information on lead-based
paint hazards from risk assessments or inspections in the
lessor's possession and notify the lessee of any known lead-based
paint hazards. A risk assessment or inspection for possible
lead-based paint hazards is recommended prior to entering into a
lease.

Subsection (c) would describe the contents of the Lead Hazard
Information Pamphlet which is required to be distributed in
(federally assisted) housing covered by the LPPPA and in private
housing covered by this section. The pamphlet would be published
in consultation with HHS through notice and comment rulemaking.
It would be released within one year of enactment and revised
periodically. The pamphlet would (1) provide information on the
health risks associated with exposure to lead; (2) provide
general information about the incidence lead-based paint and
lead-based paint hazards in pre-1978 housing; (3) describe the
risks of lead exposure to young children, pregnant women, women
of child bearing age, anyone involved in home renovation, and
others residing in housing containing lead-based paint hazards;
(4) describe the risks of do-it-yourself home renovation in
lead-contaminated housing; (5) provide information on approved
methods for evaluating and reducing lead-based paint hazards and
their effectiveness in identifying, reducing, eliminating, or
preventing exposure to lead-based paint hazards; (6) describe how
to obtain a list of local certified lead contractors; (7)
recommend having pre-1978 housing tested for lead-based paint or
lead hazards prior to purchasing, leasing or renovating pre-1978
housing; (8) state that some states and localities have stricter
laws and provide a listing of Federal, State, and local agencies
in each State, including address and telephone number, that can
provide information about applicable laws and available
governmental and private assistance and financing; and (9)
provide such other information about environmental hazards
associated with residential real property (such as radon) at the
Secretary's discretion.

Subsection (d) would describe various penalties for violation of
this section. First, the Secretary would have discretion to
impose a civil money penalty of up to $10,000 for a knowing and
material violation. The decision to impose a penalty could be
made directly by the Secretary or through an administrative
entity, through a process providing opportunity for an on the
record hearing. Review of any determination, order, or
interlocutory ruling arising from a hearing would be available.
The amount of the penalty would be in accordance with statutory
guidelines including consideration of factors such as the gravity
of the offense, ability to pay, injury to the public, benefits
received, deterrence value and other appropriate factors.
Decisions would be reviewable by the appropriate federal court of
appeals. Second, the Secretary would be authorized to seek to
enjoin violations. Third, knowing violators would be jointly and
severally liable for triple damages to aggrieved mortgage
applicants, purchasers, and lessees. Fourth, courts would be
authorized to award court costs, reasonable attorney fees and
expert witness fees to prevailing private plaintiffs.

Subsection (e) would clarify that the section does not affect the
validity or enforceability of purchase agreements, rental
agreements, loans, loan agreements, mortgages, or liens made or
arising in connection with mortgage loans, and does not act to
create a defect in title.

Sec. 1032-Public awareness

Subsection (a) would authorize the Secretary, in cooperation with
other federal agencies, to undertake a campaign to increase
public awareness of the dangers of childhood lead poisoning. The
subsection would target the campaign to parents of young children
and members of the real estate and home renovation professions
and would (1) inform the public of the health consequences of
lead exposure; (2) describe risk assessment and inspection
methods; and (3) provide advice about measures to reduce the risk
of lead exposure.

Subsection (b) would coordinate the campaign with activities
carried out by the President's Commission on Environmental
Quality and other related federal public education efforts.

Subsection (c) would set-aside $1 million from authorizations for
the grant program for each of fiscal years 1993 and 1994 to carry
out the campaign.

Sec. 1033-Relationship to other laws

This section would limit the preemptive effect of the disclosure
provision to inconsistent state laws or portions of state laws.

Under subsection (a) State laws which are not determined by the
Secretary to be inconsistent would continue to have effect. Laws
determined to be inconsistent would be affected only to the
extent of remedying the inconsistency.

Under subsection (b), states would not be precluded from
establishing more stringent standards of liability or disclosure
requirements.

SUBTITLE D-RESEARCH AND DEVELOPMENT

PART 1-HUD RESEARCH

Sec. 1051-Research on lead exposure from other sources

This section would require the Secretary, in cooperation with
other federal agencies, to conduct research on strategies to
reduce the risk of lead exposure from other sources, including
exterior soil and interior lead dust in carpets, furniture, and
forced air ducts.

