GAO

United States General Accounting Office

Report to the Chairman, Subcommittee

on Housing and Community Opportunity,

Committee on Banking and Financial

Services, House of Representatives

December 2000 PUBLIC HOUSING

Implementation Status

of Selected Provisions

of the 1998 Reform Act

GAO-01-98

Page 1 GAO-01-98 1998 Public Housing Reform Act

Contents

Letter 3

Appendixes Appendix I: Summary of 11 Selected Provisions of the Reform

Act and Their Effective Dates 14

Appendix II: Scope and Methodology 18

Appendix III: Survey of Public Housing Agencies

(Includes Final Results, Sampling Errors, and

Confidence Intervals) 20

Appendix IV: GAO Contacts and Staff Acknowledgments 29

Tables Table 1: HUD’s Issuance of Implementing Guidance for 11

Selected Reform Act Provisions, as of November 29, 2000 8

Table 2: Responses of Public Housing Agencies to GAO’s Survey

on Their Implementation of 10 Discretionary Provisions

of the Reform Act 10

Abbreviations

HUD Department of Housing and Urban Development
Page 2 GAO-01-98 1998 Public Housing Reform Act
Page 3 GAO-01-98 1998 Public Housing Reform Act

United States General Accounting Office

Washington, D.C. 20548 Letr

December 8, 2000

The Honorable Rick Lazio

Chairman, Subcommittee on Housing

and Community Opportunity

Committee on Banking and Financial

Services

House of Representatives

Dear Mr. Chairman:

Each year, the Department of Housing and Urban Development (HUD)

spends nearly $7 billion to provide about 1.3 million units of public housing

for low-income households nationwide. These units are managed by over

3,100 public housing agencies. Although public housing typically meets the

basic shelter needs of its residents, concerns have been raised about how it

often concentrates poor and jobless families in distressed neighborhoods

and fails to provide incentives for its residents to become economically

self-sufficient. To address these and other problems, the Congress passed

the Quality Housing and Work Responsibility Act of 1998, also referred to

as the Public Housing Reform Act (Reform Act). This legislation includes

over 80 mandatory and discretionary provisions aimed at giving public

housing agencies more overall flexibility to set their own policies. It also

encourages self-sufficiency on the part of the residents and involves them

in managing their housing through resident advisory boards. The legislation

has the potential to fundamentally change the nature of public housing and

the lives of its residents but can do so only if public housing agencies

understand and implement the act’s provisions.
Page 4 GAO-01-98 1998 Public Housing Reform Act

Concerned about whether public housing agencies are taking advantage of

the greater discretion granted by the Reform Act, you asked us to

determine (1) the status of HUD’s efforts to issue implementing guidance

for 11 of the Reform Act’s provisions and (2) the extent to which public

housing agencies are implementing these provisions. In selecting these 11

provisions, of which 10 are discretionary and 1 is mandatory, you chose not

to include any that HUD has already reported on.1 Public housing agencies

can implement all but 1 of the 10 discretionary provisions included in our

review. Local jurisdictions can implement the remaining discretionary

provision by participating in a HUD demonstration program if their local

housing agency is not a high performer.2 Appendix I summarizes the 11

provisions we reviewed.

To conduct our review, among other things, we surveyed 139 public

housing agencies from July through August 2000. Because the provisions

you selected cover both the public housing and section 8 tenant-based

programs, we selected our sample from a list provided by HUD of public

housing authorities that manage units under both programs.3 Because

earlier work by HUD suggested that housing agencies would implement

their discretionary authority differently depending on their size, our sample

included the 15 largest housing agencies, which manage at least 6,600

public housing units and also manage section 8 units, and 124 other

housing agencies, which manage at least 100 combined public housing and

section 8 units. We selected the 15 largest agencies, which collectively

manage about 27 percent of the nation’s public housing inventory. We then

randomly selected the 124 other housing agencies. All 15 of the largest

agencies and 115 of the 124 other agencies returned completed

questionnaires. This gave us an overall response rate of 94 percent. We did

not independently verify the agencies’ responses to our survey. Appendix II

1

HUD issued a baseline report on the uses of discretionary authority in selecting tenants,

filling vacancies, determining incomes, setting rents, and reexamining rents. See The Uses

of Discretionary Authority in the Public Housing Program: A Baseline Inventory of Issues,

Policy, and Practice (HUD/PD&R, July 1999).

