SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Public Housing Rent Reform Act''.

SEC. 2. PUBLIC HOUSING CEILING RENTS.

    Section 3(a)(2) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(a)(2)) is amended--
            (1) in subparagraph (A), by striking clause (iii) and 
        inserting the following new clause:
            ``(iii) at the election of such agency and subject to 
        approval by the Secretary, is--
                    ``(I) not less than the average monthly amount of 
                debt service and operating expenses attributable to 
                dwelling units of similar size in public housing 
                projects owned and operated by such agency;
                    ``(II) not less than the rental paid by a family 
                the amount of whose rent is such that, on the date upon 
                which a public housing agency adopts ceiling rents 
                under this subclause for the project in which such 
                family resides, not less than 10 percent nor more than 
                20 percent (as determined by the Secretary from time to 
                time by regulation) of the families residing in such 
                project pay a higher rent; any ceiling rents so adopted 
                and approved by the Secretary shall be redetermined 
                annually by application of the automatic annual 
                adjustment factors issued from time to time by the 
                Secretary pursuant to section 8(c)(2)(A); or
                    ``(III) not less than the fair market rent 
                determined by the agency for comparable units of 
                similar size pursuant to the procedures prescribed by 
                the Secretary for determining rent reasonableness under 
                the program for rental certificate assistance under 
                section 8(b); the Secretary may, not more frequently 
                than annually, review the ceiling rents determined 
                under this subclause by each agency and each agency's 
                application of the procedures for determining rent 
                reasonableness used in establishing such rents and if, 
                pursuant to such review, the Secretary determines on 
                the record after opportunity for an agency hearing, 
                that the ceiling rents adopted by an agency pursuant to 
                this subclause are deliberately and materially 
                understated, the Secretary may impose such corrective 
                actions as the Secretary considers appropriate, which 
                may include payment to the Secretary of some or all of 
                the aggregate amounts by which such rents are 
                understated; the Secretary may at any time require that 
                the determination of ceiling rents pursuant to this 
                subclause be conducted by a qualified independent third 
                party in accordance with regulations issued by the 
                Secretary.''; and
            (2) by redesignating subparagraph (B) as subparagraph (I) 
        and inserting after subparagraph (A) the following new 
        subparagraphs:
    ``(B) A waiver by the Secretary shall not be necessary for a public 
housing agency to adopt ceiling rents under this paragraph. The 
discretion of the Secretary in approving an election by a public 
housing agency to adopt ceiling rents shall be limited to ensuring that 
the election meets the requirements of this paragraph. Without limiting 
any other provision of this subparagraph, the Secretary shall not 
(except as otherwise specifically provided in subparagraph (C)) hold or 
exercise any discretion with respect to the method under subparagraph 
(A)(iii) that an agency may elect to determine its ceiling rents, and 
such election shall be within the sole discretion of the agency.
    ``(C) Unless otherwise approved by the Secretary, a public housing 
agency shall utilize the same method for determining ceiling rents for 
all projects with respect to which such agency elects to adopt ceiling 
rents; except that, with respect to single family scattered site 
housing or projects consisting of 10 or less units, a public housing 
agency may elect, or the Secretary may require, that ceiling rents 
applicable to such units be calculated using the method under 
subparagraph (A)(iii)(III), notwithstanding that ceiling rents 
applicable to the agency's other projects are calculated using another 
method. After the initial adoption of ceiling rents by a public housing 
agency and approval thereof by the Secretary, the agency may not 
thereafter elect a different method of calculating such rents except as 
approved by the Secretary.
    ``(D) Subject to the limitations under subparagraph (C), different 
ceiling rents may be adopted by a public housing agency and approved by 
the Secretary for each project owned by the public housing agency. A 
public housing agency may adopt and the Secretary may approve maximum 
rents for some or all of the projects owned by such agency.
    ``(E) Any ceiling rents adopted shall be redetermined annually, for 
each project for which such rents are adopted, by the public housing 
agency and, subject to subsequent readjustment if the Secretary 
determines after review that such rents are improper, such redetermined 
ceiling rents shall be effective without further approval by the 
Secretary.
    ``(F) Notwithstanding any other provision of this paragraph--
            ``(i) not more than 25 percent of the total number of 
        dwelling units contained in any project (rounded upward to the 
        nearest whole unit) may be occupied by families whose rents are 
        limited in amount by the ceiling rents adopted for such 
        project; if, at any time, families occupying more than 25 
        percent of the units in a project are eligible for ceiling 
        rents, then, at the time of the next annual redetermination of 
        ceiling rents for such project, the public housing agency shall 
        increase the applicable ceiling rents so that, at the time of 
        such redetermination, not more than 25 percent of the dwelling 
        units in the project are occupied by families whose rent is 
        limited by ceiling rents; and
            ``(ii) the total continuous period during which any 
        family's rent may be limited by the full application of ceiling 
        rents shall not exceed 3 years; if at any time commencing 
        before the expiration of the 3-year period, the rent payable by 
        a family is less than the applicable ceiling rent for a period 
        in excess of 12 consecutive months, because of a reduction in 
        the family's adjusted income or an increase in ceiling rents, 
        or both, then a new 3-year period shall commence when such 
        family's rent again would exceed the applicable ceiling rents; 
        after the expiration of any 3-year continuous period during 
        which ceiling rents are fully applied to limit a family's rent, 
        the reduction in such family's rent that would otherwise result 
        from full application of the ceiling rents shall be 
        successively decreased so that (I) during the 4th year, the 
        family shall receive 85 percent of the reduction that would 
        result if the ceiling rents were fully applied; (II) during the 
        5th year, the family shall receive 65 percent of such 
        reduction; (III) during the 6th year, the family shall receive 
        40 percent of such reduction; and (IV) during the 7th and 
        subsequent years the family shall not receive any reduction in 
        rent as a result of the adoption of ceiling rents; the 
        commencement of a family's initial 3-year eligibility or 
        subsequent 3-year reeligibility for full ceiling rent 
        limitations and the commencement of each reduction in the full 
        application of ceiling rents as provided in this clause shall, 
        in the case of each family, occur not later than the effective 
        date of such family's annual redetermination of rent and family 
        composition in accordance with its public housing lease.
    ``(G) Ceiling rents authorized under this paragraph shall not be 
applicable to any project which is designated as housing for elderly 
persons.
    ``(H) For purposes of this paragraph--
            ``(i) the term `ceiling rent' means the maximum amount of 
        rent, adopted by a public housing agency and approved by the 
        Secretary pursuant to this subparagraph, that may be charged to 
        a family; and
            ``(ii) the term `project' means a building or group of 
        buildings containing public housing units and having a common 
        identity and management, as determined by the public housing 
        agency; a project need not contain buildings or sets of 
        buildings having the same project number assigned by the 
        Secretary or all of the buildings or sets of buildings having 
        the same such number.''.

