```

[House Report 105-76]
[From the U.S. Government Publishing Office]

105th Congress                                             Rept. 105-76
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     Part 2
_______________________________________________________________________

 
           HOUSING OPPORTUNITY AND RESPONSIBILITY ACT OF 1997

                                _______
                                

                 April 29, 1997.--Ordered to be printed

_______________________________________________________________________

   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                         [To accompany H.R. 2]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Banking and Financial Services, to whom 
was referred the bill (H.R. 2) to repeal the United States 
Housing Act of 1937, deregulate the public housing program and 
the program for rental housing assistance for low-income 
families, and increase community control over such programs, 
and for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 29, 1997.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
    Dear. Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2, the Housing 
Opportunity and Responsibility Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Paul 
Cullinan.
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosure.

               congressional budget office cost estimate

H.R. 2--The Housing Opportunity and Responsibility Act of 1997

    Summary: H.R. 2 would eliminate or significantly change the 
programs through which the bulk of federal low-income housing 
assistance is currently provided. The United States Housing Act 
of 1937, which authorizes the public housing program and the 
section 8 rental assistance program, would be repealed. H.R. 2 
would establish new public housing and rental assistance 
programs and would authorize appropriations to fund them.
    H.R. 2 would authorize appropriations totaling $58 billion 
over the fiscal years 1998-2002. (Continuation of current 
programs, allowing for renewal of all existing section 8 
contracts, would require funding of about $112 billion over the 
same period.) CBO estimates that enactment of this bill would 
not affect direct spending or receipts. Therefore, pay-as-you-
go procedures would not apply.
    H.R. 2 contains several intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA), but CBO 
estimates that the costs of these mandates would not be 
significant. The bill also contains other provisions that could 
have a significant budgetary impact on public housing agencies, 
but they would not be considered mandates as defined in UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of this bill is summarized in Table 1. The 
program authorizations in the bill increase gradually from 
$10.1 billion for 1998 to $12.9 billion for 2002. Total outlays 
for the affected programs would decline from $25.0 billion in 
1997 to $17.6 billion in 2002, including the outlays in those 
years from sums appropriated in previous years. As a basis for 
comparison, the table also includes the spending totals under 
the CBO baseline with adjustments for inflation, which, 
pursuant to the Budget Enforcement Act of 1990, is constructed 
assuming that all expiring contracts under section 8 of the 
Housing Act of 1937 are renewed.

                                TABLE 1. ESTIMATED COST TO THE FEDERAL GOVERNMENT                               
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                        1997      1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
Spending for housing assistance under current law:                                                              
    Budget authority................................    11,182         0         0         0         0         0
    Estimated outlays...............................    24,995    20,780    12,779     9,926     7,559     5,871
Proposed changes:                                                                                               
    Authorizations of appropriations................         0    10,136    10,999    11,833    12,176    12,863
    Estimated outlays...............................         0     3,165     7,771     9,335    10,647    11,714
Spending for housing assistance under H.R. 2:                                                                   
    Budget authority/authorizations.................    11,182    10,136    10,999    11,833    12,176    12,863
    Estimated outlays...............................    24,995    23,945    20,550    19,261    18,206    17,585
Memorandum--CBO baseline with inflation adjustments:                                                            
    Budget authority................................    11,182    18,139    20,362    22,697    24,576    26,359
    Estimated outlays...............................    24,995    25,655    25,986    26,297    26,577   27,169 
----------------------------------------------------------------------------------------------------------------
Note.--This table does not include spending for HUD's administrative expenses.                                  

    The costs of this legislation fall within budget function 
600 (income security).
    Basis of estimate: CBO assumes that the bill would be 
enacted by October 1, 1997, and that the authorized amounts 
would be appropriated by the beginning of each fiscal year.

Title II--Public housing

    Title II of the bill would revise the provisions of the 
federal public housing program. The existing program is 
administered by local public housing agencies (PHAs) that own 
and manage low-income housing projects. The activities of the 
PHAs are supervised closely by the Secretary of the U.S. 
Department of Housing and Urban Development (HUD). The Congress 
provides funds in two separate budget accounts: one to cover 
operating costs and another for new construction or project 
modernization.
    Under the program established by the bill, PHAs would 
receive funding in the form of block grants and would be given 
greater flexibility in managing public housing. With certain 
constraints, a PHA could then choose to use the grant to cover 
operating expenses or capital needs. The bill would authorize 
the appropriation of $5.9 billion for each of the fiscal years 
1998-2000--the same amount as appropriated in 1997--and $5.4 
billion for each of fiscal years 2001 and 2002 for these block 
grants and for site revitalization grants (see Table 2). The 
estimated outlays are based on past spending patterns for 
operating expenses and the project modernization program.