2

HUD uses a rating system to measure public housing agencies’ performance and

categorizes the agencies as high, standard, and troubled performers. We recently reported

on the system in Public Housing: HUD Needs Better Information on Housing Agencies’

Management Performance (GAO-01-94, Nov. 2000).

3

Housing agencies receive funds from HUD to operate and maintain public housing and

administer section 8 tenant-based rental assistance programs.
Page 5 GAO-01-98 1998 Public Housing Reform Act

provides the details of our scope and methodology, and appendix III

contains the survey questions with the agencies’ responses.

Results in Brief For the 11 provisions in our review, HUD has issued final guidance for 7

and proposed guidance for 2 and has started the process of developing

guidance for 2. HUD officials said that although putting final rules in place

for all of the Reform Act’s provisions has proved challenging, the

Department has provided sufficient guidance for housing agencies to begin

implementing the four provisions in our review that have not been

finalized.

As would be expected, given the greater discretion provided by the Reform

Act, public housing agencies appear to be tailoring their use of the 11

provisions to fit their own needs and priorities. The largest housing

agencies were more likely than the others to take actions on the

discretionary provisions because they generally viewed the provisions as

helpful in managing their programs. Generally, the other housing agencies

reported not implementing most discretionary provisions, either citing a

lack of resources or noting that the provisions did not fit their

circumstances. Most of the housing agencies we surveyed reported that

they had implemented the mandatory provision, which relates to setting

rents. HUD reviewed a draft of this report and agreed with the information

presented in it.
Page 6 GAO-01-98 1998 Public Housing Reform Act

Background Under the United States Housing Act of 1937, as amended, the Congress

created the federal public housing program to assist communities in

providing decent, safe, and sanitary dwellings for low-income families.

Today, more than 3,100 public housing agencies manage approximately 1.3

million public housing units. Public housing agencies are typically

municipal, county, or state agencies created under state law to develop and

manage public housing units. These agencies contract with HUD to provide

housing in exchange for federal grants and subsidies. Although housing

agencies are not federal agencies, they must adhere to federal laws and

regulations. Public housing agencies also manage HUD’s tenant-based

section 8 program, which allows eligible households to select their own

units in the private housing market and receive subsidies to cover part of

their rent.4 HUD enters into contracts and provides payments to public

housing agencies, which use these payments to provide rent subsidies to

the owners of private housing on behalf of the assisted households. The

United States Housing Act of 1937 generally governs HUD’s public housing

and tenant-based section 8 programs.

During the 1990s, the nation’s public housing agencies gained broader

latitude—from HUD and the Congress—to establish their own policies in

areas such as tenant selection, income incentives, and rent-setting. In 1996,

the Congress enacted legislative reforms that allowed public housing

agencies to set minimum rents and to drop all mandatory federal

preferences for admission based on hardship conditions, such as rent

burden or homelessness. These reforms gave housing agencies greater

control over their social and fiscal environment, enabling them to tailor

their policies to local needs and conditions. Subsequently, on October 21,

1998, the Congress enacted the Quality Housing and Work Responsibility

Act of 1998 (Reform Act).5 This act, which extensively amended the United

States Housing Act of 1937, embodied many of these 1996 reforms. The act

further increased public housing agencies’ discretion and gave them more

flexibility to set their own policies. For example, the act gave them

permanent authority to exercise discretion in tenant selection. As a result,

4

On October 21, 1999, HUD published the final rule to implement the statutory merger of the

section 8 tenant-based certificate and voucher programs into the new Housing Choice

Voucher Program.

5

The reform act was enacted as Title V of the fiscal year 1999 appropriations act for the

departments of Veterans Affairs and Housing and Urban Development and independent

agencies.
Page 7 GAO-01-98 1998 Public Housing Reform Act

they may now adopt tenant selection criteria based on local housing needs

and priorities.

