[House Report 110-521]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
2nd Session 110-521
======================================================================
PUBLIC HOUSING ASSET MANAGEMENT IMPROVEMENT ACT OF 2007
_______
January 29, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 3521]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 3521) to improve the Operating Fund for public
housing of the Department of Housing and Urban Development,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Hearings......................................................... 5
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 6
Performance Goals and Objectives................................. 6
New Budget Authority, Entitlement Authority, and Tax Expenditures 6
Committee Cost Estimate.......................................... 7
Congressional Budget Office Estimate............................. 7
Federal Mandates Statement....................................... 8
Advisory Committee Statement..................................... 8
Constitutional Authority Statement............................... 8
Applicability to Legislative Branch.............................. 8
Earmark Identification........................................... 8
Section-by-Section Analysis of the Legislation................... 8
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Public Housing Asset Management
Improvement Act of 2007''.
SEC. 2. REVISIONS TO ASSET MANAGEMENT RULES AND RELATED FEES.
(a) Management and Related Fees.--The Secretary shall not impose
any restriction or limitation on the amount of management and related
fees with respect to a public housing project if the fee is determined
to be reasonable by the public housing agency, unless such restriction
or limitation imposed by the Secretary on such fees--
(1) is determined pursuant to a negotiated rulemaking which
is convened by the Secretary no earlier than April 1, 2009, and
in accordance with subchapter III of chapter 5 of title 5,
United States Code, with representatives from interested
parties; and
(2) is effective only on or after January 1, 2011.
(b) Increase of Threshold for Exemption From Asset Management
Requirements.--Any public housing agency that owns or operates fewer
than 500 public housing units under title I of the United States
Housing Act of 1937 may elect to be exempt from any asset management
requirement imposed by the Secretary.
SEC. 3. PROHIBITION ON RESTRICTION OF FUNGIBILITY OF CAPITAL FUND
AMOUNTS.
The Secretary of Housing and Urban Development shall not impose any
requirement, regulation, or guideline relating to asset management that
restricts or limits in any way the use by public housing agencies of
amounts for Capital Fund assistance under section 9(d) of such Act,
pursuant to paragraph (1) or (2) of section 9(g) of the United States
Housing Act of 1937 (42 U.S.C. 1437g(g)), for costs of any central
office of a public housing agency.
SEC. 4. TENANT PARTICIPATION.
(a) Rule of Construction.--Neither the requirements of this Act,
nor any other requirement, regulation, guideline, or other policy or
action of the Department of Housing and Urban Development relating to
public housing asset management may be construed to repeal or waive any
provision of part 964 of title 24 of the Code of Federal Regulations,
regarding tenant participation and tenant opportunities in public
housing. The Secretary of Housing and Urban Development shall ensure
that public housing agencies encourage the reasonable efforts of
resident tenant organizations to represent their members or the
reasonable efforts of tenants to organize.
(b) Guidance.--Guidance issued by the Secretary of Housing and
Urban Development shall encourage participation by residents in the
implementation of asset management and the development of local
policies for such purposes.
Purpose and Summary
The purpose of H.R. 3521, the ``Public Housing Asset
Management Improvement Act of 2007,'' is to ease the regulatory
burden on public housing agencies of complying with the
Department of Housing and Urban Development (HUD) regulations
requiring certain public housing agencies to convert to asset
management. The bill includes the following regulatory relief
reforms: (1) ensure that the management and related fees
established by HUD are reasonable and that such fees become
effective on or after January 1, 2011, the date by which public
housing authorities are required under the Public Housing
Operating Fund Final Rule to demonstrate conversion to asset
management; (2) restate provisions of current law that permit
public housing authorities to use a portion of their capital
fund grant for operating expenses; (3) increase the number of
public housing authorities that are exempt from mandatory
conversion to asset management; and (4) encourage the
participation of public housing residents in the implementation
of asset management.
Background and Need for Legislation
The nation's public housing system is in the process of a
major administrative transformation as public housing agencies
(PHAs) move from managing their portfolios on an agency-wide
basis to a system in which they administer each development on
a project-level basis. It is the largest change to the way
public housing is operated in more than 30 years. Known as
``asset management,'' this system of project-level
administration is based on the Federal Housing Administration
(FHA) multi-family model and is required for public housing by
the Public Housing Operating Fund Final Rule. The Final Rule
was developed via negotiated rulemaking between HUD,
representatives from key industry groups, and several PHAs. The
Final Rule, which became effective on November 18, 2005,
required PHAs that administer more than 250 units of public
housing to restructure their organizations, retrain their
staffs, and reorganize their physical assets as part of the
conversion.
While there is general consensus that asset management is
desirable, housing agency groups have been critical of several
components of the negotiated rule, specifically with respect to
how PHAs' management fees are set and how much flexibility they
will have to retain some centralized operations. The Final Rule
states that PHAs must be in full compliance with asset
management by 2011.
It is important to note that two of the provisions in H.R.
3521 were included as part of H.R. 2764, the Consolidated
Appropriations Act of 2008 (Public Law 110-161) which was
signed into law on December 26, 2007. Specifically, the
Consolidated Appropriations Act included the provision
exempting small PHAs of 400 or less from asset management and
the provision to reinstate fungibility of capital funds as
operating assistance.
Finally, the Congressional Budget Office estimates that
H.R. 3521 would have no significant impact on the federal
budget. Enacting the bill would not affect direct spending or
revenues.
