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[House Report 110-521]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2nd Session                                                    110-521

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        PUBLIC HOUSING ASSET MANAGEMENT IMPROVEMENT ACT OF 2007

                                _______
                                

January 29, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3521]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 3521) to improve the Operating Fund for public 
housing of the Department of Housing and Urban Development, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Hearings.........................................................     5
Committee Consideration..........................................     6
Committee Votes..................................................     6
Committee Oversight Findings.....................................     6
Performance Goals and Objectives.................................     6
New Budget Authority, Entitlement Authority, and Tax Expenditures     6
Committee Cost Estimate..........................................     7
Congressional Budget Office Estimate.............................     7
Federal Mandates Statement.......................................     8
Advisory Committee Statement.....................................     8
Constitutional Authority Statement...............................     8
Applicability to Legislative Branch..............................     8
Earmark Identification...........................................     8
Section-by-Section Analysis of the Legislation...................     8

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Public Housing Asset Management 
Improvement Act of 2007''.

SEC. 2. REVISIONS TO ASSET MANAGEMENT RULES AND RELATED FEES.

    (a) Management and Related Fees.--The Secretary shall not impose 
any restriction or limitation on the amount of management and related 
fees with respect to a public housing project if the fee is determined 
to be reasonable by the public housing agency, unless such restriction 
or limitation imposed by the Secretary on such fees--
            (1) is determined pursuant to a negotiated rulemaking which 
        is convened by the Secretary no earlier than April 1, 2009, and 
        in accordance with subchapter III of chapter 5 of title 5, 
        United States Code, with representatives from interested 
        parties; and
            (2) is effective only on or after January 1, 2011.
    (b) Increase of Threshold for Exemption From Asset Management 
Requirements.--Any public housing agency that owns or operates fewer 
than 500 public housing units under title I of the United States 
Housing Act of 1937 may elect to be exempt from any asset management 
requirement imposed by the Secretary.

SEC. 3. PROHIBITION ON RESTRICTION OF FUNGIBILITY OF CAPITAL FUND 
                    AMOUNTS.

    The Secretary of Housing and Urban Development shall not impose any 
requirement, regulation, or guideline relating to asset management that 
restricts or limits in any way the use by public housing agencies of 
amounts for Capital Fund assistance under section 9(d) of such Act, 
pursuant to paragraph (1) or (2) of section 9(g) of the United States 
Housing Act of 1937 (42 U.S.C. 1437g(g)), for costs of any central 
office of a public housing agency.

SEC. 4. TENANT PARTICIPATION.

    (a) Rule of Construction.--Neither the requirements of this Act, 
nor any other requirement, regulation, guideline, or other policy or 
action of the Department of Housing and Urban Development relating to 
public housing asset management may be construed to repeal or waive any 
provision of part 964 of title 24 of the Code of Federal Regulations, 
regarding tenant participation and tenant opportunities in public 
housing. The Secretary of Housing and Urban Development shall ensure 
that public housing agencies encourage the reasonable efforts of 
resident tenant organizations to represent their members or the 
reasonable efforts of tenants to organize.
    (b) Guidance.--Guidance issued by the Secretary of Housing and 
Urban Development shall encourage participation by residents in the 
implementation of asset management and the development of local 
policies for such purposes.

                          Purpose and Summary

    The purpose of H.R. 3521, the ``Public Housing Asset 
Management Improvement Act of 2007,'' is to ease the regulatory 
burden on public housing agencies of complying with the 
Department of Housing and Urban Development (HUD) regulations 
requiring certain public housing agencies to convert to asset 
management. The bill includes the following regulatory relief 
reforms: (1) ensure that the management and related fees 
established by HUD are reasonable and that such fees become 
effective on or after January 1, 2011, the date by which public 
housing authorities are required under the Public Housing 
Operating Fund Final Rule to demonstrate conversion to asset 
management; (2) restate provisions of current law that permit 
public housing authorities to use a portion of their capital 
fund grant for operating expenses; (3) increase the number of 
public housing authorities that are exempt from mandatory 
conversion to asset management; and (4) encourage the 
participation of public housing residents in the implementation 
of asset management.

