NAHRO Legislative

On October 21, 1998 the President enacted into law the Quality Housing and Work Responsibility Act of 1998 (QHWRA) that revises the public housing and Section 8 tenant-based programs. Subsequently, during the month of December 1998, NAHRO conducted briefing sessions in eight cities across the nation.

In the course of the briefing sessions, questions were raised regarding public housing and Section 8 provisions in the new legislation. Following is a list of frequently asked questions and answers on provisions regarding agency planning, admissions and occupancy, rent-setting policies, community service, the Section 8 tenant-based program and capital improvement activities.

HUD released interim agency plan regulations on February 18, 1999, [see the Federal Register for the HUD issuances] 120 days after enactment of QHWRA  Following this issuance will be a 60-day comment period and two "enhanced rulemaking" meetings among the national industry groups, representatives of local housing agencies and residents.  The Department is then scheduled to issue additional regulations during the Spring.

In light of the fact that HUD announced that housing agencies with fiscal years starting January 1, 2000 will be the first to submit agency plans on October 15, 1999, the following questions are essential to provide assistance so that housing agencies may proceed with assembling their annual and 5-year agency plans.

As the NAHRO staff receives additional information, we will continue to update these questions. If you have further questions regarding the legislation please feel free to contact the staff by email at nahro@nahro.org or telephone at (202) 289-3500.

Updated:  February 19, 1999

A.  Annual and 5-Year Planning Requirements
B.  Board of Commissioner Requirement for a Recipient of Assistance
C.  Rent Setting Policies
D.  Admissions and Occupancy
E.  Income Mix and Deconcentration Provisions
F.  Pet Ownership Policies
G.  Community Work Requirements
H.  Family Self-Sufficiency
I.   Capital Improvement and Fund Activities
J.  Conversion Assessment
K.  Public Housing Drug Elimination Program (PHDEP)
L.  Safety and Security-Related Provision, Sections 575-578
M.  Section 8 Issues

• Section 8 Merger
• Section 8 General
• Section 8 Renewals
• Section 8 Homeownership

1.  When are the initial agency plans due and what is the time-table for housing agencies to submit annual and 5-year plans?  HUD released interim regulations on February 18, 1999.  These regulations confirm the due dates for all local housing agencies (LHAs) to submit annual and 5-year plans. Agencies with fiscal years starting January 1, 2000 will be the first to submit their agency plans on October 15, 1999. Thereafter, LHAs with fiscal years starting on April 1, July 1, and October 1, will submit their plans to HUD 75 days before the start of their agency’s fiscal year.

2.  Is HUD preparing any forms for inclusion in the annual plan?  This question has been forwarded to HUD headquarters and interim regulations will announce and clarify the submission due dates, format and contents of agency plans.

3.  Who will review agency plans, HUD headquarters, field offices, or will the Department establish a new hub similar to the Real Estate Assessment or Grants Management Centers?  This question has been forwarded to HUD headquarters. At this time, we do not know the entity within the Department that will be responsible for reviewing agency plans. Reportedly, the Department is planning the review process, but has not announced the role of field offices. HUD is developing software that will allow for, and eventually require, electronic submission of the PHA annual and 5-year plan.

4.  How extensive will HUD oversight be for agency plans?  According to the Act, the HUD review for approval purposes is limited to determining that the contents of the plans are complete, and plan activities are consistent with the community’s consolidated plan, and not prohibited by any provision in the Act or applicable laws. The NAHRO leadership recommended that HUD conduct a limited review using a checklist to determine that the 5-year and annual plans contain the appropriate contents.

According to Congressional staff, HUD only has the capacity to review agency plans in a cursory fashion within the 75-day period. HUD is required to approve agency plans within 75 days after receipt of the plan. If HUD lets the 75-day period pass without commenting on the plan, the plan is deemed approved. However, judicial review of agency plans is not precluded.

5.  In light of this judicial review provision regarding agency plans, may HUD attempt at a later date, possibly 6 months later, to pursue litigation against a housing agency?  This question has been forwarded to HUD and the intent of this judicial provision is subject to HUD and Congressional interpretation. After the 75-day period the plan is deemed approved, but there is no specific provision prohibiting HUD from questioning an agency’s plan at a later date.  However, the provision is designed to allow an individual, resident, or local organization to sue an agency for violations of federal or state laws.

6.  What are the key elements of the 5-year and annual plan?

Following is a list of the key elements for both plans. Each of these elements is required, except that demolition/disposition, elderly/disabled designation, and homeownership plans are optional.

a.  5-Year Plan Contents

• Mission Statement
• Goals and Objectives to address low-income housing needs

b. Annual Plan Contents

• Needs Statement on Housing
• Financial Resources
• Eligibility, Selection and Admissions
• Rent Determination
• Operations, maintenance, and management plan
• Grievance procedures
• Capital improvements plan
• Demolition/disposition plan and schedule
• Elderly disabled designation plan and unit descriptions
• Conversion assessment description
• Homeownership program description
• Community work requirement and self-sufficiency plan
• Safety and crime prevention efforts
• Pet ownership policies
• Civil rights and fair housing certification
• Annual audit results
• Capital asset statement (long-term viability)
• Other Information

7.  What are specific elements of a streamlined plan for small agencies (under 250 units) and high performers? 

For small PHAs that are not designated as troubled, the streamlined plan must include the following statements:

• Housing needs
• Financial resources
• PHA's policies that govern elibigility, selection, and admissions
• PHA's rent determination policies
• Capital improvements needed
• Demolition and/or disposition
• Homeownership programs administered by the PHA
• PHA's safety and crime prevention measures
• PHA's policies and rules regarding pet ownership
• Civil rights certification
• Fiscal Year audit
• Other:  Table of contents, executive summar

8.  Within the financial resources section of the annual plan, what funding does an agency have to include? Does an agency have to show federal, state, local, and private sources of funding?  The Act states the annual plan must contain a statement of financial resources available to the agency and the planned uses.