    Of the amounts appropriated for the title II programs, the 
Secretary would be allowed to retain up to 2 percent for a 
headquarters reserve fund. This fund would be used for needs 
resulting from natural disasters or other unforeseen events. 
Based on the Secretary's previous use of reserved funds, we 
assume that the Secretary would retain all the funds allowed 
and that they would be disbursed within two years. In addition, 
$15 million from the block grants could be used for the 
resident management assistance program in fiscal year 1998.

Title III--Choice-based rental housing

    Title III would establish a new tenant-based low-income 
rental assistance program that would replace the one created by 
section 8 of the Housing Act of 1937. Under the current 
program, HUD enters into contracts with PHAs to provide 
assistance to qualified households. The new grants would be 
given directly to PHAs and would serve very similar purposes. 
PHAs would be given greater flexibility, but the program would 
still be geared toward low-income tenants. Rental assistance 
contracts would be limited to one year but could be renewed 
annually.
    The bill would authorize appropriations for Title III of 
about $1.9 billion for each year of the 1998-2002 period, of 
which about $50 million would be specifically directed to serve 
nonelderly, disabled families. CBO estimates that the $1.9 
billion authorized would renew 293,000 units, far short of the 
1.29 million units coming up for renewal in 1998. Because 
housing costs continue to rise with inflation and some existing 
longer-term contracts expire each year, annual funding of $1.9 
billion would result in a continuing decline in the number of 
assisted units. By 2002, the authorized funding level in the 
bill would support less than 20 percent of those tenant-based 
units currently under contract. The impact of this change on 
HUD's administrative expenses is discussed below.

Title IV--Home Rule flexible grant options

    Title IV of the bill would create a Home Rule Flexible 
Grant Option whereby a jurisdiction could combine funding from 
various assistance programs in order to meet the housing needs 
of a community with more flexibility. A jurisdiction would have 
to submit to HUD an application and a plan for using the funds. 
HUD would be responsible for reviewing, approving and 
overseeing the applications and plans. Section 407 of this 
title would require HUD to provide technical assistance to 
local jurisdictions, and to evaluate and report on successful 
models for using the flexible grant. Other than its effects on 
HUD's administrative costs, which are discussed below, Title IV 
would have no significant effect on the federal budget.

Title V--Accountability and oversight of public housing agencies

    Subtitle B of Title V would create the Housing Foundation 
and Accreditation Board, an independent agency that would be 
modeled after private accreditation boards for education and 
health care organizations. However, the bill would not grant 
the board any authority. The board would be established and its 
responsibilities outlined; but the board's ability to act on 
such responsibilities would require a separate change in law. 
If the change in law were to later require the board to 
evaluate and accredit the approximately 3,400 PHAs at least 
once every five years, CBO expects the annual costs would 
likely run between $10 million and $20 million. Because such 
costs are contingent on future Congressional action, CBO 
estimates that the subtitle would have no significant budgetary 
effect. Title V would also authorize the appropriation of 
$500,000 for the study of performance measures for the 
evaluation of PHAs.

Title VI--Repeals and related amendments

    Title VI would repeal the current housing programs. 
However, the title requires the project-based assistance under 
section 8 of the Housing Act of 1937 be continued as if the 
1937 Act were not repealed. The estimated authorization for 
project-based contract renewals is $2.0 billion in 1998, rising 
to $5.3 billion in 2002.
    Title VI also would revise part of the Anti-Drug Abuse Act 
of 1988 by allowing HUD to make grants for use in eliminating 
all types of crime, not just drug-related crimes. The bill 
would authorize appropriations for such grants of $290 million 
per year for the 1998-2002 period.

HUD's administrative costs

    CBO estimates that enacting this bill would result in 
significant administrative savings in the long run, largely as 
a result of the reduction in scope of the section 8 program 
under Title III. If HUD's administrative requirements were to 
decline in proportion to the total number of assisted units--
both project-based and tenant-based-then the savings would 
amount to between $90 million and $100 million per year by 
2002. However, to the extent that administrative costs entail 
fixed overhead requirements, the savings would be less than the 
40 percent reduction assumed in that estimate. Another unknown 
factor is the degree to which administrative costs are 
associated with the number of contracts rather than the number 
of assisted units. If the average number of units per contract 
were to decrease but the number of contracts were to remain 
stable, HUD's administrative burden would fall by a smaller 
percentage.
    Certain provisions of Title IV would impose additional 
administrative responsibilities on HUD, namely reviewing the 
applications and plans of jurisdictions and providing technical 
assistance. In the near term, HUD might incur additional costs 
to implement the flexible grant program, though such costs 
could be offset by administrative savings under Title III. In 
the long run, CBO expects that an increasing number of 
jurisdictions would opt for the flexible grant program and, as 
a result, administrative costs for the grant program would 
decline over time. We expect that it would be less costly for 
HUD to administer a streamlined, flexible grant program than to 
oversee the various housing assistance programs that could be 
consolidated under the grant program.