                  Background and Need for Legislation

    The nation's public housing system is in the process of a 
major administrative transformation as public housing agencies 
(PHAs) move from managing their portfolios on an agency-wide 
basis to a system in which they administer each development on 
a project-level basis. It is the largest change to the way 
public housing is operated in more than 30 years. Known as 
``asset management,'' this system of project-level 
administration is based on the Federal Housing Administration 
(FHA) multi-family model and is required for public housing by 
the Public Housing Operating Fund Final Rule. The Final Rule 
was developed via negotiated rulemaking between HUD, 
representatives from key industry groups, and several PHAs. The 
Final Rule, which became effective on November 18, 2005, 
required PHAs that administer more than 250 units of public 
housing to restructure their organizations, retrain their 
staffs, and reorganize their physical assets as part of the 
conversion.
    While there is general consensus that asset management is 
desirable, housing agency groups have been critical of several 
components of the negotiated rule, specifically with respect to 
how PHAs' management fees are set and how much flexibility they 
will have to retain some centralized operations. The Final Rule 
states that PHAs must be in full compliance with asset 
management by 2011.
    It is important to note that two of the provisions in H.R. 
3521 were included as part of H.R. 2764, the Consolidated 
Appropriations Act of 2008 (Public Law 110-161) which was 
signed into law on December 26, 2007. Specifically, the 
Consolidated Appropriations Act included the provision 
exempting small PHAs of 400 or less from asset management and 
the provision to reinstate fungibility of capital funds as 
operating assistance.
    Finally, the Congressional Budget Office estimates that 
H.R. 3521 would have no significant impact on the federal 
budget. Enacting the bill would not affect direct spending or 
revenues.

     ESTABLISHMENT OF REASONABLE MANAGEMENT FEES AND FEE SCHEDULE 
                          IMPLEMENTATION DATE

    While the Final Rule addressed the operating fund formula, 
it did not establish specific criteria for fees nor require 
that fees be made effective prior to January 1, 2011. Instead, 
the Final Rule stated that the fees must be reasonable. 
Subsequent to the Final Rule, HUD issued Interim Guidance on 
September 7, 2006 that outlined three types of fees: property 
management fees, asset management fees and bookkeeping fees. 
This guidance effectively required PHAs to begin implementing 
asset management prior to implementation of the Final Rule. In 
the absence of data on the actual costs of managing public 
housing, subsequent HUD Guidance stated that the fees would be 
based on the FHA multi-family inventory and that PHAs must be 
in compliance with those fees by the second year of project-
based budgeting and project-based accounting (e.g. between July 
1, 2008 and April 1, 2009).
    PHAs have questioned both the methodology and adequacy of 
the fees and contend that using FHA properties as a model is 
not an appropriate comparison because of significant statutory 
and regulatory differences in the way public housing and 
privately-owned and managed housing operate. In addition, PHAs 
contend that significant shortfalls in the annual 
appropriations for the public housing operating and capital 
funds make conversion to asset management even more 
challenging. Given these challenges, PHAs contend that some 
regulatory relief is needed in order for agencies to 
successfully convert to asset management by 2011. As such, PHAs 
have requested that the method of establishing a reasonable 
management fee be developed through a negotiated rulemaking. 
The Final Rule already requires HUD to convene a meeting of 
stakeholders in 2009 in accordance with the Federal Advisory 
Committee Act to evaluate subsidy levels based on actual cost 
data. PHAs contend that expanding the scope of the meeting in 
2009 to include management fees would provide time for PHAs to 
track their management costs under the new system and gather 
data, which in turn could be used by the negotiated rulemaking 
committee to establish fees. PHAs also contend that the fees 
should not be established at the beginning of the process of 
conversion to as- set management, but should be developed with 
deliberation based on actual cost data over a period of time. 
They have therefore requested that the effective date of the 
fee schedule coincide with the effective date by which PHAs are 
required to demonstrate full compliance with asset management.
    Under the bill, HUD and PHAs would commence negotiated 
rule-making with interested stakeholders on or after April 1, 
2009 to establish reasonable management and related fees. This 
provision is consistent with information provided to the 
Committee by HUD in which the Department stated that a formal 
rule-making process to specifically focus on the matter of fees 
under asset management be initiated to allow for broad public 
input. In addition, the bill provides that the management and 
related fees shall become effective on or after January 1, 
2011, consistent with the dates set forth in the Final Rule.