The Reform Act included over 80 provisions, with varying effective dates

and statutorily prescribed rulemaking procedures. Some provisions went

into effect when the act was enacted on October 21, 1998, while other

provisions took effect later. Under the act, the Secretary of Housing and

Urban Development can implement any provision in the act by notice

unless otherwise indicated.6 The act specifies that some provisions must be

implemented by rulemaking or by negotiated rulemaking.7 HUD’s Office of

Policy, Program, and Legislative Initiatives, within the Office of Public and

Indian Housing, administers rulemaking for the Reform Act’s provisions.

In February 1999, HUD published a Federal Register notice providing initial

guidance on provisions that were effective immediately and identifying

several provisions that would later require rulemaking. In December 1999,

HUD published another Federal Register notice updating its

implementation of the act and indicating where the guidance that had

already been issued could be found. At that time, some of Reform Act’s

provisions did not require rulemaking, and rulemaking for other provisions

was still in progress. For those provisions, the notice provided guidance

that the public housing agencies should follow until HUD completed the

rulemaking. Since then, HUD has published other proposed, interim, and

final rules for housing agencies to implement the Reform Act.

Besides publishing guidance on the Reform Act’s provisions, HUD held

several training conferences during the summer of 2000 to explain how

changes due to the Reform Act affected its public housing and tenant-based

section 8 assistance programs. Four conferences were held for resident

leaders, and two conferences were held for HUD and public housing

agency staff.8 During these conferences, HUD provided an overview of and

6

Notices include a Federal Register notice or a direct notice issued by HUD’s Office of

Public and Indian Housing, giving HUD staff or program participants temporary instructions

or amend previous instructions for HUD programs until a handbook revision or change is

issued.

7

Rulemaking is a process through which an agency considers and formulates the issuance,

modification, or repeal of a rule. Negotiated rulemaking is a process through which an

agency, using a mediator, must negotiate with interested parties to develop a rule.

8

During the conferences for HUD and public housing agency staff, about 2 days were

devoted to public housing topics and about 2 days to section 8 topics.
Page 8 GAO-01-98 1998 Public Housing Reform Act

explained many of the act’s provisions, including some of those we

reviewed.

HUD Has Issued Final

Guidance for 7 of 11

Provisions

As of November 29, 2000, HUD had finished implementing 7 of the 11

provisions we reviewed, issued proposed rules for 2 provisions, and

initiated the process to develop rules for 2 provisions, as indicated in table

1. HUD has worked to finalize the guidance for the four remaining

provisions but has been hampered by several factors, including the need to

devote time and resources to develop the guidance for other provisions of

the act. HUD hopes to finalize the rules for the four provisions by the end of

calendar year 2000. Until HUD completes the rulemaking, the December 22,

1999, Federal Register provides guidance for housing agencies to follow.

Table 1: HUD’s Issuance of Implementing Guidance for 11 Selected Reform Act Provisions, as of November 29, 2000

a

The Resident Opportunities and Self-sufficiency program consolidated the funding for

several HUD programs.

b

Section 519 established a capital fund and an operating fund for public housing in section 9

of the United States Housing Act of 1937, as amended. Our review was limited to subsection

9(l), which allows public housing agencies to retain income from nonrental sources.

Provision Status Date Action

Section 561: Home Rule Flexible Grant

Demonstration

Completed February 18, 1999 Notice of initial guidance on the Reform Act

published in Federal Register

Section 538: Linking Services to Public

Housing Residents

Completed August 10, 1999 Notice of funding availability published for

the ROSS programa

Section 525: Site-based Waiting Lists Completed October 21, 1999 Final rule published in Federal Register

Section 519: Income from Nonrental Sourcesb Completed February 3, 2000 Public and Indian Housing Notice 2000-4

published

Section 523: Family Choice of Rental Payment Completed March 29, 2000 Final rule published in Federal Register

Section 555: Section 8 Homeownership Option Completed September 12,

2000

Final rule published in Federal Register

Section 515: Joint Ventures and Consortia Completed November 29, 2000 Final rule published in Federal Register

Section 533: Voluntary Conversion of Public

Housing to Tenant-based Assistance

Ongoing July 23, 1999 Proposed rule published in Federal Register

Section 536: Public Housing Homeownership Ongoing September 14,

1999

Proposed rule published in Federal Register

Section 516: Public Housing Agency

Mortgages and Security Interests

No rule c c

Section 539: Mixed Finance Public Housing No rule c c
Page 9 GAO-01-98 1998 Public Housing Reform Act

c

HUD is in the process of developing the rule for this provision. However, the December

22,1999 Federal Register notice allows public housing agencies to submit proposals under

this provision.

