II 113th CONGRESS 1st Session S. 576 IN THE SENATE OF THE UNITED STATES March 14, 2013 Mr. Johanns (for himself and Mr. Tester ) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To reform laws relating to small public housing agencies, and for other purposes.

1. Short title This Act may be cited as the Small Public Housing Agency Opportunity Act of 2013 . 2. Findings and purpose (a) Findings Congress finds the following: (1) Although small public housing agencies are numerous, they administer only a small fraction of the financial resources provided under the Federal housing programs. (2) The oversight of small public housing agencies by the Department of Housing and Urban Development is disproportionate to the financial risk the operations of these agencies pose to the Federal Government. (3) Small public housing agencies perform better than larger agencies, as public housing agency performance is presently measured by the Federal Government. (4) The Department of Housing and Urban Development should deploy its administrative oversight resources in a manner that reflects relative risk to the Federal Government. (5) Regulatory and administrative burdens that may be reasonable for larger public housing agencies may not be so for smaller public housing agencies with more limited resources. (6) Eliminating unnecessary or unreasonable regulatory and administrative burdens will improve the effectiveness of small public housing agencies as providers of housing assistance to low-income families. (7) Small public housing agencies and their residents would benefit from, and small public housing agencies should be afforded, maximum flexibility in the use of their resources. (8) Congress and the Department of Housing and Urban Development should reduce administrative and regulatory burdens on small public housing agencies. (9) Public housing revitalization funding has been largely unavailable to small public housing agencies. (10) Congress should establish a program of assistance to enable public housing revitalization activities by small public housing agencies. (11) Small public housing agencies and their residents would benefit from conversion of their public housing projects to projects assisted with project-based section 8 rental assistance. (b) Purposes The purposes of this Act are— (1) to assure the long-term viability and effectiveness of the small public housing agencies and the housing assistance programs they operate; (2) to ensure that small public housing agencies are not subject to unnecessary Federal regulatory control and administrative requirements; (3) to afford flexibility to small public housing agencies in the use of their resources; (4) to adjust Federal oversight requirements for small public housing agencies to better reflect financial risk to the Federal Government and the relative resources of such agencies; (5) to explore innovative approaches to simplifying determination of income and tenant rents; and (6) to ensure that small public housing agencies have access to the resources necessary for the modernization and revitalization of their public housing stock. 3. Small public housing agencies (a) In general Title I of the United States Housing Act of 1937 ( 42 U.S.C. 1437 et seq. ) is amended by adding at the end the following: 37. Small public housing agencies (a) Definitions In this section, the following definitions shall apply: (1) Housing voucher program The term housing voucher program means a program for tenant-based assistance under section 8. (2) Small public housing agency (A) In general The term small public housing agency means a public housing agency for which the sum of the number of public housing dwelling units administered by the agency and the number of vouchers under section 8(o) administered by the agency is 550 or fewer. (B) Transition A public housing agency that qualifies as an eligible small public housing agency but subsequently fails to meet the qualification criterion in subsection (a) shall remain an eligible small public housing agency for 3 additional years to provide for a transition to noneligible status in order to avoid disruption in the plans and projects undertaken by the agency. (3) Troubled small public housing agency The term troubled small public housing agency means a small public housing agency designated by the Secretary as a troubled small public housing agency under subsection (c)(4). (b) Applicability Except as otherwise provided in this section, a small public housing agency shall be subject to the same requirements as a public housing agency. (c) Program inspections and evaluations (1) Public housing projects (A) Physical inspections (i) Frequency (I) Inspection by the Secretary The Secretary shall carry out an inspection of the physical condition of a small public housing agency’s public housing projects not more frequently than once every 3 years, unless the agency has been designated by the Secretary as troubled small public housing agency based on deficiencies in the physical condition of its public housing projects. (II) Inspection by agencies A small public housing agency shall not be subject to section 6(f)(3), and the Secretary may not otherwise require the small public housing agency to inspect its public housing units. (ii) Standards The Secretary shall apply to small public housing agencies the same standards for the acceptable condition of public housing projects that apply to projects assisted under section 8. (B) Financial condition The Secretary shall determine the financial condition of a small public housing agency’s public housing program solely on the basis of the ratio of current assets to current liabilities. A ratio of at least 1 shall result in a determination that the financial condition of a small public housing agency is acceptable. (C) Management condition (i) Determination (I) In general Except as provided in clause (ii), the Secretary shall determine the management condition of a small public housing agency’s public housing program