Sec. 1052-Testing technologies

This section would require the Secretary, in cooperation with
other federal agencies, to conduct research to (1) develop
improved methods for evaluating lead-based paint hazards in
housing; (2) develop improved methods for reducing lead-based
paint hazards in housing; (3) develop improved methods for
measuring lead in paint films, dust, and soil samples; (4)
establish performance standards for various detection methods,
including spot test kits; (5) establish performance standards for
lead-based paint hazard reduction methods, including the use of
encapsulants; (6) establish appropriate cleanup standards; (7)
evaluate the efficacy of interim controls in various hazard
situations; (8) evaluate the relative performance of various
abatement techniques; (9) evaluate the long-term
cost-effectiveness of interim control and abatement strategies;
and (10) assess the effectiveness of hazard evaluation and
reduction activities funded by this Act.

Sec. 1053-Authorization

This section would set aside $5 million in fiscal years 1993 and
1994 for HUD research.

Part 2-GAO Report

Sec. 1056-Federal implementation and insurance study

This section would mandate two studies to be performed by the
General Accounting Office.

Subsection (a) would require GAO to assess the effectiveness of
Federal enforcement and compliance with lead safety laws and
regulations. GAO would specifically consider whether changes are
needed in annual inspection procedures to identify lead-based
paint hazards in housing benefitting from section 8 tenant-based
assistance.

Subsection (b) would require GAO to assess the availability of
liability insurance for owners of residential housing that
contains lead-based paint and persons engaged in lead-based paint
hazard evaluation and reduction activities. In carrying out the
assessment, GAO would: (1) analyze any precedents in the
insurance industry for the containment and abatement of
environmental hazards, such as asbestos, in federally assisted
housing; (2) provide an assessment of the recent insurance
experience in the public housing lead hazard identification and
reduction program; and (3) recommend measures for increasing the
availability of liability insurance to owners and contractors
engaged in federally supported work.

SUBTITLE E-REPORTS

Sec. 1061-Reports of the Secretary of Housing and Urban
Development

This section would require the Secretary to transmit to Congress
an annual and biennial report.

Under subsection (a), the annual report would: (1) set forth the
Secretary's assessment of the progress made in implementing the
various programs authorized by this title; (2) summarize the most
current health and environmental studies on childhood lead
poisoning, including studies that analyze the relationship
between interim control and abatement activities and lead
poisoning; (3) recommend legislative and administrative
initiatives to expand HUD's role in lead hazard evaluation and
reduction; (4) describe the results of HUD's research under
subtitle D; and (5) estimate the amount of Federal assistance
annually expended on lead hazard evaluation and reduction
activities.

Under subsection (b), the biennial report would describe HUD's
progress in implementing expanded lead-based paint hazard
evaluation and reduction activities. The report would: (1) assess
the effectiveness of the disclosure provisions in making the
public aware of lead-based paint hazards; (2) estimate the extent
to which lead-based paint hazard evaluation and reduction
activities are being conducted in the various covered categories
of housing; (3) monitor and report HUD's expenditures for
lead-based paint hazard evaluation and reduction; (4) identify
the infrastructure needed to eliminate lead-based paint hazards
in all housing as expeditiously as possible, including
cost-effective technology, standards and regulations, trained and
certified contractors, certified laboratories, liability
insurance, private financing techniques, and appropriate
Government subsidies; (5) assess the extent to which the lead
evaluation and reduction infrastructure exists, with
recommendations to correct shortcomings, and estimate the costs
of measures needed to build an adequate infrastructure; and (6)
included any additional information the Secretary deems
appropriate.

                   REGULATORY IMPACT STATEMENT

In accordance with paragraph 11 of Rule XXVI of the Standing
Rules of the Senate, the Committee makes the following statement
regarding the regulatory impact of the bill.

Various provisions of the reported measure would reduce
regulatory and administrative burdens. Section 505, for example,
would direct the HUD Secretary to review and streamline
regulations, administrative procedures and recordkeeping and
documentation requirements that govern compliance with the public
and Indian housing programs.
Although the reported bill would authorize new programs, the
Committee was cognizant during their design to prescribe only the
minimum necessary regulatory requirements.