Source: GAO’s presentation of information from HUD.

While noting that HUD is working to develop final implementing guidance

for all of the Reform Act’s provisions, agency officials cited reasons why

some provisions in our review may not yet have final rules. According to

the Deputy Assistant Secretary for Policy, Program, and Legislative

Initiatives, HUD set priorities for rulemaking to recognize specific

deadlines in the new law, ensure the individual rights of public housing

residents or section 8 recipients, and implement significant changes in law

that could not otherwise be implemented. Additionally, the official said the

time and resources spent on required negotiated rulemaking may have

affected the development of rules for the four provisions for which rules

are not yet final.9

Housing Agencies

Differ in Their

Implementation of

Selected Provisions

Compared with the other housing agencies, the largest housing agencies

are implementing 8 of the 10 discretionary provisions by a significantly

higher percentage. The largest agencies also demonstrated more

awareness of a ninth discretionary provision, which allows for converting

public housing to tenant-based assistance (section 533) after submitting an

evaluation report, which is due to HUD by October 2001. A tenth

discretionary provision, the Home Rule Demonstration (section 561), is

applicable only when agencies are not high performers, and the discretion

to implement the provision lies with the local jurisdiction, not with the

housing agency. Many of the agencies in our sample responded that this

provision did not apply to them. Finally, most housing agencies reported

implementing the one mandatory provision in our review. This provision

(section 523) requires a family to choose each year whether it will pay a flat

rent or a rent based on a percentage of its income.

9

The Reform Act required HUD to develop allocation formulas for the capital fund,

operating fund, and section 8 renewals through negotiated rulemaking procedures. Our

review did not include these formulas.
Page 10 GAO-01-98 1998 Public Housing Reform Act

Largest Housing Agencies

Are Taking More Actions to

Implement 8 of 10

Discretionary Provisions

As table 2 indicates, a significantly higher percentage of the largest housing

agencies we surveyed reported taking actions to implement 8 of the 10

discretionary provisions we reviewed. Consistent with their actions, the

largest agencies also more often viewed these discretionary provisions as

helpful in managing their public housing or tenant-based section 8

programs.

Table 2: Responses of Public Housing Agencies to GAO’s Survey on Their Implementation of 10 Discretionary Provisions of the

Reform Act

Notes:

The differences between the largest and the other housing agencies are statistically significant for all

but the Home Rule Flexible Grant Demonstration provision.

Further information about each of the provisions in this table appears in appendix I.

a

The sampling error should be added to and subtracted from the estimate to obtain the

confidence interval for the estimate. See appendix II for a complete discussion of the

sampling error.

Provision

Percentage of the largest housing

agencies

(Number of responses)

Estimated percentage of other

housing agencies

(Sampling error)a

Section 533: Housing agency knew about the voluntary

conversion requirement and the deadline

87%

(N = 13)

24

(± 8%)

Section 515: Housing agency entered into business

arrangements such as joint ventures and consortiab

80%

(N = 12)

52%

(± 9%)

Section 519: Housing agency received income from

nonrental sources

80%

(N = 12)

60%

(± 9%)

Section 539: Housing agency requested HUD’s approval

for a mixed finance project

73%

(N = 11)

8%

(± 5%)

Section 538: Housing agency applied for ROSS program

funding in 1999 and 2000c

67%

(N = 10)

11%

(± 6%)

Section 525: Housing agency maintains site-based waiting

lists

53%

(N = 8)

18%

(± 7%)

Section 561: Local government not eligible for Home Rule

Flexible Grant Demonstration because housing agency is a

high performer

36%

(N = 5)

42%

(± 9%)

Section 536: Housing agency established a

homeownership program

27%

(N = 4)

8.5%

(± 5.5%)

Section 516: Housing agency entered into agreements

granting security interests to others

20%

(N = 3)

d

Section 555: Housing agency sought HUD’s approval of a

section 8 homeownership program

7%

(N = 1)

d
Page 11 GAO-01-98 1998 Public Housing Reform Act

b

Some of these arrangements were entered into before the Reform Act was passed.

c

The Resident Opportunities and Self-sufficiency program consolidated the funding for

several HUD programs.

d

Estimate does not differ significantly from 0.