solely on the basis of the ratio of vacant unit months to eligible unit months. (II) Ratio Except as provided in subclause (III), a ratio of not more than 10 percent shall result in a determination that the management condition of a small public housing agency is acceptable. (III) Exception In determining the management condition of a program or project of a small public housing agency with an extremely low number of public housing units, the Secretary may apply a ratio or standard that is different than the standard under this subparagraph. (ii) Changing market conditions In determining the management condition of a small public housing agency’s public housing program, the Secretary shall take into consideration a demonstration by the small public housing agency that its inability to lease an adequate number of units is a result of changes in market conditions. (2) Housing voucher program (A) Physical inspection of assisted units A small public housing agency administering assistance under section 8(o) shall make periodic physical inspections of each assisted dwelling unit not less frequently than once every 3 years, to determine whether the unit is maintained in accordance with the requirements under section 8(o)(8)(A). (B) Management assessment The Secretary shall evaluate the management of a voucher program of a small public housing agency solely on the basis of the lease-up rate or the budget utilization rate of the small public housing agency. A lease-up rate or budget utilization rate of at least 90 percent shall result in a determination that the management of the voucher program is acceptable. (3) High-performing agencies The Secretary shall designate a small public housing agency as a high-performing agency if the Secretary determines that the small public housing agency exceeds the criteria for acceptability established under paragraphs (1) and (2) by an extent established by the Secretary, by rule. (4) Troubled small public housing agencies (A) Public housing program Notwithstanding any other provision of law, the Secretary may designate a small public housing agency as a troubled small public housing agency with respect to the public housing program of the small public housing agency only if the Secretary determines that the agency— (i) has failed— (I) to maintain its public housing units in a satisfactory physical condition, based upon an inspection conducted by the Secretary; and (II) to correct deficiencies before the date that is 90 days after the date on which the Secretary verifies the inspection results; (ii) does not have at the end of its fiscal year an acceptable ratio of current assets to current liabilities, as determined under paragraph (1)(B); (iii) has failed to maintain an acceptable average ratio of vacant unit months to eligible unit months during any calendar year, as determined under paragraph (1)(C), and that the failure is not the result of changes in market conditions; or (iv) has failed to account for its revenues and expenses, misappropriated Federal funds, or otherwise failed to comply with applicable Federal law. (B) Housing voucher program Notwithstanding any other provision of law, the Secretary may designate a small public housing agency as a troubled small public housing agency with respect to the housing voucher program of the small public housing agency only if the Secretary determines that the agency— (i) has failed to comply with the inspection requirements under paragraph (2)(A); (ii) during the calendar year has failed to maintain an acceptable lease-up rate or budget utilization rate, as determined under paragraph (2)(B); or (iii) has failed to account for its revenues and expenses, misappropriated Federal funds, or otherwise failed to comply with applicable Federal law. (C) Appeals (i) Establishment The Secretary shall establish an appeals process under which a small public housing agency may dispute a determination of deficiency. (ii) Official The appeals process established under clause (i) shall provide for a decision by an official who has not been involved, and is not subordinate to a person who has been involved, in the original determination of deficiency. (D) Corrective action agreement (i) Agreement required Not later than 60 days after the date on which a small public housing agency is designated as a troubled public housing agency, the Secretary and the small public housing agency shall enter in to a corrective action agreement under which the small public housing agency shall undertake actions to correct the deficiencies upon which the designation is based. (ii) Terms of agreement A corrective action agreement entered into under clause (i) shall— (I) have a term of 1 year, and shall be renewable at the option of the Secretary; (II) provide, where feasible, for technical assistance to assist the public housing agency in curing its deficiencies; (III) provide for— (aa) reconsideration of the designation of the small public housing agency as a troubled small public housing agency not less frequently than annually; and (bb) termination of the agreement when the Secretary determines that the small public housing agency is no longer a troubled small public housing agency; and (IV) provide that in the event of substantial noncompliance by the small public housing agency under the agreement, the Secretary may— (aa) contract with another public housing agency or a private entity to manage the public housing of the troubled small public housing agency; (bb) withhold funds otherwise distributable to the troubled small public housing agency; (cc) assume possession of, and direct responsibility for, managing the public housing of the trouble small public housing agency; (dd) petition for the appointment of a receiver, in accordance with section 6(j)(3)(A)(ii); and (ee) exercise any other remedy available to the Secretary in the event of default under the public housing annual contributions contract entered into by the small public housing agency under section 5. (E) Emergency actions