The statement of resources must address the financial resources available to the PHA for the support of Federal public housing and tenant-based assistance programs administered by the PHA during the plan year.  The statement must include a listing of the significant PHA operating, capital and other proposed Federal resource commitments available to the PHA, as well as tenant rents and other income available to support public housing or tenant-based assistance.  The statement also should include the non-Federal sources of funds supporting each federal program.

9.  What will streamlined 5-year and annual plans look like for housing agencies that administer only the Section 8 tenant-based program?  Following is a listing of the planning elements that appear to only apply to the Section 8 program. Additionally, housing agencies need to have in place a description of their administrative process for conducting HQS inspections. HUD has the discretion to issue streamlined plan regulations.

A.  5-year Plan Contents

• Mission statement
• Goals and objectives

B.  Annual Plan Sections

• Housing Needs Statement
• Financial Resources
• Eligibility, Admissions, and Occupancy Policies (safety and security screening, income targeting requirement, HQS etc.)
• Rent-setting and Income-determination (Section 8 payment standard and provisions related to contracts with owners)
• Grievance Procedures
• Homeownership Program Description (if applicable)
• Community service and self-sufficiency programs (if applicable)
• Civil rights and fair housing certification
• Annual audit results

10.  What are the benefits of the new planning requirements for all agencies: small, medium, and large?  Some agencies may have to develop or revise their operating policies and procedures dealing with admissions and screening, income reviews, and rent-setting in light of legislative changes in the public housing and Section 8 tenant-based programs.

However, for funding purposes, the annual plan necessitates that agencies program available funding on an annual basis. By doing this, LHA management will plan program activities according to the low-income housing needs of the community and engaging in the planning process may assist agencies with identifying needed funding.

In tandem with the requirements for the agency plan to be consistent with the locality’s consolidated plan and the public hearing, each of these requirements may provide LHAs an opportunity to encourage local governments to provide assistance and financial resources in support of the public housing and Section 8 programs.

11.  For local housing agencies that form a consortium or serve communities in multiple counties or jurisdictions, what local government official must certify that the plan is consistent with the state or localities' consolidated plan?

Because the legislation is silent on this issue, HUD will need to issue guidance to the agency that authored the plan. HUD may suggest that housing agencies serving more than one non-metropolitan area seek approval from the state official responsible for the state’s consolidated plan.

12.  For local housing agencies serving more than one locality or county, how will agencies comply with the public comment and resident advisory board consultation requirements?  It could be a geographic and management challenge to obtain public comments in several towns and localities served by a housing agency. At the discretion of the agency, it may be more feasible to make the plan available 45 days prior to the hearing at each location and notify the respective communities about the hearing to comply with these requirements.

Regarding the resident advisory board requirement, agencies must ensure that the board is representative of residents served by the agency.

13.  Should legal aid or an attorney review an agency’s 5-year and annual plan before submitting it to HUD?  This is not required, but it might be advisable if you believe there are local conditions where legal aid, law students, or tenant advocates may potentially file a claim against the housing agency regarding an agency achieving its goals and objectives within its agency plan.

Under the new Act, there is a provision permitting judicial review of an agency’s activities in the event HUD does not notify an agency whether its plan has been approved within 75 days after it is submitted to HUD, although the Act states the agency plan is considered to be approved. Regarding this judicial review provision, the statute does not clearly define the parameters and circumstances for this judicial action.

14.  What are the appropriate details that HUD is looking for within the annual and agency plan, for example within the operations, maintenance, and management plan?

The interim regulations released on February 18, 1999 clarifies this issue. NAHRO will meet at least twice with HUD during "enhanced rulemaking" sessions regarding planning requirements.

It is possible that LHAs may only have to briefly summarize the contents of sections of the annual plan. For example, the operations and management plan would describe how staff maintain and manage properties. In the event, the policies and procedures listed above need to be revised, we believe housing agencies should undertake the necessary action, but HUD should not require agencies to submit these policies in their agency plan for Departmental review and approval. We believe that management discretion must be preserved and HUD does not have the capacity nor should they be involved in reviewing these internal management issues through a review and approval process.

15. Where in the agency plan would an LHA address continued occupancy issues (e.g. re-examinations, transfer policies, etc. Would this come under the admission and occupancy (ACOP) or Section 8 administrative plan, and now be included in the agency plan?  Generally, the relevant section of the annual plan would be the eligibility and admissions section. We believe the new agency plan should be used as a strategic planning tool to encourage good management practice instead of being used as a compliance-driven review tool for HUD oversight purposes. Regarding past ACOP and administrative plans that were submitted to HUD, NAHRO recommends that the new agency plan reports should be based on the statute and only summarize the respective sections of the agency plan relative to eligibility and admissions policies for tenant selection, established admissions preferences, and maintenance of the waiting list based on the exact bill language.

16.  What is the number of units used to determine a small agency versus a medium-sized agency? For example, an agency has 230 public housing units and 6,000 Section 8 vouchers and certificates. Is this agency considered to be a small agency for purposes of the agency plan?   Yes, for purposes of this Act, small housing agencies are defined as those with less than 250 public housing units. These are agencies that may submit streamlined agency plans when HUD issues regulations regarding the contents.

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1.  How and when does a local housing agency implement this board requirement?  When the board of commissioners is not located in a state where the board is required to be salaried or serve full-time for housing agencies, these agencies must allow a recipient of assistance on the board of commissioners. The regulations are silent on how housing agencies make this transition and come into compliance.

Because the statute does not address this item, HUD will need to issue regulations indicating when resident commissioners are required to begin serving their terms.