Source: GAO’s survey data.

The largest agencies were also more aware of the requirements of a ninth

provision concerning the voluntary conversion of public housing stock.

This provision—section 533—requires housing agencies to evaluate the

continued operation of their units as public housing and to compare this

option with the conversion of the units to tenant-based assistance. While

housing agencies are not required to submit this evaluation report to HUD

until October 1, 2001, a greater percentage of the largest housing agencies

were aware of this requirement. However, these agencies were either

uncertain whether the provision would help them in managing their

operations or thought it would hinder their program management. Only one

of the largest housing agencies viewed the provision as helpful. Many of the

other housing agencies reported not being aware of the provision, and

most, like the largest housing agencies, were uncertain of its effects or

believed it would hinder their management.

Agencies Cited Several

Reasons for Not

Implementing Particular

Provisions

The housing agencies cited several reasons for not taking actions to

implement the discretionary provisions. Those most frequently cited were

a lack of resources and the perception that the provisions did not fit the

agencies’ needs. Another provision, which under certain conditions allows

a local jurisdiction to administer an agency’s public housing and section 8

tenant-based funds, applies only to agencies that are not high performers,

and many of the agencies we surveyed reported that they were high

performers.

A lack of resources was one reason many other housing agencies gave for

not implementing several provisions. For example, they often did not seek

approval for mixed-finance public housing (section 539) because they did

not have the funds necessary for such an undertaking. Likewise, many

other housing agencies reported not applying for funding to link services to

public housing residents (section 538) because they did not have the time

and/or technical expertise to prepare the grant application or they found

the provision administratively burdensome.
Page 12 GAO-01-98 1998 Public Housing Reform Act

The perception that provisions were not applicable to their needs or would

not be of value to them was another frequently cited reason for not taking

actions to implement certain discretionary provisions. Many agencies

reported not establishing site-based waiting lists (section 525) because they

had determined that centralized waiting lists were more appropriate to

their needs. For example, one agency reported not adopting site-based

waiting lists because it had few developments that were near each other.

Likewise, some of the largest agencies had not entered into agreements to

mortgage or sell security interests in their public housing developments

(section 516) because they did not see the benefits of doing so.

Section 561, the Home Rule Flexible Grant Demonstration, applies only

when housing agencies are not high performers. Five of the 14 largest

housing agencies and many of the others reported that they were high

performers and, therefore, their local jurisdiction could not participate in

the program. If a housing agency is not a high performer, this provision

allows the local jurisdiction to assume responsibility for and administer the

agency’s public housing and section 8 tenant-based funds for 1 to 5 years.

However, half of the largest housing agencies reported that the

demonstration project would greatly hinder their ability to operate and

manage their programs. Many of the other housing agencies were uncertain

of the provision’s effects or indicated it would neither hinder nor help their

operations.

Most Housing Agencies

Report Compliance With the

Mandatory Provision

Most of the largest and other housing agencies reported that they had

complied with the mandatory provision on the household’s choice of rental

payment (section 523) by issuing the required statement of policy on public

housing rents. Most of the housing agencies had established a policy, and

most had fully implemented the policy. The agencies that had not

established or implemented a policy cited various reasons. For example,

one housing agency reported it was awaiting approval from its board of

directors, and another said it was developing a marketing strategy to

attract working families.

Conclusions One objective of the Reform Act was to provide the nation’s public housing

agencies with greater discretion over many aspects of their public housing

and tenant-based section 8 programs. In the 2 years since the legislation

was passed, it seems that HUD has provided sufficient guidance for

housing agencies to begin making use of their expanded discretionary

authority. In deciding how to exercise their discretionary authority, public
Page 13 GAO-01-98 1998 Public Housing Reform Act

housing agencies indeed appear to be tailoring their policies to fit their own

perceived needs and priorities, adopting those they believe will help them

manage their programs.

Agency Comments We provided HUD with a draft of this report for its review and comment.

HUD officials advised us that they agreed with the information presented in

the report and provided technical clarifications, which we incorporated as

appropriate.