INCREASE OF ASSET MANAGEMENT EXEMPTION THRESHOLD TO PROVIDE REGULATORY 
RELIEF FOR MEDIUM-SIZED PUBLIC HOUSING AGENCIES THAT MANAGE BETWEEN 250 
                             AND 500 UNITS

    The Public Housing Operating Fund Final Rule exempts 
housing authorities with fewer than 250 public housing units 
from an asset management model. PHAs contend that housing 
authorities with fewer than 500 units of public housing should 
have local discretion in deciding whether to convert to asset 
management. According to public housing authorities, these 
small agencies generally have few properties, few staff and few 
financial resources. Furthermore, these agencies generally 
operate in rural areas, small towns and suburbs, so they are 
easily managed as a single entity geographically.
    Under the bill, agencies that manage 500 or fewer units of 
public housing would not be subject to asset management. 
Increasing the exemption threshold from 250 to 500 would affect 
441 agencies or about 14 percent of all housing authorities. As 
a result, approximately 2,292 PHAs out of 3,087 PHAs would be 
exempt. In terms of the number of public housing units that 
would remain subject to asset management under this provision, 
more than 751,000 units (or 68 percent of all public housing 
units) would still be required to transition to asset 
management.
    The Committee notes that current HUD guidance requires 
agencies that have more than one asset management project in 
their portfolio to comply with asset management regardless of 
whether an agency falls within the exemption threshold. Under 
the bill, the exemption shall apply to all PHAs that administer 
fewer than 500 units of public housing, regardless of the 
number of asset management projects a PHA has designated with 
respect to its public housing inventory.

 FUNGIBILITY OF CAPITAL FUNDS PROVIDED BY THE QUALITY HOUSING AND WORK 
                           RESPONSIBILITY ACT

    The Quality Housing and Work Responsibility Act of 1998 
(QHWRA) allows PHAs to transfer up to 20 percent of their 
capital fund grant to fund operations with no further 
restrictions [See Section 9(g) of the U.S. Housing Act of 1937, 
as amended]. HUD has issued Guidance that allows up to 20 
percent of the capital fund to be transferred for direct 
project expenses, but prohibits the use of these funds on 
central office overhead. In addition, the Guidance does not 
allow more than 10 percent of an agency's capital funds for 
central office costs. PHAs contend that the costs of transition 
to asset management will be significant. Furthermore, housing 
authorities are in their fifth consecutive year of underfunding 
of the Operating Fund and contend that the flexibility provided 
by QHWRA is crucial to the successful conversion to asset 
management and to the successful operation of public housing. A 
HUD-commissioned study by the Harvard Graduate School of Design 
concluded that the federal government has been under-funding 
the operating costs of PHAs.
    The bill would prohibit HUD from preventing PHAs from 
transitioning up to 20 percent of their capital fund grant to 
fund operations as provided for under QHWRA.

                          TENANT PARTICIPATION

    On March 1, 2007, HUD issued a Notice [FR-5128-N-01] 
providing for an expedited waiver process for HUD regulations 
as they transition to asset management. Included in the Notice 
are several examples of HUD regulations for which HUD would 
consider expedited requests. Among those regulations is a 
provision providing for tenant participation that is set forth 
at 24 CFR 964 (Tenant Participation). While the authority to 
seek waivers from certain HUD regulations, including tenant 
participation, is not new, tenant advocates contend that 
tenants should be involved in the discussions on asset 
management and that the limited rights tenants have should not 
be further eroded.
    Under the bill, HUD would be required to ensure that PHAs 
involve tenants in the local decisions that affect their 
housing.