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1.  Because housing agencies are required to charge a minimum rent of up to $50, what is the minimum dollar amount for the minimum rent?  Presumably, a required minimum rent would be at least a $1, but this is not clear within the statute.

2.  In light of the prohibition against evicting families for non-payment of the minimum rent, is the required minimum rent enforceable?  Only to the extent that housing agencies can attempt to collect minimum rents from families because the statute states that tenants may not be evicted for nonpayment of the minimum rent.

3.  Explain financial hardship exemptions that waive the minimum rent for 90-days.  When requested by tenants, housing agencies must immediately grant exemptions from the minimum rent for financial hardships. These hardships include situations in which a family is awaiting eligibility for federal, state, or local assistance (including a resident alien entitled to welfare assistance), the family would be evicted for nonpayment of the minimum rent, the family income has decreased due to changed circumstances, a death in the family, and other circumstances determined by the agency (or HUD for families awaiting an eligibility determination).

Temporary financial hardship exemption. When a tenant’s hardship is determined to be short-term, a resident is not granted a 90-day exemption beginning on the date of the request for an exemption, so the agency can attempt to collect the rent, but the tenant cannot be evicted for nonpayment of the minimum rent.

Long-term financial hardships. After a tenant has made an initial request for a financial hardship exemption and it is later determined to be a long-term hardship, they must be given a retroactive exemption from the minimum for the 90-day period. When this occurs, the tenant is exempted from paying the minimum rent for that 90-day period and the rent cannot be collected by the housing agency. However, there is concern because the statute does not establish a limit on the time-period for financial hardship exemptions that are requested by tenants.

4.  How should agencies treat tenant account receivables that increase as a result of the financial hardship exemption and non-payment of the minimum rent by families?  It is unclear in the statute and hopefully this will be covered in regulations. However, it is clear that non-payment of minimum rent would adversely affect tenant account receivables and the PHAS assessment. The recommendations that local housing agencies should not be penalized under the PHAS management and financial condition assessments for factors that are beyond their control in light of non-payment of the minimum rent by families that request hardship waivers has been forwarded to HUD.

5.  How are flat rents set?  The statute states that housing agencies may set flat rents based on the rental value of units as determined by housing agencies. Additionally, this flat rent may exceed operating costs and housing agencies may set different flat rents for different units according to their bedroom size and for different buildings and developments.

6.  What is the difference between flat rents and ceiling rents?  Flat rents must be established by housing agencies for all units within every building and development because each year tenants may choose to pay an income-based or flat rent.

On the other hand, the ceiling rent is discretionary and may be set based on reasonable market value not less than 100 percent of operating costs for predominantly senior and disabled housing and not less than 75 percent of operating costs for family units. Additionally, housing agencies may continue using ceiling rents established based on the 95^th percentile of rents for comparable units and the fair market rent that are required by HUD regulations prior to the new legislation.

7.  Can a tenant switch rent payment methods several times during a year and cause housing agencies an administrative burden by conducting numerous income reviews for tenants that claim financial hardships?  No, a tenant may only switch payment methods one time during a year. After the switch is made from a flat to an income-based rent, the tenant must continue paying the income-based rent until the end of the annual lease period.

A local housing agency shall immediately allow tenants to switch payment methods for financial hardships, including:

• situations where family income has decreased because of changed circumstances, loss or reduction of employment, death in the family, reduction of income or loss of other assistance;

• an increase, because of changed circumstances in the family’s expenses for medical costs, child care, transportation, education, or similar items;

• and other situations determined by the housing agency.

8.  Impact on Operating Fund.  In light of the revised rent-setting and income-disallowance provisions, how will HUD make better projections of need for operating funding?  This is a central objective of the industry to address with HUD through negotiated rulemaking for the new operating fund formula that will be established. The following issues regarding loss of income due to mandatory income-disallowances, 2-year rental phase-in or savings account, the minimum rent financial hardship, and the annual tenant choice may make it challenging for HUD and housing agencies to project future rent revenues. These issues will also need to be discussed during negotiated rulemaking.

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1.  What are the new public housing lease provisions that will needed to be altered in light of the Act?  In light of the following new rent-setting and admissions and occupancy policies, local housing agencies (LHAs) will need to notify public housing residents of policy changes or alter their leases. It is the discretion of housing agencies to determine how to incorporate issues related to the following provisions within the lease and the process for notifying tenants.

• 8-hour community work requirement
• new income-review and rent-setting provisions
• 2-year rent phase-in or savings account income disallowances
• annual tenant choice for an income-based or flat rent
• rent switching provisions for financial hardships for the flat to income-based rent
• minimum rent and financial hardship exemption
• Income reviews no less than every 3 years for flat rent families
• Pet ownership policy
• No rent reduction for fraud or non-compliance with welfare
• LHA can reduce rents when benefits are reduced because of time-limit expiration, and circumstances beyond their control, but family has complied with welfare program requirements
• Safety and security issues for admissions and occupancy including registration of convicted sexual offenders

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1.  What are some of the incentives that may be offered to families to encourage income-mixing?  The Act does not specify any particular incentives. However, an agency might consider using its locally-determined preferences, rent structure options, self-sufficiency programs, or other tools and flexibility provided in the Act, to encourage income-mixing.

2.  Is it mandatory for every agency to have an income mix and deconcentration policy?  Yes, it is. Agencies must describe it in their agency plan.

3.  What problems are anticipated when mixing higher-income families into lower-income areas, without quotas? How does the Act impact issues about desegregation and deconcentration in public housing?  Please refer to section 513, income targeting. The effective date of these provisions is October 21, 1998.