                     CHANGES IN EXISTING LAW

The Committee has determined that it is necessary, in order to
expedite the business of the Senate, to dispense with the
requirements of rule XXVI, paragraph 12, of the Standing Rules of
the Senate, with respect to this legislation.

                         COST ESTIMATE

The Committee has requested a cost estimate of this legislation
under the provision of section 403 of the Congressional Budget
Act of 1974. The cost estimate was not available by the time of
filing of this report. It will be made available prior to
consideration of this legislation by the full Senate.

             ADDITIONAL VIEWS OF SENATOR CONNIE MACK

I regret having to oppose the Committee bill to reauthorize the
National Affordable Housing Act of 1990. Just two years ago, this
Committee meticulously debated the HOME program, and in
particular, its matching requirements.

Current law authorizes a graduated match for the HOME program,
depending on the type of housing activity a particular city or
state chooses to use. The Committee bill proposes to change the
tiered match to a flat 25 percent match for the HOME program.

During negotiations, we engaged in extended debate over the
merits of vouchers versus new construction. We reached agreement
on the HOME program only after vouchers were accepted as an
eligible use and after Senator Sarbanes suggested the concept of
a graduated match. These were breakthrough agreements allowing
for final agreement on the entire bill.

For those of us who argued for an increased focus on vouchers and
against new construction, it was for the sake of maximizing
scarce federal dollars and for serving more low income families.
Because vouchers use current housing already built, vouchers are
effective immediately. People can live where they choose, near
jobs and education. They won't be segregated into ``low-income
units''.

According to the U.S. Department of Housing and Urban
Development, 22,132 fewer families will be served if the tiered
match is changed to the proposed flat match. The flat match would
remove the economic incentive for communities to utilize vouchers
over new construction.

We came to hard agreements in 1990 and I believe we ought to
allow current law on HOME to stand before tinkering with a
program we haven't even given an opportunity to work.

Connie Mack.

         ADDITIONAL VIEWS OF SENATOR ALFONSE M. D'AMATO

During the Committee mark-up of the National Affordable Housing
Act Amendments of 1992, I was pleased to offer an amendment to
authorize the National Cities in Schools Community Development
Program. Through this amendment, which was accepted, the
Secretary of HUD is authorized to make grants to expand the
National Cities in Schools program administered by Cities in
Schools, Inc. (CIS).

Based on over 30 years of experience, CIS has refined the
techniques of neighborhood and community organizing and
development to help young people become successful, productive
community members. With the school as the focal point, CIS brings
its proven partnership building strategies to bear, helping local
community leaders organize an independent, community-owned
coalition of business and community leaders, government
officials, health and human service providers, educators and
parents.

Because CIS community partnerships arrange for the repositioning
of social service providers from their home agencies, the program
is extremely cost effective. Little new money is required to
start a CIS program. And the results-for the empowerment of the
community-far outweigh the dollars invested. Through the National
Center for Partnership Development (NCPD), CIS supports community
leaders from across the country, providing training in the CIS
organizing strategies and the continuing technical assistance
required to ensure successful, self-sustaining local programs.

Alfonse M. D'Amato.

      ADDITIONAL VIEWS OF SENATORS GARN, D'AMATO, AND MACK

Introduction

Since the beginning of this year, we have recognized the
importance of legislation to reauthorize and improve existing
housing programs. We believed this approach would be satisfied by
a simple reauthorization bill focused on technical improvements
to ensure that current housing programs function as effectively
as possible consistent with Congressional intent.

Despite our hopes for a simple bill, we have before us an
expansive proposal that establishes new programs, substantially
modifies existing programs and policies, and heaps change after
change upon a Department still implementing some provisions of
the National Affordable Housing Act of 1990 (NAHA) and addressing
long-standing internal management challenges. Although the
development of the bill was conducted in a cooperative and fair
process, we went into mark-up with many difficult issues
unresolved. Many amendments were accepted at mark-up that
improved the bill. Therefore, most of us supported the bill.
However, we still have reservations about certain sections of the
bill and believe these issues must be resolved before the bill
can win broad support from the full Senate.

