HOPE VI is a public housing reform program. Through HOPE VI, the Department of Housing and Urban Development (HUD) provides funds to rehabilitate or demolish public housing and replace it with housing that serves both the poor as well as the middle class. In order to understand HOPE VI and its issues, it is important to first understand a brief history of the larger public housing program. The Low-Rent Public Housing program was created as a part of the U.S. Housing Act of 1937 (P.L. 75-412). The Depression-era program was intended to stimulate construction activity, clear slums, and provide low-rent housing to poor families. As designed under the act, public housing is built and operated by local, quasi-governmental, public housing authorities (PHAs). Tenants who live in public housing typically pay 30% of their adjusted gross incomes toward rent, although they can opt for a market-based flat rent and PHAs can choose to institute minimum rents of up to $50 per month. PHAs are able to keep public housing rents low because local governments provide property tax reductions and the federal government provides both capital and operating subsidies to supplement the low rents paid by tenants. From its inception, public housing has faced a number of barriers to success. Many communities were resistant to accepting public housing. This opposition, paired with strict federal rules about how much could be spent to build a unit of public housing, led to the construction of public housing developments in undesirable areas, such as near railroad tracks, highways, and industrial zones. The housing that was constructed was often high-density, high-rise structures. This form of development has often been characterized as "the projects." In addition to location and construction problems, many projects faced management problems. Although many public housing projects were run by effective and efficient PHAs, others had inexperienced PHAs, or in some cases, negligent PHAs, who were unable or unwilling to deal with problems as they arose. Furthermore, PHA budgets were often insufficient to maintain the properties. It was thought at the time the program was created that most tenants would be working adults whose incomes would increase until their economic situation improved enough that they could move out of public housing. This was the case in the early years of the program. However, policies that adopted rent levels based on incomes rather than operating costs and gave priority to the elderly and disabled, paired with changing demographics and a growth in single-mother-headed households, resulted in a population of public housing residents that was very different than originally envisioned. Today, about half of public housing residents are elderly or disabled and about half are non-elderly, non-disabled single-adult-headed households, the majority with children. Of those non-elderly, non-disabled households, only about half have income from work, while the other half either receive some form of cash assistance, such as welfare, or report no income. Today's public housing serves the very poor, who are only required to pay a percentage of their income toward rent. Since the rent that PHAs receive from tenants is so low, public housing is dependent on congressional appropriations, and the budget has not always kept up with need. Many units of public housing fell into disrepair, and some units had to be left vacant because they were no longer habitable. Public housing, over time, became known for terrible living conditions. Research has shown that communities with high concentrations of poverty often fall victim to myriad social ills. The often dense, high-rise structures of public housing became riddled with crime, drugs, and violence. Public housing was the primary government housing program for the poor until the late 1970s. However, out of growing concern about the problems with public housing, and other government-subsidized housing construction programs, President Nixon declared a moratorium on federal housing construction programs in 1973. In 1974, Congress authorized the Section 8 program, which provided subsidies to allow low-income families to live in private market housing. It was hoped that through partnerships with the private sector, the Section 8 program could avoid the problems faced by public housing. The Section 8 program also introduced tenant-based assistance, which subsidized tenants rather than units, giving tenants the option to move. Tenant-based assistance has grown in popularity, partially out of the hope that it can prevent concentrations of poverty in neighborhoods. Over time, Section 8 overtook public housing as the government's largest housing program for the poor; today, almost twice as many households are served by Section 8 than are housed in public housing. Although new construction of public housing had ended by the early 1970s, over 1 million units of public housing were still occupied, and many were still plagued by problems. In order to determine how to deal with the existing stock of public housing, Congress created the National Commission on Severely Distressed Public Housing ( P.L. 101-235 ) in 1989. The commission was mandated to identify those public housing projects that were in a severe state of distress; assess the most promising strategies for improvement; and develop a national action plan. In 1992, the commission issued its findings and recommendations on the