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SHARPSMALL HOUSING AUTHORITY REFORM PROPOSALSHARPSHARPSMALL HOUSING AUTHORITY REFORM PROPOSALSMALL HOUSING AUTHORITY REFORM PROPOSAL

More Service to Residents, Less Paperwork for Agencies

The Public Housing Authorities Directors Association (PHADA) is a professional association representing approximately 1,900 executive directors of local housing authorities. Th e National Association of Housing and Redevelopment and Housing Offi cials (NAHRO) is a professional association representing approximately 20,000 individual members and 3,200

housing and community development agencies and organizations. A signifi cant proportion of our PHADA and NAHRO members govern, lead, work for or otherwise represent smaller organizations that operate a modest number of deeply assisted housing units.

Over the past months, leaders, staff and members of our associations have developed the Small Housing Authority Reform Proposal (SHARP), an initiative that would signifi cantly ease administrative burdens and increase program fl exibility available to smaller organizations operating the public housing program and/or the Housing Choice Voucher program. Together with the support of the Housing Authority Insurance Group (HAI), we have developed a proposal and accompanying legislative language that would liberate smaller housing authorities from unnecessary and unproductive red tape and provide these organizations with signifi cantly improved fl exibility to administer their assisted housing programs eff ectively, effi ciently and in the interests of low-income residents, applicants and the general public.

Th is publication describes PHADA and NAHRO’s proposal and off ers reasons why implementing all elements of our reform would benefi t residents, local housing authorities and other sponsors of public housing and Housing Choice Voucher programs, and the Department of Housing and Urban Development (HUD) and the federal government.

PHADA and NAHRO believe this proposal off ers reasonable and pragmatic changes in the federal government’s deeply assisted housing programs. We hope that you will support this compelling need for reform.

Sincerely,

Akinola PopoolaPresidentNational Association of Housing and Redevelopment Offi cials

P. Curtis HiebertPresidentPublic Housing Authorities Directors Association

“For core compliance monitoring, HUD’s level of effort for small PHAs is grossly disproportionate to the level of risk, total units involved, and subsidy dollar volume.”SOURCE: Excerpted from the HUD Commissioned Report on Small Agency Reform, “Rebalancing HUD’s Oversight and Small PHAs’ Regulatory Burdens,” conducted by IBM Business Consulting Services.

The Proposal Would:Define small agencies as those with 550 or fewer public housing units and Housing Choice Vouchers combined

Reduce administrative burdens for both agencies and HUD

Provide flexibility to improve services to residents

Enable HUD to target its scarce resources where risks are greatest

Reform HUD’s burdensome oversight and monitoring processes

Provide administrative and regulatory relief

Reform arcane rent structures

Encourage housing development among small agencies

Reform and its Benefits

HUD commissioned a study by IBM Business Consulting Services (IBM). The IBM report entitled “Rebalancing HUD’s Oversight and Small PHAs’ Regulatory Burdens” makes a series of suggestions to HUD to deregulate small housing authorities and to reform its approach to monitoring and oversight. The report’s recommendations are:

HUD should reform its monitoring and oversight of small agencies so that those that only consume a small proportion of HUD’s program funding consume a proportionate level of HUD’s oversight capacity.

HUD should take steps to dramatically reduce the regulatory and administrative burdens for small agencies, which have limited resources.

HUD should consider enlarging its definition of small authorities to include more agencies in streamlining and deregulation.

What is SHARP? Small Housing Authority Reform ProposalThis proposal to reform the regulatory regime applicable to small housing authorities includes many of the suggestions in the IBM Business Consulting Services’ report.

Small PHAs

HUD

Oversight

In 2008, HUD published a report by IBM on small housing authority reform entitled, “Rebalancing HUD’s Oversight and Small PHAs’ Regulatory Burdens.” Th at report assessed characteristics of agencies with small inventories of public housing and Housing Choice Vouchers (HCVs), the impact of federal oversight on those agencies, and alternatives available to the Department to reduce burdens on small agencies and on the Department. Th ese alternatives would not appreciably increase risks to the federal government. HUD’s report concluded that, “For core compliance monitoring, HUD’s level of eff ort for small PHAs is grossly disproportionate to the level of risk, total units involved, and subsidy dollar volume.”