Background

This year's reauthorization bill ought to be simple and
straightforward principally because the extensive changes enacted
in the National Affordable Housing Act of 1990 (NAHA) require a
reasonable implementation and evaluation period before major
alterations prevent them from taking effect fully. Even as we
submit this report, HUD is still issuing regulations to implement
provisions of NAHA. In fact, most NAHA programs received funding
for the first time this year and there are several provisions
that the Department has yet to implement, mostly due to the
enormous workload of extensive legislation imposed on a limited
staff. (We note the irony in the fact that the demands placed
upon HUD to monitor and participate in Congress' legislative
hearings and the reauthorization process have exacerbated the
difficulties in achieving timely implementation of NAHA.)

Majority members of the Committee have asserted in hearings and
in this report that the federal commitment for housing had
decreased dramatically since 1980. This tired old chestnut must
be cracked open so we examine whether it is valid or not. During
hearings on this bill, we established convincingly that although
budget authority appropriated for HUD's housing programs has
decreased since 1980, outlays have increased from $5.3 billion in
1980 to $16.7 billion in 1991.

And although we don't want to get caught in the trap of measuring
programs merely by how much we spend on them, the amount of
discretionary budget authority provided for HUD's housing
programs increased from $12.6 billion in 1989 to $17.4 billion in
1992. This 38% increase is many times greater than the rate of
inflation or the growth in overall domestic discretionary
spending.

Another way of looking at trends in housing programs is to
consider the change in the number of households assisted through
HUD's housing programs. By this measure, we can see that the
federal government is assisting more families than ever. In 1980,
HUD assisted 3.1 million families. In 1991, HUD assisted 4.4
million families. That is an increase of 42%. Furthermore,
although the number of persons with worst case housing needs
increased from 1979 until 1983, this number declined from 1985 to
1989. Similarly, the number of low-rent units decreased during
the 1970s but has stabilized in the late 1980s. Finally, the
number of units with gross rents below local ``fair market
rents'' far exceeded the number of low-income renters eligible
for rental assistance and actually increased during the 1980s.

However, these promising and suggestive statistics should not
allow us to ignore the serious housing needs of our society. What
Congress and the Administration must do is to determine how to
best meet these needs. As HUD Secretary Kemp told the Committee
at a hearing on May 14:

 There are another 5 million people at risk. That is, they spend
more than half of their income for rent, and they need help. They
should get a voucher. You can get it to them faster. It is less
costly to the taxpayer. It does not take seven years for
construction, and the power does not go to the developer and the
PHA, it goes directly to the family that gets some choice, some
power, some ability to become a more dignified member of American
society.

As this statement demonstrates, one of the critical questions in
housing policy pertains to how to spend the resources we have.

Over the last few years we have shifted the emphasis from
unwieldy categorical construction programs to flexible,
locally-based programs that give tenants, state and local
governments, and housing providers at the local level more
opportunity to manage their own housing programs. The number of
households assisted through tenant-based rental assistance
programs that provide real choice to recipients has increased
dramatically. We have developed programs that promote
homeownership and give the Department more tools to root out
fraud, abuse, and mismanagement in HUD's housing programs. We are
proud of these recent achievements.

Despite these achievements, however, we must focus housing policy
on efforts to reduce the worse case housing needs, promote
homeownership, reduce homelessness, and make troubled public
housing developments better living environments. This bill moves
toward these goals in several areas, but fails to keep these
goals in mind in other areas.

                       THE COMMITTEE BILL

We commend the Committee's Chairman, Don Riegle, and the Housing
Subcommittee Chairman, Alan Cranston, as well as their
cooperative and competent staff, for preparing this bill in an
open process that gave us opportunity to participate in the
development of the bill and recommend various changes to it. We
appreciate their bipartisan and cooperative attitude.
Despite this cooperation and openness, we had many concerns when
we examined the Committee Print because it failed to include many
provisions that we and the Administration believed are very
important. We offered many amendments to address these issues.
Many of these amendments were accepted during mark-up, indicating
the Majority's continuing interest in cooperating with the
Minority and the Administration to develop a consensus bill.

We are pleased that the Committee bill makes many sensible
changes to existing housing programs and establishes promising
new programs. For example, the Committee bill adopts several
initiatives proposed by the Administration, makes technical
changes to improve the Administration of HOME and other programs,
and authorizes reasonable funding levels for the HOPE
homeownership programs, although the total funding level for the
bill is still substantially above baseline.

