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Public Housing

February 1, 2008
By Linda Couch, Deputy Director, National Low Income Housing Coalition

The U.S. Department of Housing and Urban Development’s (HUD) public housing program is administered by the Office of Public and Indian Housing. Public housing was created in the 1937 Housing Act, one of the landmark legislative victories of the New Deal. Public housing is owned and operated by public housing agencies (PHAs) that are chartered by the states in which they operate and are governed by locally appointed or elected Boards of Commissioners. There are nearly 14,000 public housing developments operated by 3,050 PHAs containing almost 1.2 million units.

Public housing was established by the 1937 Housing Act; a moratorium on public housing was declared in 1974. At that point, housing policy shifted to subsidize the private sector’s involvement in affordable housing through the Section 8 program. Federal funds specifically for adding to the public housing stock were last appropriated in 1994, but little public housing has been built since the early 1980s. Federal law capped the number of public housing units at the number each PHA operated on October 1, 1999. In 1998, the Quality Housing and Work Responsibility Act reformed various aspects of public housing, including public housing’s two main funding streams, the operating and capital subsidies. Today, units are being lost through PHA demolition and disposition of units, the HOPE VI program that removes more units than it replaces, the mandatory and voluntary conversion of public housing to voucher assistance and the cumulative impact of decades of underfunding on once-viable public housing units.

Public housing is home to more than 2 million people. About 41% are families with children, 31% are elderly households and 32% are households headed by people with disabilities. The demand for public housing far exceeds the supply. In many large cities, waiting list times can be up 10 years or longer.

Access to public housing is means-tested. All public housing households must be low income (income less than 80% of area median) and at least 40% of new admissions in any year must be extremely low income (income less than 30% of area median). PHAs can also establish local preferences for certain populations, such as the elderly, people with disabilities, veterans, full-time workers, domestic violence victims and people who are homeless or who are at risk of becoming homeless, etc.

Like other federal housing assistance programs, residents of public housing pay the highest of: 1) 30% of their monthly adjusted income; 2) 10% of their monthly gross income; 3) their welfare shelter allowance; or 4) a PHA-established minimum rent of up to $50.

Most PHAs are required to complete annual and five-year plans detailing many aspects of their housing programs, who is assisted and how the programs will be administered. These plans are submitted to HUD. The five-year plan must include the PHA’s mission and a statement of goals and objectives to meet its mission. The annual plans must be developed in consultation with a Resident Advisory Board (RAB) (see Resident Participation in Subsidized Housing chapter) and be consistent with the applicable Consolidated Plan. Notice of plan development and a public hearing are required before a plan can be submitted to HUD.

PHAs receive two annual grants from HUD – operating and capital subsidies. The operating subsidy theoretically would make up the balance between what residents pay in rent and what it actually costs to operate the public housing. Major operating costs include building maintenance, utilities, services for residents and PHA employee salaries and benefits. The FY07 operating subsidy appropriation was $3.8 billion, about 84% of what it actually costs to operate public housing. The fiscal year 2006 (FY06) appropriated level only funds PHAs at about 84% of their actual operating needs. Such continual and historic underfunding will continue to undermine the viability of these homes.

The operating subsidy is in the midst of a major change. As a result of the 1998 Quality Housing and Work Responsibility Act, HUD published a final new operating subsidy formula in September 2005. (The transition of the operating subsidy to an asset management tool is discussed in a separate chapter on asset management). Asset management will require each public housing development to operate and survive as a stand-alone property, as opposed to all public housing units being administered on a PHA-wide basis.

The new operating formula will base an agency’s operating subsidy on a property-by-property basis, rather than the current PHA-by-PHA basis. If, compared to the current formula, a PHA gains operating subsidy with the new formula, the addition will be phased in over two years. Conversely, if a PHA loses subsidy under the new formula compared to the old, then the loss can only be tempered (and potentially arrested) by that PHA’s conversion to asset-based management. After a gradual implementation of losses, all will be imposed by October 1, 2011.