Public housing agencies are required to serve families at or below 80% of the area median income, and forty percent (40%) of new families must have incomes at or below 30% of the area median. Therefore, the difference in income levels is not expected to create insurmountable difficulties in blending these families in a certain development or community. Creating racial or income quotas is not permitted. The applicant alone must make the choice whether to accept the incentive to occupy a unit in a development where most incomes are either above or below that of the family. Agencies may not coerce applicants or take adverse actions against them. Skipping over a family who chooses not to participate is not considered a negative action. In order to obtain a mix at a development, agencies may skip over families on the waiting list who do not wish to live at that site. The agency's plan for income targeting, income mixing and deconcentration should be constructed in a way that does not prevent or interfere with the use of site-based waiting lists.

4.  Where in the Act should an agency look for language on qualifying over-income families to live in senior high-rises?  Please refer to section 524. The provisions of this section are effective on October 21, 1998. Basically, any public housing agency that owns or manages less than 250 units may lease units on a month-to-month basis to families who are not low-income at the time they first occupy a public housing unit. The Act does not differentiate between family units and elderly units. The over-income family must move out of the unit with 30-days notice from the agency, should a public-housing eligible family apply for a unit, and there are none but the over-income family's unit available. The rent paid by the over-income family must at least cover the cost of operating the unit. All other terms and conditions of these tenancies are to be determined by the agency.

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1.  What is the pet ownership policy? According to the statutory language residents of public housing units are permitted to own one or more common household pets subject to reasonable requirements, but housing agencies may prohibit pets that are classified as dangerous and prohibit pets in certain kinds of buildings or developments. This provision is effective when HUD issues regulations.

2.  What is a common household pet? Do I have to allow snakes?  The statute does not define common household pets and we will have to wait and see whether HUD issues guidance that establishes definitions for common household pets. NAHRO is recommending that maximum local flexibility should be permitted in implementing the pet provision. Your agency should be permitted to propose a definition regarding common household pets that permits, for example, ownership of only dogs, cats, small birds, gerbils, hamsters, fish, small turtles, but snakes, pigs, ferrets, lizards, or iguanas are prohibited.

3.  What breeds are dangerous and should be prohibited?  Agencies should review local and state laws or ordinances regarding licensing or registration requirements.

4. What size prohibitions or restrictions for certain buildings or developments can agencies establish?  Agencies should review pet ownership polices of agencies with senior and disabled pet ownership policies and those for other federally assisted housing in an effort to establish restrictions and prohibitions within buildings according to the size of pets. Agencies may also consider state and local animal control and animal cruelty laws.

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The new Act requires each adult member of a public housing household, as part of their lease, to contribute eight hours per month of community service within the community in which that adult resides or to participate in an economic self-sufficiency program for eight hours per month. The Act includes several exemptions for various groups of the population.

1.  Who is exempt from the community work requirement? Do Section 8 residents have to comply with the community work requirement? Near elderly public housing residents who do not work and are retired, are they grandfathered in or must they comply with the 8-hour/month community work requirement?   This requirement is only for public housing residents who are not 62 years of age or older; blind or disabled; employed; a Section 8 recipient; a person engaged in a work program as part of the state’s welfare reform efforts; or anyone in a family receiving assistance in a state that has a welfare to work program and is complying with program requirements.

2.  Does a local housing agency have to evict a tenant for non-compliance with the work requirement?  When an agency conducts a determination 30-days before the end of the lease period to determine whether a tenant has fully complied with the total number of hours, an agency may not renew a tenant’s lease unless the agency enters into an agreement with the tenant before the expiration of the lease-period. Then the tenant is permitted to come into compliance with the requirement by participating in an economic self-sufficiency program or by contributing community service for as many additional hours needed to comply in the aggregate over the 12-month term of the lease.

3.  If a housing agency determines that a housing agency has failed to meet the work requirement (8 hours per month for each adult household member) and the lease is terminated, is the termination subject to the agency’s grievance procedures?  Yes, the housing agency is required to notify residents of their noncompliance and the termination is subject to the administrative grievance procedure in the agency plan.

4.  Must work performed by tenants be done in public housing or the larger community?   It is the discretion of local agencies to provide tenants with on-site work or at other locations not owned by the agency, however, employees of the housing agency must not be replaced or substituted by tenants performing community service-related work.

5.  How can a LHA monitor tenant compliance with the 8-hour community work requirement?  The Act states that housing agencys must describe in their annual plan how they will administer the community work requirement. Additionally, agencies may use a third-party to administer and coordinate the community service requirement directly through a resident organization or a contractor with experience in administering volunteer-based community service programs. HUD may establish qualifications for these organizations.

6.  Are LHAs required to pay participants a minimum wage or workman’s comp or are these waived? What are the implications of this "lease provision" in terms of liability issues, such as workman’s compensation? Even if the LHA does not directly use the services of residents, could there not still be some liability exposure to the LHA for injuries arising out of community service being provided at some other location since it could be argued that the LHA mandated it in the first place?  This depends on how your state law defines volunteer labor.  LHAs must get liability insurance to cover this requirement.

7.  Will residents be able to self-certify compliance with the community work requirement? Who will monitor it? Do residents have an appeals process?  LHAs will incorporate the community work requirement into their lease. Thirty days prior to the renewal of the lease, the LHA must determine if the resident has complied with the community work requirement. This requirement is subject to due process and must also be provided to residents as agencies enforce this provision. The manner in which the agencys administer this provision must be included in their agency plan.

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QHWRA of 1998 restricts the mandate for creating, maintaining, and expanding an FSS program to agencies that are required to comply with the FSS requirements prior to the enactment of the bill. Any incremental assistance awarded after the date of enactment will no longer trigger the FSS mandate. Agencies who currently have an FSS program can reduce their required statutory program size by the number of participants that complete their contract of participation/or graduate.