How Small?

Among the matters considered by that report was the defi nition of small agencies. A variety of defi nitions has been used in the past. For some time, HUD has considered programs with fewer than 250 assisted housing units as “small”, with no regard to the size of their HCV program. Congressional appropriations committees have extended an exemption from HUD’s asset management requirements to cover agencies with fewer than 400 public housing units, and, in 2008, Congress included agencies with fewer than 550 combined public housing and HCVs in the

administrative relief included in the Housing and Economic Recovery Act (HERA). IBM’s HUD-commissioned report advocates that, “HUD needs a simple descriptor for defi ning ‘small’ PHAs,” and goes on to suggest, “Adopting this approach, HUD could have a single classifi cation for ‘Small’ that includes all PHAs with a combined total fewer than 550 units.”

Where Are Small Agencies?

Across the country, there are approximately 3,300 small agencies. Geographically, small agencies are widely distributed among the states. Texas has 353 small agencies, or slightly more than 11 percent of the total. Georgia, Louisiana, New York, Arkansas, and Minnesota have between 130 and 160 small agencies each, and eight other states have between 100 and 130 small agencies. Only three jurisdictions have no small agencies: Alaska, Guam and Hawaii.

What Do Small Agencies Manage?

On average, small agencies each manage approximately 150 public housing units or HCVs. Approximately half operate only public housing, one quarter manage only HCVs, and one quarter manage both public housing and vouchers. Agencies that manage both programs generally

What & Where Are Small PHAs?

The graphic above shows the concentration of HAs with 550 or fewer units throughout the United States.

operate larger programs than those operating only one type of program. On average, agencies with both programs manage approximately 145 public housing apartments and almost 130 HCVs, for a combined program of 275 assisted housing units. Half of these agencies manage fewer than four developments with 150 units. Th e 1,600 housing authorities that only manage public housing operate an average of 100 public housing units, and the agencies that manage only vouchers administer an average of 178 HCVs apiece.

Monitoring and Oversight

Despite their relatively small share of the inventory and program budgets, small agencies are subject to regulations, oversight, monitoring and control similar to the agencies that control 80 percent of the inventory and consume 90 percent of the various program budgets. As the IBM report asserts, the level of HUD’s oversight for small PHAs is simply not proportionate to the level of risk, total units involved, and subsidy dollar volume. Th is “one-size-fi ts-all” approach to monitoring and oversight results in a misallocation of HUD’s oversight resources to agencies that pose little or no national risk to program integrity. As a result of these intensive oversight requirements and HUD’s limited human resources capacities, the Department faces diffi culties meeting its oversight and monitoring obligations, making it necessary to use contractors for oversight tasks such as REAC inspections.

Complexity

HUD has repeatedly pointed out that complex policy implementation makes programs diffi cult for residents to understand. Without clear policy, program outcomes for residents can appear capricious, unfair or inequitable. Providing small agencies with regulatory fl exibility will allow them to simplify policy implementation and redirect scarce resources toward providing transparent information to residents. Complex policy implementation diverts resources to address monitoring and compliance requirements, and takes away from small agencies’ attention to mission-related activities. Increasingly detailed and intrusive federal policies lead to participant and agency frustration. Small authorities may have more diffi culty tailoring programs to meet local needs and preferences. Reducing HUD’s monitoring requirements would also allow small agencies to spend more of their resources on maintenance, property improvements and resident services that directly benefi t residents. Reform can allow small agencies the fl exibility to address local residents’ priorities while freeing up resources to benefi t the residents and their families without increas-ing HUD’s program risks. IBM Business Consulting Services’ report on HUD’s oversight practices indicates that “one-size-fi ts-all” pro-gram policies and procedures result in disproportionate administrative burdens for small agencies and their under-utilization of other HUD funding resources. Th is mismatch between requirements and results consumes the already-limited resources of small authorities with little or no clear benefi t.

to use contractors for oversight tasks such as REAC inspections.

utilization of other HUD funding resources. Th is mismatch between requirements and results consumes the already-inspections. between requirements and results consumes the already-limited resources of small authorities with little or no clear benefi t.