The capital fund is also appropriated annually by Congress and is distributed by HUD to PHAs based on a formula. The capital fund can be used for modernization, including developing, rehabilitating and demolishing units, replacement housing and management improvements. The capital fund was funded at $2.4 billion in FY07, level with FY06 funding, and the president only requested $2 billion for FY08. There is a more than $20 billion backlog for capital fund repairs in public housing. The Senate’s FY08 HUD funding bill would direct HUD to do a capital needs assessment and to determine a projected annual cost to adequately maintain the public housing portfolio. The last capital needs assessment was done in 2000.

Since FY01, funding for public housing has decreased by more than $1 billion. This includes cuts to operating, capital and HOPE VI funds and the elimination of the drug elimination program.

In the 110th Congress, several provisions of the House’s Section 8 Voucher Reform Act would significantly impact public housing. For public housing, the Section 8 Voucher Reform Act proposes the following changes:

Rent Simplification. Calculating rents can be a complicated process, for both PHA staff and residents. There is general agreement that the rent-setting process can be simplified. While some would like the entire system to be reformed, the overwhelming policy thrust has been to maintain the historic policy of keeping rents tied to incomes and retaining the “Brooke Amendment,” which caps rents of public and assisted housing residents at generally 30 percent of adjusted gross income. That said, some simplifications are included in the House’s Section 8 Voucher Reform Act. These provisions would apply to voucher holders, public housing residents and to project-based Section 8 residents.

Among these rent simplification proposals, for example, are that the recertification of incomes would only be required at least every three years (instead of the current annual recertification) for elderly and disabled families on fixed incomes (at least 90 percent of their incomes from Social Security, Supplemental Security Income (SSI) or some similar source). And, interim income recertifications would be required, at the tenant’s request, for annual income decreases of $1,500 or more. Interim income recertifications for earnings increases would not be required. The bill would also increase the standard deduction for elderly and disabled households to $725 (from the current $400) while narrowing medical individual deductions to those expenses exceeding 10 percent of income (from the current 3 percent of income). The bill would also allow 10 percent of all employment earnings to be deducted from income.

Moving to Work. Moving to Work (MTW) is a PHA demonstration program that provides flexibility from most statutory and regulatory rules. Its provisions impact everything a participating PHA does, including administration of its voucher program. Under MTW, a PHA may combine its public housing operating, capital and voucher funds to assist substantially the same total number of families as otherwise would have been served. Current MTW sites can serve higher income people, impose time limits and work requirements, and change their rent policies (for example, rents may no longer be income based but must merely be “reasonable”). Because many of the original 30 MTW demonstration sites are still running their initial demonstrations, adequate evaluation of the MTW has not occurred, and, critically, because the potential for harm to residents and the long-term health of the PHAs are at stake, NLIHC believes the MTW program is not ready for expansion or permanent authorization. Various legislative vehicles seek to maintain and expand the current MTW program. (See the chapter on the Moving to Work program.)

Advocacy for Public Housing in 2008
The biggest challenge facing public housing in 2008 will be sufficient funding to operate and maintain existing public housing units. Funding for both functions in recent years has lagged well behind need. Today’s public housing authorities are operating on only 85.4% of what HUD knows they need to operate and their more than $20 billion backlog of capital needs is widely known. At least $5 billion is needed for public housing operating subsidies in FY09 and at least $3.5 billion is needed to begin to adequately address public housing capital needs in FY09.

Legislation to reauthorize the HOPE VI program is likely to receive additional attention in 2008. The House is expected to take up its HOPE VI reauthorization bill in January 2008. The bill, introduced by House Financial Services Subcommittee on Housing and Community Opportunity Chair Maxine Waters (D-CA), passed out of committee on September 26, 2007.

The Senate bill, S. 829, introduced on March 6, 2007 by Senator Barbara Mikulski (D-MD) received a hearing in the Senate Banking, Housing and Urban Affairs Committee on June 20, 2007 but it remains uncertain when the banking committee will mark up the bill.

The bills are very different from one another. The House bill requires one-for-one replacement of units, a right to return by former residents and many other protections and improvements long sought by advocates. The Senate bill does not contain any of these improvements and reverses some of the gains won Representative Mel Watt (D-NC) when the program was last reauthorized in 2003. As the bills move forward, advocates will work to ensure that the provisions in the House bill prevail.

For More Information
National Low Income Housing Coalition • 202-662-1530 • www.nlihc.org

National Housing Law Project • 510-251-9400 • www.nhlp.org