1.  An LHA applied for Mainstream certificates for FY ’98. The original NOFA stated that the award of these funds would increase the LHA’s mandatory FSS size. If the LHA has not been awarded these funds until after October 21, 1998, is the agency still required to increase its FSS program size?  Discussions with HUD imply that they use the date the agency received the allocation of new units when determining compliance with the FSS program size. In the case stated above, even though the funding is from FY 1998 but the agency received the allocation after 10/21/98, these units do not increase the FSS program size. It may be advisable for the agency to seek clarification on this issue either in regulations or when they receive the assistance.

2.  While the Act removes the mandatory requirement for FSS for new allocations, can agencies still increase their FSS program size?  Yes. LHAs can have voluntary FSS programs.

3.  Are agencies still required to have escrow accounts?  Yes, for mandatory programs all programs requirements are still intact including escrow accounts.

4.  Do mandatory FSS public housing residents have a choice of rent option?  It is unclear in the Act whether FSS participants have the choice of rent option. However, current FSS participants are bound to a contract of participation, which dictates that any increase in rent is subject to the escrow account. Therefore, it may be assumed that current FSS participants may not have a choice of rent option unless the agency rewrites their contract with this provision.

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1.  Can capital funds be mixed with other local funds to construct non-dwelling service facilities that will be used by both public housing and non-public housing, not low-income families?  Probably. Usually the housing agency needs to have some ownership or lease interest in the building, and it must be located where residents of the intended public housing audience realistically can access it.  Agencies can talk with staff at HUD's Office of Public Housing Investment on specific ideas.

2.  The CGP and CIAP law (section 14 of the 1937 act) is repealed. What governs the process under the capital fund as of October 1, 1999? In the interim? 

The new capital fund money will be allocated by a formula that will include all agencies, regardless of size. The new formula is being developed under the negotiated rulemaking process. This process requires an impartial professional negotiator to convene a group of interested parties, including HUD officials, industry representatives, practitioners, and others. The formula is supposed to be in effect in time to distribute fiscal year 2000 funds.

Agencies with 250 or more public units are permitted to follow the same basic eligible activities as they have been, plus the use of up to 10% of modernization funds for operating purposes. Other provisions that were included in former appropriations bills, are in effect for all agencies as of the enactment date of the bill ( October 21, 1998).   This includes mixed finance, and the repeal of one-for-one replacement.  Small agencies have full flexibility beginning with FY 1999 funds.

3.  For LHAs with over 250 units, must these agencies wait until October 1, 1999 to use up to 20% of their capital funds towards operating expenses?  Yes. The effective date of this provision is October 1, 1999. However, the bill does permit these agencies to use up to 10% of their capital funds in this manner effective on October 21, 1998 (the date of enactment).

4.  What relationship does the new law have to HOPE VI sites?  HOPE VI or revitalization grantees should expect to adhere to the changes in the same areas that affect other public housing units. This includes admissions, occupancy, targeting, rent options, safety and security, leases, financing, and total development costs (TDCs).

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1.  How will local housing agencies conduct the voluntary cost and market analysis  to determine whether it is more cost-effective to provide housing assistance as vouchers or hard units?

Section 533 of the statute states that agencies must consider th following:

• Cost analysis (also on a net present value basis) to determine whether it is less expensive to operate a voucher program than maintaining a public housing program for the remaining useful life of a development.
• Market value analysis before and after renovations and before and after conversion.
• Analysis of rental market conditions with respect to success of the specific public housing residents using vouchers
• Impact of conversion on neighborhood where public housing development is located.

2.  Are all housing agencies required to perform a conversion assessment?  For Mandatory conversion, yes.

3.  What is meant by the phrase "authority to convert public housing to vouchers?"  This means that an LHA, through HUD's approval of their conversion plan, has the authority to convert public housing dwelling units to section 8 vouchers. This can happen in one of three ways:

• The agency has chosen voluntarily to decrease its stock of public housing units, and will re-house the dislocated families through the use of section 8 vouchers. Refer to section 533, Voluntary Conversion. The LHA's conversion plan must describe the future use or disposition of the public housing units affected by the conversion.

• The agency has units which were identified under the mandatory conversion provision of the bill (see section 535). These units must be removed from inventory, and the families relocated to suitable other public housing, or may accept section 8 vouchers. Under this provision, funds that had been allocated to the development identified for mandatory conversion will be re-allocated to the agency's section 8 program, to help pay for the vouchers.

• The agency is conducting a revitalization project (like HOPE VI) and section 8 vouchers are used to relocated affected families.

4.  Our agency does not have a Section 8 program, but we must complete a cost assessment for the voluntary conversion provision. How do we do a comparison of the cost of vouchers to public housing units if we have no section 8 vouchers?  Use comparable costs from an agency near you, or an agency located in an economically and demographically similar area. You may seek assistance from a real estate firm, your local HUD office, or your Regional NAHRO chapter.

5.  Under the new housing law, can capital funds be used to pay rental subsidies to low-income renters where the LHA joins in a partnership venture to build mixed-income units? Can the capital or operating funds be used as an enhancement for tax credit equity?  Public housing capital funds can be used to subsidize the cost of developing a unit to make it affordable for public housing eligible families. When public housing program funds, operating or capital, are used in a unit, the unit must be kept affordable for public housing eligible families for 20 to 40 years. However, capital funds cannot be used as a rent subsidy at any time. Operating funds are used for that purpose. Capital funds can be used as credit enhancement (see mixed finance, section 539). Agencies may layer Section 8 subsidies over tax credits in order to make a tax credit unit affordable for a public housing eligible family.

6.  Can capital funds be used for new construction of public housing units which are then sold under a public housing homeownership program?  Yes.

7.  If LHAs are prohibited from increasing their inventory, how can an agency use capital funds for a homeownership program?  First, agencies may add units to their inventory if the units are part of a mixed finance project and meet some other requirements (see section 519(g), limitation on use of capital funds). Second, agencies may add units to their inventory for the purpose of a homeownership program. Units in this category can receive capital and operating fund allocations for up to five years, even though they are in excess of inventory limit. The bill language is not specific on what happens after five years, but presumably the agency would have to either sell the unit to a qualified family, or dispose of it some other way.