                                   TABLE 2. ESTIMATED AUTHORIZATIONS BY TITLE                                   
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                  1998      1999      2000      2001      2002  
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
Title II--Public housing spending:                                                                              
    Capital fund:                                                                                               
        Authorization level...................................     1,935     1,950     1,950     1,950     1,950
        Estimated outlays.....................................         0       213       698     1,089     1,299
    Operating fund:                                                                                             
        Authorization level...................................     3,342     3,342     3,342     3,342     3,342
        Estimated outlays.....................................     1,604     3,309     3,342     3,342     3,342
    Site revitalization grants:                                                                                 
        Authorization level...................................       500       500       500         0         0
        Estimated outlays.....................................         0        10        46       150       265
    Resident management assistance:                                                                             
        Authorization level...................................        15         0         0         0         0
        Estimated outlays.....................................         1         2        11         2         0
    Secretary reserve:                                                                                          
        Authorization level...................................       108       108       108       108       108
        Estimated outlays.....................................        54       108       108       108       108
                                                               -------------------------------------------------
        Total--Title II:                                                                                        
            Authorization level...............................     5,900     5,900     5,900     5,400     5,400
            Estimated outlays.................................     1,659     3,641     4,204     4,691     5,014
Title III--Choice-based housing assistance:                                                                     
    Tenant-based assistance:                                                                                    
        Authorization level...................................     1,862     1,862     1,862     1,862     1,862
        Estimated outlays.....................................       745     1,862     1,862     1,862     1,862
    Disabled families:                                                                                          
        Authorization level...................................        50        51        53        54        56
        Estimated outlays.....................................        20        51        52        53        55
                                                               -------------------------------------------------
        Total--Title III:                                                                                       
            Authorization level...............................     1,912     1,913     1,915     1,916     1,918
            Estimated outlays.................................       765     1,913     1,914     1,915     1,917
Title V--Accountability and oversight of public housing                                                         
 agencies:                                                                                                      
    Public housing study:                                                                                       
        Authorization level...................................         1         0         0         0         0
        Estimated outlays.....................................       \1\       \1\         0         0         0
Title VI--Repeal and related amendments:                                                                        
    Project-based assistance: \2\                                                                               
        Estimated authorization level.........................     2,033     2,896     3,728     4,570     5,255
        Estimated outlays.....................................       722     2,169     2,966     3,751     4,493
    Drug elimination grants:                                                                                    
        Authorization level...................................       290       290       290       290       290
        Estimated outlays.....................................        19        48       251       290       290
                                                               -------------------------------------------------
        Total--Title VI:                                                                                        
            Estimated authorization level.....................     2,323     3,186     4,018     4,860     5,545
            Estimated outlays.................................       741     2,217     3,217     4,041     4,783
    Total:                                                                                                      
        Estimated authorization level.........................    10,136    10,999    11,833    12,176    12,863
        Estimated outlays.....................................     3,165     7,771     9,335    10,647   11,714 
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.                                                                                         
\2\ Although Title VI repeals the Housing Act of 1937, this title also includes language that project-based     
  assistance under section 8 of the 1937 Act would continue as under current law.                               

    Pay-as-you-go considerations: None.
    Estimated impact on State, local, and tribal governments: 
H.R. 2 contains several intergovernmental mandates as defined 
in UMRA. CBO estimates that the total cost of these mandates--
primarily preemptions of state and local laws--would not be 
significant. The bill also contains a number of other 
provisions that are conditions of receiving federal financial 
assistance, and while these conditions are not mandates as 
defined in UMRA, their enactment would have a significant 
budgetary impact on public housing agencies (PHAs). CBO 
estimates that compliance with these new conditions would 
result in additional costs to PHAs totaling $65 million in the 
first year and about $35 million annually thereafter. These 
costs could be at least partially offset by increased rental 
income that would result from new flexibility given to PHAs. 
H.R. 2 would not impose mandates or have other budgetary 
impacts on tribal governments.

Mandates

    A number of provisions in H.R. 2 would preempt state and 
local laws by: allowing HUD, or a receiver of a PHA, to be 
exempt from certain state and local laws; requiring a PHA board 
of directors to include an elected public housing resident; and 
allowing public housing residents who face eviction to review 
relevant records and documents notwithstanding state laws. Such 
preemptions are mandates under UMRA. CBO estimates that their 
enactment would not require state or local governments to 
expend additional funds and that any loss of fee or penalty 
revenue from these provisions would be small.