Unfortunately, however, this bill includes other provisions that
raise serious concerns. Specifically, the bill eliminates the
variable matching requirement of the HOME Investment Partnerships
program, creates a new set of requirements for eliminating
lead-based paint hazards in housing, and fails to include several
additional proposals recommended by the Administration.

                   ADMINISTRATION INITIATIVES

One of the most positive aspects of the Committee Bill is that it
incorporates many of the ideas presented by the Administration's
Opportunity and Empowerment Act of 1992. HUD Secretary Jack Kemp
transmitted this legislative proposal to the Congress on March
23, 1992. This proposal included the following ideas:

Perestroika for troubled public housing.-This initiative seeks to
improve the most severely distressed Public Housing Authorities
(PHAs) by allowing the residents of these PHAs to have the option
of alternative management or ownership. Increasing the voice of
the residents in the management of their buildings will give the
managers new incentives to provide higher quality services.
Providing the residents with the opportunity to own their
building will increase their level of personal freedom and
responsibility, making it easier for them to become
self-sufficient. The Administration's proposal would also create
a ``Take the Boards Off'' program to assist community-based
housing groups transform vacant public housing projects into
decent shelter for the poor and homeless.

Project RESTORE.-To address the needs of the residents of
FHA-insured or assisted housing, the Administration proposes the
RESTORE program. This program would improve the living conditions
of assisted housing by tying federal support for rehabilitation
expenses to improved management accountability and performance,
increased resident involvement in management, and greater choice
for tenants.

Homeownership vouchers.-Under this program, the Section 8 rental
subsidy program will be expanded to permit recipients to use
certificate or voucher assistance to support homeownership.

Safe havens.-Under this proposal, the Federal Government will
support the development of ``safe havens'' where mentally ill
persons who are unwilling to accept more structured transitional
housing programs can live in less structured environment to make
the transition from homelessness to other support systems
designed to assist them live independently. This program will
fill a need noted by the Federal Task Force on Homelessness and
Severe Mental Illness which stated that:

 Mentally ill people on streets or in shelters need a secure,
clean, and stable residence where they can recuperate from the
harsh street environment and develop necessary life skills and
linkages to benefits, treatment, and supports.

Moving to opportunity.-This initiative will combine special
counseling and services with rental assistance to enhance the
ability of recipients in predominantly low-income areas move to
areas of higher income. The Gautreaux Demonstration near Chicago
has demonstrated that this approach can make a tremendous
difference in the lives of some persons, increasing job
opportunities, improving children's school performance levels,
and enhancing life options.

These proposals are good ideas and we are pleased that the bill
would establish these programs. The bill incorporates all or most
of the Homeownership Vouchers, Safe Havens, and Moving to
Opportunity proposals. The public housing reform section
incorporates many of the basic concepts contained in the
Administration's Choice in Management and the Take the Boards Off
proposals, but does not include the Choice in Ownership proposal
and reduces the size of the Choice in Management program. The
bill uses the name ``Restore'' to repackage existing multi-family
housing improvement programs, but fails to incorporate most of
the Administration's ideas to ensure greater accountability or
resident choice. We believe that there is much more in the
Administration's ``Restore'' program that deserves to be included
in this bill.

During the last several months, the Administration has also
transmitted legislative proposals to control housing expenditures
under several HUD programs, to encourage the dismantling of
regulatory barriers to affordable housing, and to make various
technical or minor modification of many of HUD's programs to make
them operate more effectively.

In addition, the Farmers Home Administration (FmHA) made several
recommendations regarding rural housing programs. This bill
incorporates their proposals to establish a rural housing voucher
program and to increase the equity requirement under the Section
515 multifamily housing development program. However, there are
still provisions which FmHA opposes, such as a provision allowing
for administrative appeals of tenant grievances in properties
assisted under FmHA programs and a provision which would require
FmHA to provide assistance to residents of areas that would
otherwise not be eligible for FmHA assistance.

    HOME INVESTMENT PARTNERSHIPS PROGRAM MATCHING REQUIREMENT

One of the most troublesome aspects of the Committee Bill is a
provision to eliminate the variable matching system created as
part of the HOME Investment Partnerships program. In fact HUD has
estimated that the changes included in the Committee Bill will
reduce the number of families assisted through the HOME program
by 20,000 families in FY 1993. We believe that new legislation
would not be worthwhile if it include any fundamental retreat
from the basic compromises that made the enactment of NAHA
possible.

