the Secretary or enters into a performance con-
tract to undertake energy conservation improve-
ments in a public housing development, under
which the payment does not exceed the cost of
the energy saved as a result of the improvements
during a reasonable negotiated contract period,
the formula shall not take into account the
amount of any cost reductions for the agency due
to the differences between projected and actual
utility consumption attributable to actions that
are taken by the agency which lead to such re-
ductions, as determined by the Secretary. Not-
withstanding the preceding 2 sentences, after the
expiration of the 10-year period beginning upon
the savings initially taking effect, the Secretary
may reduce the amount allocated to the agency
under the formula by up to 50 percent of such
differences.
(3) CONSIDERATION OF PERFORMANCE, COSTS,
AND
OTHER
FACTORS.—The formulas under para-
graphs (1) and (2) should each reward performance
and may each consider appropriate factors that re-
flect the different characteristics and sizes of public
housing agencies, the relative needs, revenues, costs,
and capital improvements of agencies, and the rel-
ative costs to agencies of operating a well-managed
agency that meets the performance targets for the
agency established in the local housing management
plan for the agency.
(4) DEVELOPMENT UNDER NEGOTIATED RULE-
MAKING PROCEDURE.—The formulas under this sub-
section shall be developed according to procedures for
issuance of regulations under the negotiated rule-
making procedure under subchapter III of chapter 5
of title 5, United States Code, except that the for-
mulas shall not be contained in a regulation.
(5) REPORT.—Not later than the expiration of
the 12-month period beginning upon the enactment of
this Act, the Secretary shall submit a report to the
Congress containing the proposed formulas established
pursuant to paragraph (4) that meets the require-
ments of this subsection.
(d) INTERIM ALLOCATION REQUIREMENTS.—
(1) OPERATING ALLOCATION.—
(A) 
APPLICABILITY
TO
APPROPRIATED
AMOUNTS.—Of any amounts available for alloca-
tion under this subsection for a fiscal year, an
amount shall be used only to provide amounts
for operating allocations under this paragraph
for eligible public housing agencies that bears the
same ratio to such total amount available for al-
location that the amount appropriated for fiscal
year 1997 for operating subsidies under section
9 of the United States Housing Act of 1937 bears
to the sum of such operating subsidy amounts
plus the amounts appropriated for such fiscal
year for modernization under section 14 of such
Act.
(B) DETERMINATION.—The operating allo-
cation under this paragraph for a public housing
agency for a fiscal year shall be an amount de-
termined by applying, to the amount to be allo-
cated under this paragraph, the formula used for
determining the distribution of operating sub-
sidies for fiscal year 1997 to public housing
agencies (as modified under subparagraphs (C)
and (D)) under section 9 of the United States
Housing Act of 1937, as in effect immediately
before the effective date of the repeal under sec-
tion 601(b).
(C) TREATMENT OF CHRONICALLY VACANT
UNITS.—The Secretary shall revise the formula
referred to in subparagraph (B) so that the for-
mula does not provide any amounts, other than
utility costs and other necessary costs (such as
costs necessary for the protection of persons and
property), attributable to any dwelling unit of a
public housing agency that has been vacant con-
tinuously for 6 or more months. A unit shall not
be considered vacant for purposes of this para-
graph if the unit is unoccupied because of reha-
bilitation or renovation that is on schedule.
(D) TREATMENT
OF
INCREASES
IN
IN-
COME.—The Secretary shall revise the formula
referred to in subparagraph (B) to provide an
incentive to encourage public housing agencies to
increase nonrental income and to increase rental
income attributable to their units by encouraging
occupancy by families whose incomes have in-
creased while in occupancy and newly admitted
families. Any such incentive shall provide that
the agency shall derive the full benefit of any in-
crease in nonrental or rental income, and such
increase shall not result in a decrease in
amounts provided to the agency under this title.
In addition, an agency shall be permitted to re-
tain, from each fiscal year, the full benefit of
such an increase in nonrental or rental income,
except that such benefit may not be retained if—
(i) the agency’s operating allocation
equals 100 percent of the amount for which
it is eligible under section 9 of the United
States Housing Act of 1937, as in effect im-
mediately before the effective date of the re-
peal under section 601(b) of this Act; and
(ii) the agency’s operating reserve bal-
ance is equal to the maximum amount per-
mitted under section 9 of the United States
Housing Act of 1937, as in effect imme-
diately before the effective date of the repeal
under section 601(b) of this Act.
(2) CAPITAL IMPROVEMENT ALLOCATION.—
(A) 
APPLICABILITY
TO
APPROPRIATED
AMOUNTS.—Of any amounts available for alloca-
tion under this subsection for a fiscal year, an
amount shall be used only to provide amounts
for capital improvement allocations under this
paragraph for eligible public housing agencies
that bears the same ratio to such total amount
available for allocation that the amount appro-
priated for fiscal year 1997 for modernization
under section 14 of the United States Housing
Act of 1937 bears to the sum of such moderniza-
tion amounts plus the amounts appropriated for
under this title shall be maintained and used as pub-
lic housing for the 20-year period beginning upon the
receipt of such grant. Any public housing develop-
ment, or portion thereof, that received the benefit of
a grant pursuant to section 14 of the United States
Housing Act of 1937 shall be maintained and used as
public housing for the 20-year period beginning upon
receipt of such amounts.
(2) MIXED
INCOME
DEVELOPMENTS.—Amounts
may be used for eligible activities under section
203(a)(1) for mixed-income developments, which shall
be a housing development that—
(A) contains dwelling units that are avail-
able for occupancy by families other than low-in-
come families;
(B) contains a number of dwelling units—
(i) which units are made available (by
master contract or individual lease) for oc-
cupancy only by low- and very low-income
families identified by the public housing
agency;
(ii) which number is not less than a
reasonable number of units, including relat-
ed amenities, taking into account the
amount of the assistance provided by the