We performed our work between April 2000 and October 2000 in

accordance with generally accepted government auditing standards. As

noted, appendix II discusses our scope and methodology.

As arranged with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after the

date of this letter. At that time, we will send copies to the Honorable

Andrew M. Cuomo, Secretary of Housing and Urban Development, and

other interested parties. We will also make copies available to others on

request.

If you have any questions about this report, please call me or Carol

Anderson-Guthrie at (214) 777-5739. Other key contributors to this report

are listed in appendix IV.

Sincerely yours,

Stanley J. Czerwinski

Director, Physical Infrastructure
Page 14 GAO-01-98 1998 Public Housing Reform Act

Appendix I

Summary of 11 Selected Provisions of the Apendxies

Reform Act and Their Effective Dates ApendxiI

Provision Effective date Summary of provision

Mandatory:

Section 523:

Family Choice of Rental Payment

October 1, 1999 Section 523 amends section 3(a) of the United States Housing Act

of 1937 (U.S. Housing Act). This section requires housing agencies

to develop policies that give families a choice, to be exercised

annually, of paying rent as either (1) an amount that shall not

exceed 30 percent of their adjusted gross income or (2) a flat rent,

which the public housing agency is to determine for each unit in its

inventory. In making these rent determinations, public housing

agencies are to strive to develop rent structures that do not create

disincentives for residents to work and become self-sufficient.

Discretionary:

Section 515:

Joint Ventures and Consortia

October 1, 1999 Section 515 creates a new section 13 of the U.S. Housing Act. This

section permits any two or more public housing agencies to form a

consortium to receive assistance and allows public housing

agencies to enter into joint ventures, partnerships, or other

business arrangements with other entities to administer public

housing programs. Under this section, public housing agencies will

have great flexibility in determining the scope of responsibility of

any consortia they may form. For example, two public housing

agencies may form a consortium for the purpose of sharing

managerial responsibilities, administering a joint section 8 program,

or effecting a complete merger.

Public housing agencies will also be able to retain amounts

generated from activities carried out under this section without

incurring a reduction in funds provided under the operating or

capital funds or other funding sources provided under the Reform

Act. Such amounts must be used for low-income housing or the

benefit of the residents.

Section 516:

Public Housing Agency Mortgages and

Security Interests

October 1, 1999 Section 516 adds a new section 30 to the U.S. Housing Act to allow

public housing agencies to mortgage or grant a security interest in

any project where approved by HUD. In making such authorization,

HUD may consider the ability of the public housing agency to use

the proceeds of the mortgage or security interest for low-income

housing, the ability of the public housing agency to make payments

on the mortgage or security interest, and other criteria. Section 516

also provides that no action taken under this provision shall result in

any liability to the federal government.

Section 519:

Public Housing Capital and Operating Funds

February 3, 1999 Section 519 of the Reform Act amends section 9 of the U.S.

Housing Act to establish a capital fund and an operating fund for

public housing. Section 9(l) provides that income from nonrental

sources (as determined by the Secretary) is to be retained by public

housing agencies and used only for low-income housing or the

benefit of assisted residents, without any decrease in the amounts

received by the housing agency from the capital and operating

formula accounts.
Appendix I

Summary of 11 Selected Provisions of the

Reform Act and Their Effective Dates

Page 15 GAO-01-98 1998 Public Housing Reform Act

Section 525:

Site-based Waiting Lists

October 1, 1999 Section 525 adds a new provision to section 6 of the U.S. Housing

Act allowing public housing agencies to establish site-based waiting

lists for admission to public housing developments. This section

requires any procedures for site-based waiting lists to comply with

title VI of the Civil Rights Act of 1964, the Fair Housing Act, and

other applicable civil rights laws. It also requires that public housing

agencies provide full disclosure of any housing options available

within the public housing agency to individuals applying for public

housing assistance.

Section 533:

Voluntary Conversion of Public Housing to

Tenant-based Assistance

October 1, 1999 Section 533 amends section 22 of the U.S. Housing Act to allow a

public housing agency to convert any public housing project (or a

portion) to tenant-based assistance if, after conducting a

conversion assessment, the public housing agency determines that

the conversion: (1) will not be more expensive than continued

operation of the housing project, (2) will benefit the residents of the

housing project, and (3) will not adversely affect the availability of

affordable housing in the community. All public housing agencies

must conduct and submit to HUD a conversion assessment no later

than October 1, 2001. HUD may waive the assessment requirement

or allow for a streamlined assessment.