SEC. 3. EARNED INCOME EXCLUSIONS.

    Section 3(b)(5) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(b)(5)) is amended--
            (1) in subparagraph (C)--
                    (A) by striking ``and'' before ``(ii)''; and
                    (B) by inserting before the semicolon at the end 
                the following; ``; and (iii) to the extent documented, 
                the amount actually paid by the family for health 
                insurance coverage for any members of the family 
                residing in the household who, at the time, are not 
                receiving or approved to receive any assistance for 
                health care from the Federal Government or any State 
                government'';
            (2) by striking subparagraph (E) and inserting the 
        following new subparagraph:
            ``(E) in the case of an elderly family, 10 percent of the 
        earned income of the family, and, in the case of a nonelderly 
        family, 20 percent of the earned income of the family;'';
            (3) in subparagraph (F), by striking ``and'' at the end;
            (4) in subparagraph (G), by striking the period at the end 
        and inserting a semicolon; and
            (5) by adding at the end the following new subparagraphs:
            ``(H) in the case of 2-parent families with children (as 
        defined by the Secretary by regulation), an amount not to 
        exceed an additional 10 percent of the earned income of the 
        family; and
            ``(I) in the case of a family residing in public housing, 
        of any earned income of any formerly dependent child who is a 
        member of the family--
                    ``(i) 100 percent of such earned income during the 
                period beginning on the date of the first 
                redetermination of the rent for and family composition 
                of the family that occurs after the child reaches 18 
                years of age and ending upon the commencement of the 
                period under clause (ii);
                    ``(ii) 85 percent of such earned income during the 
                period beginning on the date of the first 
                redetermination of the rent for and family composition 
                of the family that occurs after the child reaches 21 
                years of age and ending upon the commencement of the 
                period under clause (iii);
                    ``(iii) 65 percent of such earned income during the 
                period beginning on the date of the first 
                redetermination of the rent for and family composition 
                of the family that occurs after the child reaches 22 
                years of age and ending upon the commencement of the 
                period under clause (iv);
                    ``(iv) 40 percent of such earned income during the 
                1-year period beginning on the date of the first 
                redetermination of the rent for and family composition 
                of the family that occurs after the child reaches 23 
                years of age.''.

SEC. 4. EFFECTIVE DATE.

    The amendments made by this Act shall take effect 120 days after 
the date of the enactment of this Act.

SEC. 5. IMPLEMENTATION.

    The Secretary shall issue any final regulations necessary to 
implement the amendments made by this Act, which shall take effect not 
later than the effective date under section 4 for the amendments. The 
regulations shall be issued after notice and opportunity for public 
comment in accordance with the procedures under section 553 of title 5, 
United States Code, applicable to substantive rules (notwithstanding 
subsections (a)(2), (b)(B), and (d)(3) of such section).
Public Housing Rent Reform Act - Amends the United States Housing Act of 1937 to:  (1) revise public housing maximum rent provisions; and (2) exclude private health insurance payments and increase and expand earned income exclusions from related income eligibility determinations.
Public Housing Rent Reform Act