                                Hearings

    The Committee did not hold any hearings on H.R. 3521 in the 
110th Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
September 25, 2007, and ordered H.R. 3521, Public Housing Asset 
Management Improvement Act of 2007, as amended, reported by a 
voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken in conjunction with the consideration 
of this legislation. A motion by Mr. Frank to report the bill, 
as amended, to the House with a favorable recommendation was 
agreed to by a voice vote.
    During the consideration of the bill, the following 
amendments were considered:
    An amendment by Mr. Sires, No. 1, a manager's amendment 
making various technical and substantive changes, was agreed to 
by a voice vote.
    An amendment by Ms. Velazquez, No. 2, striking prevention 
of certain PHAs from participation in negotiations, was agreed 
to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The goal of H.R. 3521 is to ease the regulatory burden on 
public housing agencies of complying with the Department of 
Housing and Urban Development (HUD) regulations requiring 
certain public housing agencies to convert to asset management 
through the inclusion of important regulatory relief reforms. 
These reforms would: (1) ensure that the management and related 
fees established by HUD are reasonable and that such fees 
become effective on or after January 1, 2011, the date by which 
public housing authorities are required under the Public 
Housing Operating Fund Final Rule to demonstrate conversion to 
asset management; (2) restate provisions of current law that 
permit public housing authorities to use a portion of their 
capital fund grant for operating expenses; (3) increase the 
number of public housing authorities that are exempt from 
mandatory conversion to asset management; and (4) encourage the 
participation of public housing residents in the implementation 
of asset management.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                   Washington, DC, October 2, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3521, the Public 
Housing Asset Management Improvement Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Chad Chirico.
            Sincerely,
                                         Robert A. Sunshine
                                   (For Peter R. Orszag, Director).
    Enclosure.

H.R. 3521--Public Housing Asset Management Improvement Act of 2007

    CBO estimates that H.R. 3521 would have no significant 
impact on the federal budget. Enacting the bill would not 
affect direct spending or revenues.
    H.R. 3521 would alter the Department of Housing and Urban 
Development's (HUD's) implementation of a new system for 
allocating operating subsidies to public housing authorities 
(PHAs). Historically, HUD has provided funding to PHAs in an 
aggregate amount for each authority. Under the agency's new 
operating fund formula, PHAs will receive a separate subsidy 
for each housing project under their control. The bill would 
prevent HUD from imposing a limit on the amount of funding that 
can be used for management fees, increase the unit threshold 
under which smaller PHAs are exempt from asset management 
requirements, and prevent HUD from limiting the use of Public 
Housing Capital Fund assistance for PHAs' central office costs.
    H.R. 3521 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act. State, 
local, and tribal governments that participate in housing 
assistance programs would benefit from management activities 
authorized in the bill.
    The CBO staff contact for this estimate is Chad Chirico. 
The estimate was approved by Keith J. Fontenot, Deputy 
Assistant Director for Health and Human Resources, Budget 
Analysis Division.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3521 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-By-Section Analysis of the Legislation

Section 1. Short title

    This section establishes the short title of the bill, the 
``Public Housing Asset Management Improvement Act of 2007.''

Section 2. Revisions to asset management rules and related fees

    Prohibits HUD from establishing restrictions or limits on 
the amount of management and related fees with respect to a 
public housing project if the fee is determined reasonable by 
the PHA before January 1, 2011. Requires HUD to establish fees 
pursuant to negotiated rulemaking that would commence on or 
after April 1, 2009 and would include interested stakeholders. 
This prohibition is also applicable to public housing agencies 
that are seeking a discontinuance of the reduction in their 
operating fund reductions.
    Increases the threshold for exemption from asset management 
requirements for medium-sized public housing authorities. Thus, 
agencies that own or operate fewer than 500 public housing 
units may elect to be exempt from asset management 
requirements.

Section 3. Prohibition on restriction of fungibility of capital fund 
        amounts

    Clarifies that notwithstanding HUD guidance, public housing 
agencies are permitted the flexibility allowed by the Qualify 
Housing and Work Responsibility Act to transfer up to twenty 
percent of their capital funds for operations with no further 
restrictions.

Section 4. Tenant participation

    Encourages HUD to ensure that public housing agencies 
encourage the reasonable efforts of resident tenant 
organizations to represent their members and the reasonable 
efforts of tenants to organize.

                                  
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