Section 536:

Public Housing Homeownership

October 1, 1999 Section 536 adds section 32 to the U.S. Housing Act, which

authorizes a new public housing homeownership program that

replaces, but is substantially based on, the former section 5(h)

program implemented by 24 C.F.R. part 906. This section allows

public housing agencies to design homeownership programs for the

sale of public housing units to public housing residents, to entities

for resale to residents or other low-income persons, or directly to

low-income persons.

The purchasing family must provide not less than 1 percent of the

downpayment from its own resources. Resale restrictions are

imposed on purchasers for 5 years after sale to prevent purely

speculative purchases. Homeownership programs under this

section are not subject to the demolition or disposition requirements

of section 18 of the 1937 act.

Provision Effective date Summary of provision
Appendix I

Summary of 11 Selected Provisions of the

Reform Act and Their Effective Dates

Page 16 GAO-01-98 1998 Public Housing Reform Act

Section 538:

Linking Services to Public Housing

Residents

October 21, 1998 Section 538 adds a new section 34 to the U.S. Housing Act to allow

HUD to make grants to public housing agencies, resident

management corporations, resident councils, or resident

organizations for supportive services and resident empowerment

activities to assist public housing residents in becoming

economically self-sufficient.

Grants may be used for (1) physical improvements to a public

housing project to provide space for supportive services for

residents; (2) the provision of service coordinators and congregate

housing services programs for the elderly and disabled; (3) the

provision of services related to work readiness and economic and

job development; (4) resident management and resident

participation activities; and (5) other activities designed to improve

the economic self-sufficiency of residents. All grants require a

match of at least 25 percent of the grant amount. The match can be

in-kind and/or cash contributions.

Section 539:

Mixed Finance Public Housing

October 1, 1999 Section 539 adds a new section 35 to the U.S. Housing Act. Under

this section, a public housing agency may provide operating and

capital funds for a “mixed-finance project” in the form of a grant,

loan, or guarantee, for the construction or rehabilitation of public

housing units. A mixed-finance project is one that is financially

assisted by private resources, which can include low-income

housing tax credits.

Section 555:

Section 8 Homeownership Option

October 21, 1998 Section 555 amends section 8(y) of the U.S. Housing Act and

authorizes a public housing agency to provide tenant-based

assistance for an eligible family that purchases a dwelling unit that

will be occupied by the family.

This section amends section 8(y) in several ways to make the

program more flexible and easier for housing agencies to

administer by (1) allowing voucher holders to obtain

homeownership through shares in a cooperative housing

development or through lease-purchase arrangements, whether or

not they are first-time homeowners; (2) altering the assistance

formula for families receiving assistance for homeownership, so as

to make it comparable to the new formula for tenant-based

assistance; (3) allowing public housing agencies to contract with a

nonprofit entity to administer the program; (4) allowing participation

only if the public housing agency determines that the families have

sufficient resources; and (5) eliminating the requirement that at

least 80 percent of the down payment amount must come from the

homebuyer’s own resources.

Provision Effective date Summary of provision
Appendix I

Summary of 11 Selected Provisions of the

Reform Act and Their Effective Dates

Page 17 GAO-01-98 1998 Public Housing Reform Act

Section 561:

Home Rule Flexible Grant Demonstration

October 21, 1998 Section 561 adds a demonstration program through which eligible

jurisdictions, typically units of general local government, can

receive public housing and tenant-based assistance for up to 5

years to meet specified performance goals. Throughout the

demonstration period, up to 100 jurisdictions may participate,

except those served by public housing agencies designated as high

performers under the Public Housing Assessment System or any

successor assessment program.

The demonstration program gives local government leaders the

option to combine federal housing assistance funds into a flexible

seamless grant for use in meeting the housing needs of their

communities. The funds must be used by these communities to

provide housing for low-income families.