Nothing in this paragraph may be construed to prohibit the Secretary from taking any emergency action necessary to protect Federal financial resources or the health or safety of residents of public housing projects. (d) Reduction of administrative burdens (1) Reports (A) Comparability with section 8 requirements Notwithstanding any other provision of law, and except as otherwise provided in this section, the Secretary may not require a small public housing agency to submit any report, plan, or other information with respect to the public housing units, projects, or programs of the small public housing agency if the report, plan, or other information is not required to be submitted by the owner of a project assisted under section 8 that is covered by a mortgage insured by the Secretary. (B) Exception for designated housing for elderly and disabled families A small public housing agency shall submit to the Secretary the plan required by section 7 in order to designate occupancy in public housing units in accordance with section 7. (C) Compliance For purposes of determining the benefits or funding available to a small public housing agency, the small public housing agency shall be deemed to be in compliance with a requirement under Federal law to submit a report, plan, or other information with respect to the public housing units, projects, or programs of the small public housing agency if the small public housing agency submits the reports, plans, or other information required under subparagraphs (A) and (B). (2) Community service (A) In general Notwithstanding any other provision of law, a small public housing agency may elect to comply with the requirements under section 12(c)(3) through the use of tenant certifications. (B) Monitoring of compliance The Secretary may not impose any administrative burden or requirement with respect to the monitoring of compliance with section 12(c) on a small public housing agency that has made an election under subparagraph (A), except a requirement to obtain tenant certifications and make the tenant certifications available to the Secretary. For purposes of this subparagraph, the term administrative burden or requirement includes a requirement to review or verify information contained in a tenant certification. (C) Determination of noncompliance A small public housing agency may not make an election under subparagraph (A) if the Secretary determines that there is substantial noncompliance by the tenants at the small public housing agency with the requirements of section 12(c). (3) Economic opportunity Section 3 of the Housing and Urban Development Act of 1968 ( 12 U.S.C. 1701u ) shall apply to a small public housing agency only to the extent that such section 3 applies to the owner of a project assisted under section 8 of this Act. (4) Asset management At the request of a small public housing agency or a public housing agency that administers not more than 400 public housing dwelling units, the Secretary shall exempt the small public housing agency or public housing agency from any asset management requirement otherwise imposed by the Secretary on public housing agencies. (5) Environmental reviews (A) Exemption Notwithstanding any other provision of law, a small public housing agency shall be exempt from any environmental review requirements with respect to a development or modernization project having a total cost of not more than $100,000. (B) Streamlined procedures The Secretary shall, by rule, establish streamlined procedures for environmental reviews of small public housing agency development and modernization projects having a total cost of more than $100,000. (e) Fungibility (1) In general Notwithstanding any other provision of law and subject to paragraph (2), a small public housing agency may— (A) combine funds provided to the small public housing agency for voucher assistance under section 8(o), from the Capital Fund, and from the Operating Fund; and (B) use the funds combined under subparagraph (A) for any activity authorized under section 8(o) or subsection (d) or (e) of section 9. (2) Limitation In using funds combined under paragraph (A), a small public housing agency shall assist substantially the same number of low-income families, with a comparable mix of families by family size, as it did in the year preceding its qualification as a small public housing agency, with appropriate adjustments made by the Secretary on the basis of any increase or decrease in the number of vouchers or units assisted. (f) Project-Based vouchers With respect to a program carried out by a small public housing agency under section 8(o)— (1) section 8(o)(13)(B) shall be applied by substituting 50 percent for 20 percent ; and (2) section 8(o)(13)(C) shall not apply. (g) Conversion to section 8 (1) In general A small public housing agency may, subject to the availability of appropriations and approval by the Secretary, convert all or a portion of the public housing units of the small public housing agency to project-based voucher assistance under section 8(o)(13) or to project-based assistance under section 8. (2) Project-Based voucher assistance (A) Inapplicable provisions Subparagraphs (B), (C), and (D) of section 8(o)(13) shall not apply to public housing units converted to project-based voucher assistance under paragraph (1). (B) Rent calculation for tax-credit projects Rents for public housing units converted to project-based voucher assistance under paragraph (1) shall be established in accordance with section 8(o)(13)(H), without regard to whether or not a project is located in a qualified census tract. (3) Project-based assistance (A) Initial rents (i) Establishment Initial rents for public housing units converted to section 8 project-based assistance under paragraph (1) shall be established, at the option of the small agency— (I) at the comparable rent for unassisted units in the area; or (II) on a budget basis. (ii) Budget-based rents In approving a budget-based rent under clause (i)(II), the