8.  Is competitive CIAP over?  Yes.

9.  In the former 5(h) home ownership program, there was a maximum resident payment of 35% of adjusted income. Does the new bill retain this limit?  No. The public housing home ownership provision, section 536 of the new Act, states only that the family must make a downpayment from their own resources at not less than 1% of the purchase price (gifts, grants and donations from family members or other sources are acceptable). The public housing agency itself may use capital funds to assist a public housing family to purchase a unit. The language in this section overall is very open, so that an LHA can devise a program that makes sense locally.

10.  Does approval of an LHA's annual plan containing a demolition or disposition application allow the agency to act without further submissions or HUD approvals?  No. There are certain elements of the agency plan which will need to be approved by a branch of HUD - in the case of demolition and disposition, this is the Special Applications Center. The agency would not be able to act upon its demolition or disposition activity until notified that the application is approved by the SAC. The agency's notification letter from HUD to the LHA about its agency plan would also inform them of this.

11.  What are the penalties for slow obligation or slow expenditure of capital funds?  Let's establish the obligation and expenditure time limits: for obligation, LHAs must obligate (have the funds under contract for use) not later than 24 months from the time the funds became available; or, the date on which the agency accumulates enough funds to undertake modernization, substantial rehabilitation, or new construction of units. (HUD has not yet made any comment on holding funds for modernization). LHAs may petition the Secretary for an extension if there are circumstances beyond their control that delay obligation. The LHA is not subject to an obligation schedule for funds in a given fiscal year that are less than 10% of the original amount allocated to the agency.

An LHA which has unobligated funds in excess of 10% of their total allocation for that year, and over 24 months, will not receive any capital assistance for any month when there is a violation. In other words, if an agency has unobligated funds in June, July and August of a fiscal year, the agency will not receive its pro rata share of funds for those three months (12-month award = $36,000; three months in violation, so $9,000 withheld). If the agency cures the violation in the same fiscal year, it will receive the funds from the months withheld.

LHAs have four years (48 months) to spend their capital funds from any given fiscal year, counted from the date on which the agency had the funds available for obligation. The Secretary can enforce this time limit with default remedies up to and including withdrawal of funding.

The Secretary has the right to recapture obligated funds from any agency for violation of the requirements for obligation or expenditure. This means that even if an agency has funds under contract, the Secretary can recapture those obligated funds. The Act does not state under what grievous circumstances this might occur.

12.  In reference to the conversion assessment for tenant-based versus project-based, will the LHA be required to submit a demolition or disposition plan if the assessment shows that vouchers are more economical?  The purpose of the mandatory conversion assessment is to remove from inventory built units of public housing ("hard units") which cannot be reasonably and economically rehabilitated for housing use. Voluntary conversion may be conducted at the option of the LHA as an asset management tool. Tenant-based assistance does not involve built units, and is therefore not addressed in this requirement. Likewise, project-based section 8 units are not considered to be part of the public housing program, and so are not addressed by the conversion requirement. In the case of voluntary assessments which show that vouchers may be more economical than maintaining the units, these units may be identified under the criteria for mandatory assessment (because of the expense of maintaining or rehabilitating the units). If the mandatory assessment shows units need to be de-commissioned, or if the LHA voluntarily wishes to de-commission units, then the appropriate application for demolition or disposition must be included in the agency's annual plan or update.

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1.  The Act states that ongoing programs will have preference in PHDEP. Does this mean that the funding can continue despite a significant reduction in the crime rate?

Yes, funding can continue for up to five years, assuming the application is successful. Specifically, the Act states, in section 586(b)(2), that the Secretary can't provide funds to applicants unless the agency will use the grant to expand or continue activities, in which case the Secretary shall provide a preference to that applicant. Exceptions include situations where the Secretary finds that the programs are not worthy of continuation, and the Secretary must not use this preference to preclude other meritorious applications that address urgent or serious crime needs. The terms "urgent," "serious," and "worthy" are yet to be defined. In fact, the Secretary is directed by Congress to issue criteria for a class of agencies with "urgent and serious crime problems" and to consider public comments on the criteria before finalizing them. The Secretary may create a set-aside of a certain dollar amount within the PHDEP allocation to fund applications in this category.

A proposed rule for a PHDEP formula allocation was published in the Federal Register on February 18, 1999 (Vol.64, #32 pp 8210-8212).

2.  Under five-year funding for PHDEP, will extensions be permitted?  First, to clarify, there is not five-year funding for PHDEP. There is a one year renewable grant, which does not guarantee any given agency will receive funding for every year, nor does it guarantee that the amount of funding will be the same year to year. There is nothing in the Act to indicate that an agency would or would not be receiving funding beyond five years. NAHRO will be discussing this question with HUD.

3.  Is PHDEP limited to public housing under the new bill, or can it be spent on Section 8 clients?  Section 8 clients, assuming tenant-based Section 8, are recipients of services of public housing agencies, may participate in services offered by the agency's PHDEP program. Program-based Section 8 would be served through the owner's application as an "other" federally assisted housing applicant.  Those applicants are not eligible for the one-year renewable grant.

4.  If an agency is limited by the grant as to how many police officers may be hired for its force, can the agency use capital funds to hire additional officers?  No. The agency should use operating funds for this purpose. Recall that the PHDEP grant will only pay for services such as police officers over the baseline level of services an agency should be receiving from its local jurisdiction. Also, agencies may use 10% or 20% (for agencies with less than 250 units) of their capital funds for operating expenses, which must be reflected in the agency's budget and HUD reports.