Reform can free funds and human resources for maintenance, physical

improvements and services that benefi t residents directly.

Benefits to Residents

Reform can free funds and human resources for mainte-nance, physical improvements and services that benefit residents directly.

Benefits to HUD

Reform of oversight and regulation of small housing authorities reduces the resources HUD requires to moni-tor those agencies. Resources no longer required for small agency monitoring may be reallocated for monitoring those agencies that pose higher levels of risk to the federal government. Finally, HUD’s staff and financial capac-ity may become adequate to the task of a reformed set of monitoring and oversight responsibilities and the Depart-ment may be able to curtail its dependence on contracts.

Benefits to Housing Authorities

Reform of HUD’s oversight and regulatory regime may reduce agencies’ resource requirements for oversight and compliance activity, and those resources may be devoted to activities directly related to fulfilling the agencies’ and the programs’ central missions. Small housing authorities may also find it easier to tailor programs to fit local needs and preferences, providing residents and communities more satisfaction with assisted housing programs.

Where is the Risk?

What Are the Benefits?

Housing AgenciesHousing Units

HUD $$$

Proportions of Public Housing Agencies, Units and Dollars by Agency Size

80%20%

Small PHAs (≤550 units) represent 80% of all agencies but administer only 20% of the units and receive only 10% of the public housing and Housing Choice Voucher funds.

10%

PHADA and NAHRO believe that by implementing the reforms suggested in the SHARP proposal, small housing authorities will be able to spend more time with their residents and less time on burdensome paperwork.

Th e following summarizes the legislation’s key components:

Eligibility: Th e act defi nes small agencies as those that operate 550 or fewer public housing apartments and Housing Choice Vouchers combined. Congress has adopted this standard elsewhere in statute.

Monitoring and Oversight: Th e proposal provides the government with reasonable tools to safeguard the eff ective operation of assisted housing programs:

• Th e act replaces the Public Housing Assessment System (PHAS) with 3 simple criteria:

1. Physical inspections will be conducted by a third party every 3 years (the standard for many private sector assisted housing properties).

2. An annual fi nancial assessment based on a small agency’s current ratio. A ratio of 1 is ac-ceptable.

3. An annual management assessment based on a vacancy rate (the ratio of vacant unit months to

SHARPSMALL HOUSING AUTHORITY REFORM PROPOSALTh e Small Public Housing Agency Opportunity Act is a comprehensive reform proposal intended to address the needs and concerns of small housing authorities.

Th e recommendations contained in this proposal would:

Defi ne small agencies as those with 550 or fewer public housing units and Housing Choice Vouchers combined

Reduce administrative burdens for both agencies and HUD

Provide fl exibility to improve services to residents

Enable HUD to target its scarce resources where risks are greatest

Reform HUD’s burdensome oversight and monitoring processes

Provide administrative and regulatory relief

Reform arcane rent structures

Encourage housing development among small agencies

available unit months). A rate at or below 10 percent or below is acceptable.

• Th e act replaces the Section 8 Management Assessment Program (SEMAP) with two simple criteria:

1. Small agencies must inspect each HCV subsidized housing unit at least once every 3 years.

2. Small housing authorities must use an acceptable proportion of available vouchers or available funds. Using 90 percent of vouchers or funds is acceptable.

• Th e act would require a small housing authority failing to meet these standards to establish a corrective action plan with HUD. HUD would retain other remedial op-tions in the event of material non-compliance with an agreement.