Secretary shall take into account the need to provide for sufficient replacement reserves to offset a reduction or elimination of capital subsidy funds for a project and for debt service on loans to fund capital improvements. (B) Rent adjustments The Secretary shall annually adjust the rents established under subparagraph (A) using an operating cost adjustment factor established by the Secretary (which shall not result in a negative adjustment) or, at the request of the owner, on a budget basis. (C) Term The term of any contract for assistance payments pursuant to this paragraph shall be the longer of 20 years or the remaining period during which the project would have been required to be operated as public housing (as calculated immediately prior to the conversion). (D) Other provisions Except as otherwise provided in this subsection, a project converted under paragraph (1) shall be subject to the provisions of section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 ( 42 U.S.C. 1437f note). (4) Release of encumbrances At the time of conversion of a project under paragraph (1), the Secretary shall release the project from any applicable annual contributions contract and release and cancel of record all deeds of trust and other instruments encumbering the project in favor of the Federal Government. Upon conversion, a project shall no longer be subject to Federal laws and requirements applicable solely to public housing projects. Administrative oversight of public housing units converted to section 8 project-based assistance under paragraph (1) shall be transferred to the Office of Housing within the Department of Housing and Urban Development. (5) Transfer of funds Upon conversion of a project under paragraph (1), the Secretary shall reprogram to the appropriate section 8 account— (A) an amount of public housing Operating Fund budget authority equal to that which would otherwise be allocated to the converted project; and (B) an amount of public housing Capital Fund budget authority otherwise allocable to the small public housing agency with respect to the converted project. (h) Replacement housing factor funds During the first year of each 5-year period for which a small public housing agency qualifies for the addition of a replacement housing factor under section 905.10(i) of title 24, Code of Federal Regulations, the Secretary shall pay to the small public housing agency the portion of the total amount that the Secretary plans to make available to the small public housing agency from the Capital Fund established under section 9(d) during that 5-year period that is attributable to the addition of the replacement housing factor. . (b) Technical and conforming amendments Section 5A of the United States Housing Act of 1937 ( 42 U.S.C. 1437c–1 ) is amended— (1) in subsection (b), by striking paragraph (3); (2) in subsection (e), by striking paragraph (4); and (3) in subsection (f), by striking paragraph (5). 4. Rent reform demonstration project for small public housing agencies (a) Definitions In this section, the following definitions shall apply: (1) Extremely low-income family The term extremely low-income family means a family whose income does not exceed 30 percent of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except the Secretary may establish income ceilings higher or lower than 30 percent of the median income for the area on the basis of the Secretary’s findings that such variations are necessary because of unusually high or low family incomes in the area. (2) Income The term income shall have the meaning given that term by section 3(b)(4) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)(4)). (3) Low-income family The term low-income family means a family whose income does not exceed 80 percent of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except the Secretary may establish income ceilings higher or lower than 80 percent of the median incomes for the area on the basis of the Secretary’s findings that such variations are necessary because of unusually high or low family incomes in the area. (4) Median income for the area The term median income for the area means the median income of all families in a geographic area, as determined by the Secretary. (5) Secretary The term Secretary means the Secretary of Housing and Urban Development. (6) Small public housing agency The term small public housing agency has the same meaning as in section 37(a) of the United States Housing Act of 1937, as added by this Act. (7) Very low-income family The term very low-income family means a family whose income does not exceed 50 percent of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except the Secretary may establish income ceilings higher or lower than 50 percent of the median income for the area on the basis of the Secretary’s findings that such variations are necessary because of unusually high or low family incomes in the area. (b) In general The Secretary shall carry out a demonstration project to examine how various methods of determining rent in public housing affect— (1) the administrative burden on small public housing agencies; and (2) the residents of public housing. (c) Scope of demonstration project (1) Request to participate The Secretary shall select small public housing agencies to participate in the demonstration project from among small public housing agencies that request to participate in the project. (2) Number The Secretary shall select not more than 20 percent of the total number of small public housing agencies to participate in the demonstration project. (3) Representation The Secretary shall select small public housing agencies representing a broad range of geographic areas and urban and rural locations. (d) Rent-Setting mechanisms A small public housing agency participating in the demonstration project shall select 1 or more of the following methods for establishing a family’s rent contribution for a dwelling unit in public housing: (1) Tiered system (A) Initial rents A tiered system under