NAHA was of the result of a bipartisan spirit focussed on
achieving comprehensive housing legislation to reform the
nation's housing programs. At times, there were serious
differences of opinion over some issues, but these disagreements
were resolved through compromises that allowed all the
participants involved to support the final bill. One of the most
important compromises reached as Congress developed NAHA was the
variable matching system that convinced the Administration and
the Minority to support the HOME program and the overall bill.

Under the graduated, or tiered, matching requirement, HOME
grantees contribute a smaller proportion of non-federal matching
funds for substantial rehabilitation than for new construction,
and make an even smaller contribution for tenant-based assistance
and light rehabilitation than for substantial rehabilitation. We
view this as an appropriate policy for the federal government
because it will encourage the most cost-effective use of federal
resources and enable the program to serve more families.

According to HUD's 1991 study on priority housing needs, seven of
ten families with ``worst case'' housing needs have as their only
housing problem excessive rent burden. Tenant-based rental
assistance to these families will immediately address their
housing need. In addition, rehabilitation is much less expensive
than new construction and most jurisdictions throughout the
country have more than enough vacant housing in need of rehab to
use most of the funds appropriated for the HOME program.

The variable match is not heavy-handed federal bias as some
claim, but a reasonable incentive designed to encourage states
and local governments to use federal funds as cost-effectively as
possible. Jurisdictions who use HOME funds still have the
discretion to decide what activities to pursue, depending on
local needs and priorities.

Because this is one of the most important priorities of the
Administration and certain members of the Minority, the
insistence of the Majority to create a uniform match is a major
impediment to a bipartisan agreement to move this bill forward.
Indeed, as Secretary Kemp wrote in a letter to Senator Riegle two
days before Committee mark-up, `` T he Administration cannot
support any housing bill reauthorizing HOME that lacks the
fundamental safeguards afforded by a tiered match.''

We cannot understand the claims that the tiered-match makes the
HOME program unworkable. There has been no opportunity for the
program to be tested because the bill making appropriations for
HUD for fiscal year 1992 waived the entire matching requirement
for one year. We suspect that HOME grantees will be able to
comply easily with the variable matching system. For all these
reasons, we support maintaining the tiered match unless and until
direct experience can demonstrate that it is unwise public
policy.

          RESIDENTIAL LEAD-BASED PAINT HAZARD REDUCTION

We are very sympathetic with the concerns regarding lead
poisoning that instigated title X of the Committee bill, the
Residential Lead-based Paint Hazard Reduction Act of 1992. The
accumulating evidence of the health hazards posed by lead-based
paint and the compelling testimony provided at the Committee's
hearings demonstrate that lead-based paint is a serious problem
that the government must address.

However, we are concerned that the Committee bill includes
far-reaching mandates on HUD, state and local governments, and
the entire housing industry that may have negative unintended
consequences. We believe that these parties may not be prepared
for these mandates and that there does not exist the necessary
expertise and capacity to implement the bill in its current form.

Although some parties have claimed that the government has not
responded effectively to the hazards of lead-based paint, the
Administration has in fact taken serious and good steps over the
last few years to deal with this complicated and important
problem. At one of the Committee's hearings on lead-based paint,
the Administration's testimony stated that:

 We believe the current actions at HUD, the Environmental
Protection Agency (EPA), the Centers for Disease Control (CDC),
and the Consumer Product Safety Commission (CPSC) are at the
correct scale, and are addressing the issues in the correct
order.

Furthermore, responding directly to the original draft of S.
2341, HUD's testimony stated that:

 The Department's misgivings about S. 2341 have to do primarily
with the pace with which the Bill would accelerate the demand for
inspection, assessment, abatement, and control services, which
are in limited supply. We believe the bill, as it stands, could
overwhelm the marketplace.

While the Majority has made several encouraging and helpful
changes to the Residential Lead-based Paint Hazard Reduction Act
since S. 2341 was introduced, we believe that further
improvements are necessary before final passage.