Administrative and Regulatory Relief: Th e act would off er small agencies substantial relief from administrative and regulatory burdens. Under the proposal, small housing authorities:

• Would not submit plans or other information to HUD not required of owners and operators of Section 8 proj-ect- based properties,

• Could choose to comply with the Community Service Requirement,

• Must comply with Section 3 requirements to the extent that owners and operators of Section 8 project-based as-sistance properties must do so,

• Could choose to implement Family Self Suffi ciency programs,

• Would not need to receive the Secretary’s approval of prevailing wage determinations,

• Would continue to be exempt from Asset Management requirements,

• Would comply with environmental review requirements only on projects costing more than $100,001.

Rent Reform: Under the proposal, the Secretary will conduct a demonstration of alternative methods for determining rent in public housing and the HCV program. Th e demonstration would involve up to twenty percent of small housing authorities. Agencies could choose to use one or more of the following rent determination methods that set rents at or below 30 percent of household income:

• A tiered system that sets rents at 30 percent of 10, 30 and 50 percent of the small agency’s area median income (AMI). Rents would be adjusted annually based on changes in area median income. Over income households would pay market rents or 30 percent of 80 percent of AMI.

• A system establishing rents at 26 percent to 28 percent of household gross income based on locally established household characteristics. Under this approach, rents would be adjusted annually based on locally estab-lished criteria.

• Th e current rent determination method.

• Under the proposal, small housing authorities would recertify household incomes at least once every 5 years. Families may however request income recertifi cations due to income changes based on locally established criteria.

• Finally, the act provides for minimum rents and hardship exceptions.

that owners and operators of Section 8 project-based as-sistance properties must do so,

Families may however request income recertifi cations due to income changes based on locally established criteria. sistance properties must do so,

• Could choose to implement Family Self Suffi ciency programs,

• Would not need to receive the Secretary’s approval of prevailing wage determinations,

to income changes based on locally established criteria.

• Finally, the act provides for minimum rents and hardship exceptions.

More Service to Residents, Less Paperwork for Agencies

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Development and Operating Opportunities:Th e act provides signifi cant fl exibility to small housing authorities to enable effi cient development and operations:

• Fungibility: Th e act enables the fungibility of resources awarded under 8(o), 9(d) and 9(e) of the 1937 Hous-ing Act for any eligible purposes under those sec-tions. Small agencies must however continue to serve substantially the same number of households with a comparable mix of families by family size.

• Labor Standards: Th e act requires that small housing authorities comply with Davis Bacon wage standards on projects in excess of $250,000.

• Project Basing: Th e act provides small agencies in-creased fl exibility to convert public housing to project based HCVs or project-based assistance for redevelop-ment or recapitalization. It allows a small agency to use up to 50 percent of its existing voucher inventory

for project-based HCV conversions, and provides the opportunity to use project-based assistance for these purposes. Where small housing authorities elect to convert public housing properties, the act provides for the release of encumbrances on the property to facili-tate the leveraging of private capital.

• Revitalization and Redevelopment Grants: Th e act creates a streamlined grant program for the revital-ization or redevelopment of small agencies’ obsolete public housing using 15 percent of funds annually ap-propriated for the HOPE VI program.

• Energy Conservation: Th e act permits small housing authorities to freeze their utility consumption levels as provided by the existing Energy Performance Con-tracting program without requiring use of an outside contractor or fi nancier and without current require-ments for use of future utility expense savings for debt service.

PHADA and NAHRO urge the adoption of the Small Housing Authority Reform Proposal as a

comprehensive initiative that assures the long-term viability and the effective and effi cient

operation of assisted housing programs operated by small agencies.

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202-546-5445 • www.phada.org

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877-866-2476 • www.nahro.org

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Small PHA Reform ToolkitGet the latest information on Small PHA Reform:

www.nahro.org/toolkit www.phada.org/toolkit

If you have any questions, wish to see language implementing these proposals, or wish additional copies of this publication, please contact

PHADA at 202-546-5445 or phada@phada.org or contact NAHRO at 877-866-2476 or nahro@nahro.org.

PHADA and NAHRO appreciate the generous support of the Housing Authority Insurance Group (HAI) in the production of this publication.