Provision Effective date Summary of provision
Page 18 GAO-01-98 1998 Public Housing Reform Act

Appendix II

Scope and Methodology ApendxiI

To determine the status of HUD’s development of implementing rules and

guidance for the 11 selected provisions of the Reform Act, we interviewed

HUD officials and reviewed documents we obtained from them. In

addition, we reviewed relevant HUD notices published in the Federal

Register. We also contacted representatives of the public housing industry

to discuss how housing agencies are exercising their discretion to act on

the Reform Act’s provisions.

To determine the extent to which public housing agencies have taken

action to implement the 11 selected provisions of the Reform Act, we

surveyed a random sample of public housing agencies. Specifically, we sent

a mail questionnaire to a sample of 139 public housing agencies. We

pretested the questionnaire at seven public housing agencies in Georgia

and Maryland to ensure that our questions were clear, unbiased, and

precise and that responding to the survey did not place an undue burden on

the agencies. We did not verify the accuracy of the agencies’ responses. We

sent follow-up mailings and called agencies to stimulate responses to the

survey.

From a list of public housing agencies provided by HUD, we identified

1,430 that met our criteria for sampling. These were public housing

agencies that administered both public housing and section 8 units, with a

combined total of at least 100 units. Housing agencies with fewer than 100

units were excluded from the public housing agency population for

purposes of sampling. We included all 15 of the largest public housing

agencies, which we defined as those with 6,600 or more public housing

units and at least 1 section 8 unit, in our sample.1 We refer to these agencies

in our report as the “largest” agencies. From the remaining 1,415 public

housing agencies that administered at least 100 combined public housing

and section 8 units, we selected a random sample of 124. We refer to these

agencies in our report as “other” agencies.

Because we used a sample (called a probability sample) to develop our

estimates for “other” public housing agencies, each estimate has a

measurable precision, or sampling error, which may be expressed as a

plus/minus figure. A sampling error indicates how closely we can

reproduce from a sample the results that we would obtain if we were to

take a complete count of the universe using the same measurement

1

Although the Puerto Rico Housing Authority is one of the largest agencies, it was not

included in our sample because it does not administer any section 8 units.
Appendix II

Scope and Methodology

Page 19 GAO-01-98 1998 Public Housing Reform Act

methods. By adding the sampling error to and subtracting it from the

estimate, we can develop upper and lower bounds for each estimate. This

range is called a “confidence interval.” Sampling errors and confidence

intervals are stated at a certain confidence level. For example, a confidence

interval at the 95-percent confidence level means that in 95 out of 100

instances, the sampling procedure we used would produce a confidence

interval containing the universe value we are estimating.

We conducted our survey from July through August 2000. All 15 of the

largest housing agencies and 115 of the 124 other housing agencies

returned completed questionnaires. This gave us an overall response rate

of 93.5 percent. The results we report for the random sample of 124 public

housing agencies generalize to 1,312 similarly sized public housing

agencies (about 93 percent of the universe of such agencies).

Because the primary purpose of our survey was to estimate the extent to

which and how housing agencies were implementing their discretionary

authority, no attempt was made to verify the agencies’ responses or to

evaluate the reported actions’ conformance to HUD’s rules.

We were also asked to provide descriptive information on how housing

agencies were implementing a provision entitled Section 512 Community

Service and Family Self-sufficiency. We contacted 46 housing agencies and

obtained information on the work and self-sufficiency activities they had or

planned for their residents to meet the requirements of this provision. On

November 17, 2000, we briefed your staff on the results of this work.
Page 20 GAO-01-98 1998 Public Housing Reform Act

Appendix III

Survey of Public Housing Agencies

(Includes Final Results, Sampling Errors, and

Confidence Intervals) ApendxiI
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 21 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 22 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 23 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 24 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 25 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 26 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 27 GAO-01-98 1998 Public Housing Reform Act
Appendix III

Survey of Public Housing Agencies (Includes

Final Results, Sampling Errors, and

Confidence Intervals)

Page 28 GAO-01-98 1998 Public Housing Reform Act
Page 29 GAO-01-98 1998 Public Housing Reform Act

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Stanley J. Czerwinski (202) 512-7631

Carol Anderson-Guthrie (214) 777-5739

Acknowledgments In addition to those named above, Johnnie Barnes, Carolyn Boyce, Sherrill

Dunbar, Bess Eisenstadt, John McGrail, and Tina Smith made key

contributions to this report.

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