state of the nation's public housing. The commission labeled 6% of the public housing stock as severely distressed, at the time, equal to 86,000 units. It also reported finding the following: residents afraid to move about in their own homes and communities because of the high incidence of crime; high unemployment and limited opportunities for the meaningful employment of residents; programs designed to address the conditions with too few resources, provided too late; programs designed to assist residents of public housing that provide disincentives to self-sufficiency; and families living in physical conditions that have deteriorated to a degree that renders the housing dangerous to the health and safety of residents. The national action plan presented by the commission included proposals for change in five major categories: Addressing the needs of residents : recommendations included increasing funding for social services, increasing coordination among federal agencies that provide social services, and promoting economic development opportunities for residents. Addressing the physical conditions : recommendations included increasing funding for capital improvements, providing national leadership to PHAs in planning and design, establishing a model process to eliminate the causes of severe distress, and increasing coordination among government programs that support the rehabilitation of severely distressed housing. Addressing management needs : recommendations included providing funding for security, further tying PHA funding to performance, and promoting income-mixing in public housing. Other strategies : recommendations included encouraging PHAs to pursue private and non-profit management opportunities, increasing and improving available data on public housing, creating a new office on severely distressed public housing at HUD, and encouraging Congress to authorize a new partnership program between PHAs, non-profits, the private sector, and residents to attract additional resources to public housing. HOPE VI began as a demonstration program, created in reaction to the findings of the National Commission on Severely Distressed Public Housing. The commission's National Action Plan was presented in August 1992; in October 1992 the final version of the FY1993 HUD appropriations bill ( P.L. 102-389 ) passed Congress, including $300 million for an Urban Revitalization Demonstration program. Under the demonstration, the Secretary of HUD was to choose 15 cities, based on need, to receive up to $50 million each to revitalize distressed public housing. Each city was required to spend 80% of its funds toward the capital costs of major reconstruction, rehabilitation and other physical improvements, the capital costs of replacement units and/or Section 8 certificates, management improvements for the reconstructed project, and for planning and technical assistance purposes. The remaining 20% was to be used for community and supportive services. PHAs were required to match 15% of all funds provided. From 1993 until 1998, the Urban Revitalization Demonstration, now commonly referred to as HOPE VI, continued to receive funding through annual appropriations bills; however, the program remained unauthorized. The law governing the program was contained within annual appropriations bills and the requirements for eligibility and funding changed from year to year. HUD administered the law not through regulation, but in the directions it issued along with each annual Notice of Funding Availability (NOFA), to which communities would apply for HOPE VI funding. Changes to the program, in addition to those mandated by annual appropriations laws, were included in these NOFAs. The FY1999 HUD appropriations bill ( P.L. 105-276 ) included a major public housing reform initiative, the Quality Housing and Work Opportunity Reconciliation Act (QHWRA), that authorized the HOPE VI program. QHWRA codified four purposes for the program: improving the living environment for public housing residents of severely distressed public housing projects through the demolition, rehabilitation, reconfiguration, or replacement of obsolete public housing projects (or portions thereof); revitalizing sites (including remaining public housing dwelling units) on which such public housing projects are located and contributing to the improvement of the surrounding neighborhood; providing housing that will avoid or decrease the concentration of very low-income families; and building sustainable communities. In the law, severely distressed public housing was defined as public housing that requires major redesign, reconstruction or redevelopment, or partial or total demolition; is a significant contributing factor to the physical decline of and disinvestment by public and private entities in the surrounding neighborhood; is occupied predominantly by families that are very low-income families with children, unemployed, and dependent on various forms of public assistance; or has high rates of vandalism and criminal activity (including drug-related criminal activity) in comparison to other housing in the area; cannot be revitalized through assistance under other programs because of cost constraints and inadequacy of available amounts; and is lacking in sufficient appropriate transportation, supportive services, economic opportunity, schools, civic and religious institutions, and public services, resulting in severe social distress in the project.