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1.  Now that the law has changed with regard to eligibility for drug and alcohol abuse, how will the LHA be able to make a determination, since we are prohibited from inquiring about a person's disability status?   LHAs are not prohibited from asking about disabilities, but LHAs are responsible for asking the same questions of every applicant.  Discrimination occurs when an agency asks one applicant and not the next. Alcoholism or drug dependency is not a valid "disability" under the Act.  An agency may determine whether or not an applicant or tenant is abusing alcohol or drugs (section 576(b)) through knowledge of that applicant or tenant, who may show a pattern of such abuse; or may consider whether the applicant or tenant has successfully completed a treatment program, or is participating in such a program. It is up to the agency to make these determinations the best way it can. Developing relationships with local treatment facilities, for example, would make this easier.

2.  If an applicant has only just completed a drug or alcohol program, is the person immediately eligible for housing? Or can the agency require a minimum grace period to ensure the person is drug- or alcohol-free?  The Act does not answer this question directly; however, an agency with this problem may wish to obtain its counsel's interpretation of "has been rehabilitated successfully" (section 576 (b)(2)A-C). The Act does indicate that it is incumbent on the agency to make a determination as to whether or not an applicant is free of abuse of alcohol or drugs.

3.  Can an LHA ask an applicant, who claims to be disabled, whether the disability is alcohol or drug related?  Not unless every applicant is asked the same set of questions about disabilities, which may still pose a discrimination risk. It would be safer for the agency to consult its counsel, or to use other sources to answer the question. The Act does not accept drug or alcohol abuse as a disability.

4.  How can LHAs convince the local judicial system to work with the housing authorities to uphold the lease? Housing court judges in our area allow tenants to break leases despite the new provisions we've put in them.   LHAs may consider involving local resident advocate groups and judicial system representatives in the development of the agency's lease (for example, consultations among LHA counsel and the counsel of other groups, or asking a housing court attorney to review the lease.) The LHA's board of commissioners should perform community outreach to businesses, organizations, and local government to inform them of the LHA's efforts to have better-run, safer, cleaner communities, which is a benefit to the entire community. Local elected officials can be entreated to support the LHA's efforts, too. Involvement of the church community can also be helpful. Most of all, the LHA needs to advertise to its prospective clients and tenants that the agency will accept only a certain caliber of behavior - let them know ahead of time that the lease will no longer be so easy to break. The basic idea is to educate, inform, and partner with all stakeholders. Because we have new legislation and must re-write all leases, with more stringent screening, admissions and evictions policies, it is a good time to launch such a campaign.

5.  Is asking questions about drug involvement at random permitted? Is there any provision for drug testing?  Random questioning is prohibited, not by the bill but by Civil Rights laws. Drug testing is not included in the Act.

6.  Will there be a rule on continued occupancy eligibility related to drug and alcohol abusers?  Persons already living in public housing at the effective date of the provisions under Subtitle F, are not subject to the admissions provisions because they are already residents. The statute is not retroactive (see section 575, optional criminal background checks, effective October 21, 1998 without further guidance from HUD; section 576, Screening of Applicants; and section 578, Ineligibility of Dangerous Sex Offenders. Sections 576 and 578 are both effective October 1, 1999). All tenants are subject to section 577, which provides for eviction due to illegal use of controlled substances or alcohol, effective October 1, 1999. This includes tenants already housed as of this date.

7.  For applicants who are convicted felons, which rule applies, the 3-year rule under H.R. 4194, or the possible ten-year rule under One-Strike?  According to section 576 of the new legislation, LHAs are to screen applicants for prior evictions from federally-assisted housing. Those whose record carries such an eviction are ineligible for federally-assisted housing for a 3-year period, beginning on the date of the eviction. There is no provision for ineligibility for convicted felons in H.R. 4194, and this legislation does not alter the One-Strike legislation.

8.  Should agencies treat local police reports with the same level of confidentiality as information received from the National Crime Information Center or other sources?  Yes. LHAs are open to civil action by applicants and tenants whose information is misused, abused, made public, or otherwise mis-handled. The legislation is clear in section 575 (c)(5), (6) and (7) that LHA personnel are required to keep confidential all information received under any provision in subsection F; that penalties apply for not following records management procedures; and that civil action may be pursued by applicants and tenants adversely affected by an LHA's actions.

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Section 8 Merger: The Act merges the two Section 8 tenant-based rental assistance programs, Certificates and Vouchers and adopts the voucher model for the new program with some changes. Families are allowed to pay more than 30% of their income for rent, except for new families and families that move, these families cannot pay more than 40% of the income for rent. The Act targets 75% of applicants to households with incomes up to 30% of income for rent, and the balance to households with incomes, up to 80% of area median income.

1.  When will the merger take place, at time of recertification or at a move? Can existing certificate and voucher tenants voluntarily convert to the new voucher program? Should an agency start issuing the new voucher when a unit of assistance turns over? What impacts will this have on certificate families where their rents exceed 120% of FMR? Should HUD freeze the rents or ask the family to pay more assistance?

HUD plans on issuing interim regulations on the merger of the Section 8 program. This is one of their priorities and HUD expects to get the interim rule out by June 1999. HUD also plans on holding industry meetings to discuss how to make some of the changes including when to switch existing Section 8 families over to the new program. HUD indicates that the first action would be to develop consolidated ACC by converting the certificate funding system to the voucher system before they could allow LHAs to convert certificates over to vouchers. Currently LHAs can offer a certificate family a voucher if the LHA has one available. Once the funding system is an all voucher system, HUD expects LHAs to issue all moves and new families an old voucher until they issue final regulations on the new voucher program. The next transition maybe old vouchers to new vouchers and then in-place vouchers, who are using the shopper’s incentive vouchers to new vouchers (this group could see a significant rent increase due to the elimination of the shopping incentive.)