                       OUTSTANDING ISSUES

Ironically, despite the breadth and scope of this bill, and the
effort that has gone into preparing it for Committee action,
there are several issues that must be addressed further before we
would feel comfortable supporting final passage of housing
legislation. Some of these issues have already been mentioned;
namely, increased support for some Administration initiatives,
modifications to the HOME program, and improvements to the
lead-based paint title. However, there are other issues to be
addressed as well.

      HOUSING FOR THE ELDERLY AND PERSONS WITH DISABILITIES

The Senate should also respond to concerns raised regarding the
quality of life for public housing residents in units that were
originally designed for elderly residents but where increasing
numbers of disabled residents have been admitted. During a
symposium on this issue, the Committee heard testimony that
described the problems that occur in some circumstances where
persons with disabilities and elderly reside in the same
developments. Because of these problems, we believe that the
system must be changed.

We hope that a satisfactory solution can be developed where
age-specific and appropriate housing opportunities can be
provided for elderly and disabled residents, according to their
own choices and what would be best for the residents and
developments. Because of the need and the opportunity to address
this issue, we feel some solution must be developed before the
Senate approves a comprehensive housing bill.

                         FLOOD INSURANCE

Before mark-up of the Committee Print, Senator Kerry introduced
an amendment to make comprehensive changes to the National Flood
Insurance Program (NFIP). This amendment was substantially
similar to a bill that Senator Kerry introduced earlier this
year, S. 1650. For various reasons, Senator Kerry withdrew his
amendment but stated his intention to offer his proposal as an
amendment to the housing bill when it is considered by the full
Senate. Since the mark-up, Senator Kerry has introduced his
proposal as a bill, S. 2907.

We are disappointed that the Banking Committee may not have the
opportunity to consider this legislation in Committee mark-up
before it is debated on the Senate floor. We believe that there
are many questions to be answered and issues to be addressed
before the Senate should pass this proposal. At a September
hearing on S. 1650, several witnesses expressed concerns
regarding the erosion management sections of the bill. These
witnesses questioned whether these sections might violate or
intrude upon the property rights of property-owners along our
nation's coastlines and improperly use the NFIP to direct local
governments to adopt certain policies regarding construction and
zoning near the coast.

While the erosion management sections of S. 2907 are different
than the related sections of S. 1650, we believe some of the same
questions may need to be answered. Furthermore, several
interested parties have notified the Committee of their concerns
that the portfolio review and lender compliance sections may
impose an unreasonable burden on banks and other lenders.
Finally, the Administration has not indicated whether it will
support S. 2907. We understand that the Committee may hold a
hearing to discuss S. 2907; that would be a good opportunity to
discuss some of these issues. In any case, we believe that the
prospects of facing these issues while the Senate debates the
housing bill may make it more difficult to pass the housing bill
and may jeopardize some Senators' support for either bill.

                           CONCLUSION

To summarize, this housing bill reflects a thoughtful,
comprehensive examination of existing programs and our nation's
housing needs. We are optimistic about the prospects for reaching
agreement on a bill that we can support and that the President
will sign. However, finalizing and ensuring this support still
depends on further improvements in the areas mentioned above and
avoiding any erosion in the gains we have made thus far. We
commend our colleagues for working with us and look forward to
continuing our discussions.

Despite this optimism regarding Senate consideration of this
bill, we must note that this Committee product is not the final
version of the bill, nor will the Senate-passed version be the
final product. We are extremely concerned that the housing bill
recently passed by the Committee on Banking, Finance, and Urban
Affairs of the House of Representatives is unacceptable to Senate
Republicans and to the Administration. Therefore, we approach the
consideration of the Committee Bill on the floor as an
opportunity to improve the bill according to the views described
here and to culminate a bipartisan approach that will be defended
by a unified Senate in conference and will result in final
legislation that will have our and the Administration's support.

Some of us would still prefer a simple reauthorization bill to
modify problems with NAHA and to make certain HUD programs more
efficient. NAHA and other legislation developed the basic tools
necessary to address our nation's housing needs. What we need to
do now is to allow the existing system to operate over time in a
stable environment. In such an environment, HUD and Congress can
focus on the most critical problems and implement measures to
address them most effectively. However, if this bill moves
forward, we believe it must be consistent with the views
expressed herein.

Jake Garn.

Alfonse M. D'Amato.

Connie Mack.
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