which the amount of initial rent is as follows: (i) For an extremely low-income family, an amount equal to 30 percent of 10 percent of the median income for the area. (ii) For a very low-income family, an amount equal to 30 percent of 30 percent of the median income for the area. (iii) For a low-income family, an amount equal to 30 percent of 50 percent of the median income for the area. (B) Subsequent rents The rent determined in accordance with subparagraph (A) shall be adjusted annually by the small public housing agency on the basis of changes in area median incomes and shall apply to the continued occupancy of an assisted family. (C) Over-income families A family assisted under a tiered system established under subparagraph (A) whose income exceeds 80 percent of the median income for the area shall pay a rent equal to the higher of 30 percent of 80 percent of the median income for the area or the market rent for the unit as determined by the small public housing agency. (2) Gross income (A) Initial rents A method under which rent is established in an amount that varies between 26 to 28 percent of a family’s income, based on family characteristics as determined by the small public housing agency. (B) Subsequent rents The rent determined in accordance with subparagraph (A) shall be adjusted annually between income recertifications on the basis of factors selected by a small public housing agency that are most relevant to the status of a resident. (C) Minimum rent In establishing rents in accordance with subparagraph (A), a small public housing agency may impose a minimum rent. (3) Existing rent mechanisms A small public housing agency may use 1 or more of the above methods for determining rents in combination with the method for establishing rents pursuant to section 3 of the United States Housing Act of 1937 ( 42 U.S.C. 1437a ). (e) Income recertifications Reviews of family income under paragraphs (1), (2), and (3) of subsection (d) shall be made at least once every 5 years, except a family may request a recertification and adjustment in rent at any time if the family income has changed by an amount established by the small public housing agency. In determining family income, the small public housing agency may use the income of the family as determined by the small public housing agency for the preceding year. (f) Hardship exception A small public housing agency shall adopt a hardship policy, comparable to the policy contained in section 3(a)(3)(B) of the United States Housing Act of 1937 ( 42 U.S.C. 1437a(a)(3)(B) ), for use in connection with a minimum rent imposed under subsection (d)(2)(C) and in connection with rents established under paragraphs (1), (2), and (3) of subsection (d). (g) Reports (1) In general Not later than 5 years after the date of enactment of this Act, the Secretary shall submit to Congress a report on the results of the demonstration project carried out under this section. (2) Recommendations for action The report submitted under paragraph (1) shall contain recommendations that Congress take 1 or more of the following actions: (A) Continue the demonstration project for a specified period of time. (B) Expand the number of participants in the demonstration project. (C) Apply the terms of the demonstration project to all small public housing agencies. (D) Change any of the terms of the demonstration project. (E) Terminate the demonstration project. (3) Recommendations for permanent legislation The Secretary shall submit to Congress recommendations for permanent legislation that implements rent reform for small public housing agencies— (A) with the report required under paragraph (1); or (B) before the date on which the Secretary submits the report required under paragraph (1). 5. Energy conservation Section 9(e)(2) of the United States Housing Act of 1937 ( 42 U.S.C. 1437g(e)(2) ) is amended by adding at the end the following: (D) Freeze of consumption levels (i) In general A small public housing agency, as defined in section 37(a), may elect to be paid for its utility and waste management costs under the formula for a period, at the discretion of the small public housing agency, of up to 20 years based on the small public housing agency’s average annual consumption during the 3-year period preceding the year in which the election is made (hereafter referred to as consumption base level ). (ii) Initial adjustment in consumption base level The Secretary shall make an initial one-time adjustment in the consumption base level to account for differences in the heating degree day average over the most recent 20-year period compared to the average in the consumption base level. (iii) Adjustments in consumption base level The Secretary shall make adjustments in the consumption base level to account for an increase or reduction in units, a change in fuel source, a change in resident controlled electricity consumption, or for other reasons. (iv) Savings All cost savings resulting from an election made pursuant to this subparagraph shall accrue to the small agency and may be used for any public housing purpose at the discretion of the small public housing agency. (v) Third parties A small public housing agency making an election under this subparagraph may use, but shall not be required to use, the services of a third party in its energy conservation program. The small public housing agency shall have the sole discretion to determine the source, and terms and conditions, of any financing used for its program. . 6. Consortia Not later than 180 days after the date of enactment of this Act, the Secretary of Housing and Urban Development shall develop and deploy all electronic information systems necessary to accommodate full consolidated reporting by public housing agencies electing to operate in consortia under section 13(a) of the United States Housing Act of 1937 (42 U.S.C. 1437k(a)). 7. Effective date This Act, and the amendments made by this Act, shall take effect 60 days after the date of enactment of this Act.