2.  The Act calls for a 40% limitation of rent at the initial receipt of assistance (the first time the participant receives the new assistance). Clarify what the 40% of income applies to, is it the total tenant payment (TTP)?  The 40% cap on the tenant rent is for all new families coming into the program. Initial discussions with HUD indicate that the 40% cap also applies to families that move; however, this has yet to be determined. The 40% cap is used when determining the total tenant payment or TTP.

3.  Does the targeting apply to only Section 8 applicants and not the existing Section 8 profile?  The targeting only applies to new admissions and not to the existing Section 8 families currently receiving assistance. The targeting is effective the date of enactment (October 21, 1998.)  Per discussions with HUD, they expect to issue regulations on targeting in February 1999. The regulations for the tenant-based program should be fairly straight forward and may focus mostly on how to use targeting with public housing (fungibility).

4.  How will the new merged program affect SEMAP? Do we still have to comply with SEMAP or wait for changes due to the new Act?

There will be some modifications to SEMAP due to the changes in the bill; however, HUD’s priority is to issue regulations to implement the provisions in the bill before it modifies SEMAP. This first year of SEMAP is a trial run and agencies only have to self-certify. The only mechanism HUD currently has to check information is Multifamily Tenant Characteristics System (MTCS), which they are still refining. The audit guide has not been finalized and it is uncertain when it will be published. Discussions with HUD indicate that they expect to issue another proposed rule on the modified SEMAP sometime this summer. In the meantime, agencies should continue to use SEMAP as best they can.

5.  Will HUD modify the MTCS system to reflect all the various changes in the Act?  HUD will modify SEMAP to reflect any changes due to the bill and therefore will also have to change MTCS wherever needed. They may also want to make modifications to reflect the changes in rents, admissions and occupancy.

6.  Are agencies still required to do rent reasonableness?  Yes. Agencies are required by the new Act to do rent reasonableness on all assisted units.

7.  Our agency received an allocation last year for mainstream vouchers, will these units be converted to "new" vouchers or will they stay certificates? What will happen to Section 8 units obligated to homeless and disabled persons under past Section 8 set-asides?  All certificates will be converted to the new voucher eventually. This does not mean that the program goals and requirements in the specialized programs using Section 8 tenant-based assistance will change. There will have to be some modification to rents and tenant obligation with programs that utilize certificates.

8.  Can agencies still do over-FMR tenancy?    Agencies can still do over-FMR tenancy with certificates until HUD issues regulations. It may be wise to consider how this will impact the tenant and the owner when conversion occurs and possibly the LHA’s budget.

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Section 8:  General

9.  HQS Inspection – The Act requires that agencies with 1250 or less units to inspect all units within fifteen days from the date of request by the owner or the family, and for agencies with more than 1250 units to inspect within a reasonable time. What if the tenant or owner fails to cooperate with the timeframe for the inspection and results in the agency not being able to meet the 15-day timeframe? Will this agency be penalized?  HUD is expected to include an interim rule by June, 1999 that will include the timeframe for HQS in Section 8. It is unclear how HUD will address this issue in the interim rule but it may be more specific when they revise SEMAP.

10.   Portability – An LHA, prior to the Act, must require one-year lease-up in the jurisdiction before allowing the family to exercise portability. The new Act states that an LHA may require the tenant to lease-up in the jurisdiction before exercising portability. When does this go into effect?   This provision is effective October 1, 1999 but it is probable that HUD will issue regulations on this sooner.

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Section 8 Renewals:  The Act establishes a new methodology for renewing expiring Section 8 contracts for FY 1999 and then requires HUD to establish through negotiated rulemaking a method for FY 2000 and beyond.

11.  What is the baseline that HUD is using to establish renewals for FY 1999? And after (FY2000)?   HUD is using as the baseline the higher of the number of units leased that the agency claimed administrative fee for as of October 1, 1997 or the number of units under ACC. The baseline adds the 52,000 additional units that were returned to agencies due to clarification of over-leasing and any incremental assistance received after Oct.1, 1997. An inflationary factor that is based on local or regional factors is then applied to the base. HUD is required by the new Act to establish a policy for renewals for the fiscal year 2000 and after through negotiated rulemaking. See PIH 98-65 (HA) issued 12/30/98 "Renewal of Expiring Contracts in the Section 8 Tenant-Based Program During Fiscal Year 1999" and the correction to this notice PIH 99-1 (HA) issued 1/12/99 "Correction to Notice PIH 98-65.

12. How will HUD factor in the units frozen due to the 90-day delay for reissuing Section 8 certificates/vouchers when calculating the renewals for FY 1999?  Since HUD is considering the "higher of the number under ACC or the number of units leased as of October 1, 1997" it is presumed that they are including units frozen due to the 90-day delay after October 1, 1997. However, it is unclear whether HUD did include frozen units into the calculation.

13. Will HUD take into consideration those certificates and vouchers which were issued but leased in another community under portability or absorbed by that community in determining renewals?  HUD will count all units that the agency reports are under lease when claiming the administrative fees and those included under the ACC. This will cover units leased under portability in another jurisdiction.

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Section 8 Homeownership:  The provision in the new Act allows agencies to determine if they wish to permit Section 8 participants to use their Section 8 rental assistance for homeownership.

14. When is the Homeownership provision effective?   Currently LHAs are allowed to use the lease-purchase provision of the Section 8 Homeownership program. The changes to the Section 8 Homeownership programs due to the Act are effective on the date of enactment, October 21, 1998. HUD has written regulations on the Section 8 Homeownership provisions and it is in clearance and expected to be published in February 1999.

15.  If the LHA uses a Section 8 unit for Homeownership, will HUD replace the funding for the lost unit due to Homeownership?  No. Once the LHA decides to allow the family to use its Section 8 assistance to pay mortgage payments, this is counted as one of the agency’s units and calculated into the budget. HUD can decide whether to limit the term of the assistance for homeownership.

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