    A bill also would require police departments and other law 
enforcement agencies to provide PHAs with information regarding 
the criminal conviction records of adult applicants for 
federally assisted housing and with information about crimes 
committed against children. In order to comply with this 
mandate, CBO assumes that PHAs would make as many as 100,000 
new requests for such information. Based on data from a number 
of police departments, the cost of responding to such requests 
generally ranges from $10 to $20 each. Therefore, CBO estimates 
that the annual costs of this mandate would be less than $2 
million. The bill would allow police departments to charge a 
reasonable fee for any information provided, and CBO assumes 
that affected agencies will charge such fees to cover 
additional costs.

Other impacts

    The bill would impose several new requirements on PHAs. 
These requirements, which are conditions of receiving 
assistance from HUD and thus are not mandates under UMRA, 
include: establishing and enforcing work requirements and self-
sufficiency agreements with residents of public housing; 
preparing more detailed local housing management plans; and 
submitting new (and potentially more burdensome) performance 
and evaluation reports. The bill also contains provisions that 
would provide PHAs additional administrative flexibility, 
including the authority to increase rental income over current 
levels.
    PHAs would be required to enter lease agreements with adult 
residents of public housing. These agreements would require 
some adult residents to contribute not less than eight hours of 
community service work per month and to sign self-sufficiency 
agreements. PHAs would also be encouraged to enter cooperative 
agreements with state and local welfare agencies to provide 
information about assistance programs. Further, PHAs would be 
required to provide information to public housing residents 
about resources available to them in meeting their self-
sufficiency requirements and to track participants' progress 
towards meeting their work requirements and self-sufficiency 
agreements.
    This provision would apply to all public housing residents 
receiving assistance under the Public Housing and Choice-Based 
Rental Housing programs established in the bill with certain 
exceptions. Among those excluded from the work requirements and 
self-sufficiency agreements would be the elderly, disabled, and 
those complying with (or excluded from) work requirements under 
other public assistance programs. Based on information from 
HUD, CBO assumes that these new requirements would apply to 
less than one-third of the households in these programs 
(800,000 out of 2.7 million).
    Information from public housing organizations indicates 
that PHAs, particularly small ones, would require additional 
staff to comply with this new requirement. (Many large PHAs 
already have similar programs.) In total, CBO estimates that in 
order to comply with this provision PHAs would have to hire 
more than 1,100 new personnel and that additional costs would 
total about $35 million per year (assuming salary and benefits 
of $30,000 per full-time staff member).
    H.R. 2 would also require each PHA to submit a local 
housing management plan to HUD. PHAs currently provide much of 
the information that would be required by HUD in one form or 
another. PHAs would be required to submit some new information 
and to aggregate existing information from various reports into 
a new document (possibly in a new format). CBO expects that 
most PHAs would comply with the requirement by hiring 
consultants or additional staff with costs varying between 
$5,000 and $10,000 per agency. Smaller housing agencies would 
likely incur costs at the higher end of the range because of 
limited staff resources. Approximately two-thirds of the 
nation's 3,400 PHAs fall into this group. CBO estimates total 
compliance costs to be approximately $30 million in the first 
year. A portion of these costs could continue into future years 
if PHAs hire permanent staff to meet these requirements.
    The bill would also require PHAs to submit an annual 
performance and evaluation report to HUD concerning the use of 
funds made available under this act. The potential cost of this 
new requirement would depend on the type of information that 
HUD requests from PHAs and how it compares to the current 
evaluation system. If the new requirements are similar to 
current requirements, PHAs would not have to incur additional 
costs. CBO does not have any information about how HUD would 
implement this requirement.
    The bill also would encourage state and local governments 
to play a greater role in providing public housing. Title IV 
would allow local government to apply to HUD to obtain the 
authority to administer federal housing assistance. Section 
201(b) would allow a governor to request that HUD make 
available to the state 50 percent of capital improvement 
allocations that have been provided to PHAs that own or operate 
fewer than 100 dwelling units. The affect of these provisions 
would be to transfer administration of public housing from PHAs 
to the state or local government. Discussions with state and 
local government organizations lead CBO to believe that only a 
small number of state and local governments would avail 
themselves of these options.
    Finally, the bill would allow HUD to reduce Community 
Development Block Grant (CDBG) funding for some local 
governments if the agency determines that these governments 
have contributed to the conditions resulting in the designation 
of a PHA as troubled. Discussions with HUD indicate that such 
penalties would rarely be imposed on local governments.
    Other provisions in H.R. 2 would provide PHAs with 
additional flexibility in administering their programs. One of 
these provisions would address the income mix of public housing 
residents and would allow PHAs to increase their rental income 
by selecting tenants for admission with slightly higher income 
levels than are allowed under current law. Information 
available to CBO from public housing organizations indicates 
that increases in rental income to PHAs would be modest, at 
least in the short term.
    Estimated impact on the private sector: The bill would 
impose no new private sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs; Paul Cullinan, Susanne 
Mehlman, Lisa Daley, and John Righter; Impact on State, local, 
and tribal governments, Marc Nicole; Impact on the private 
sector, Bruce Vavrichek.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.
```