ESTABLISHMENT OF REASONABLE MANAGEMENT FEES AND FEE SCHEDULE
IMPLEMENTATION DATE
While the Final Rule addressed the operating fund formula,
it did not establish specific criteria for fees nor require
that fees be made effective prior to January 1, 2011. Instead,
the Final Rule stated that the fees must be reasonable.
Subsequent to the Final Rule, HUD issued Interim Guidance on
September 7, 2006 that outlined three types of fees: property
management fees, asset management fees and bookkeeping fees.
This guidance effectively required PHAs to begin implementing
asset management prior to implementation of the Final Rule. In
the absence of data on the actual costs of managing public
housing, subsequent HUD Guidance stated that the fees would be
based on the FHA multi-family inventory and that PHAs must be
in compliance with those fees by the second year of project-
based budgeting and project-based accounting (e.g. between July
1, 2008 and April 1, 2009).
PHAs have questioned both the methodology and adequacy of
the fees and contend that using FHA properties as a model is
not an appropriate comparison because of significant statutory
and regulatory differences in the way public housing and
privately-owned and managed housing operate. In addition, PHAs
contend that significant shortfalls in the annual
appropriations for the public housing operating and capital
funds make conversion to asset management even more
challenging. Given these challenges, PHAs contend that some
regulatory relief is needed in order for agencies to
successfully convert to asset management by 2011. As such, PHAs
have requested that the method of establishing a reasonable
management fee be developed through a negotiated rulemaking.
The Final Rule already requires HUD to convene a meeting of
stakeholders in 2009 in accordance with the Federal Advisory
Committee Act to evaluate subsidy levels based on actual cost
data. PHAs contend that expanding the scope of the meeting in
2009 to include management fees would provide time for PHAs to
track their management costs under the new system and gather
data, which in turn could be used by the negotiated rulemaking
committee to establish fees. PHAs also contend that the fees
should not be established at the beginning of the process of
conversion to as- set management, but should be developed with
deliberation based on actual cost data over a period of time.
They have therefore requested that the effective date of the
fee schedule coincide with the effective date by which PHAs are
required to demonstrate full compliance with asset management.
Under the bill, HUD and PHAs would commence negotiated
rule-making with interested stakeholders on or after April 1,
2009 to establish reasonable management and related fees. This
provision is consistent with information provided to the
Committee by HUD in which the Department stated that a formal
rule-making process to specifically focus on the matter of fees
under asset management be initiated to allow for broad public
input. In addition, the bill provides that the management and
related fees shall become effective on or after January 1,
2011, consistent with the dates set forth in the Final Rule.
INCREASE OF ASSET MANAGEMENT EXEMPTION THRESHOLD TO PROVIDE REGULATORY
RELIEF FOR MEDIUM-SIZED PUBLIC HOUSING AGENCIES THAT MANAGE BETWEEN 250
AND 500 UNITS
The Public Housing Operating Fund Final Rule exempts
housing authorities with fewer than 250 public housing units
from an asset management model. PHAs contend that housing
authorities with fewer than 500 units of public housing should
have local discretion in deciding whether to convert to asset
management. According to public housing authorities, these
small agencies generally have few properties, few staff and few
financial resources. Furthermore, these agencies generally
operate in rural areas, small towns and suburbs, so they are
easily managed as a single entity geographically.
Under the bill, agencies that manage 500 or fewer units of
public housing would not be subject to asset management.
Increasing the exemption threshold from 250 to 500 would affect
441 agencies or about 14 percent of all housing authorities. As
a result, approximately 2,292 PHAs out of 3,087 PHAs would be
exempt. In terms of the number of public housing units that
would remain subject to asset management under this provision,
more than 751,000 units (or 68 percent of all public housing
units) would still be required to transition to asset
management.
The Committee notes that current HUD guidance requires
agencies that have more than one asset management project in
their portfolio to comply with asset management regardless of
whether an agency falls within the exemption threshold. Under
the bill, the exemption shall apply to all PHAs that administer
fewer than 500 units of public housing, regardless of the
number of asset management projects a PHA has designated with
respect to its public housing inventory.
FUNGIBILITY OF CAPITAL FUNDS PROVIDED BY THE QUALITY HOUSING AND WORK
RESPONSIBILITY ACT
The Quality Housing and Work Responsibility Act of 1998
(QHWRA) allows PHAs to transfer up to 20 percent of their
capital fund grant to fund operations with no further
restrictions [See Section 9(g) of the U.S. Housing Act of 1937,
as amended]. HUD has issued Guidance that allows up to 20
percent of the capital fund to be transferred for direct
project expenses, but prohibits the use of these funds on
central office overhead. In addition, the Guidance does not
allow more than 10 percent of an agency's capital funds for
central office costs. PHAs contend that the costs of transition
to asset management will be significant. Furthermore, housing
authorities are in their fifth consecutive year of underfunding
of the Operating Fund and contend that the flexibility provided
by QHWRA is crucial to the successful conversion to asset
management and to the successful operation of public housing. A
HUD-commissioned study by the Harvard Graduate School of Design
concluded that the federal government has been under-funding
the operating costs of PHAs.
The bill would prohibit HUD from preventing PHAs from
transitioning up to 20 percent of their capital fund grant to
fund operations as provided for under QHWRA.
TENANT PARTICIPATION
On March 1, 2007, HUD issued a Notice [FR-5128-N-01]
providing for an expedited waiver process for HUD regulations
as they transition to asset management. Included in the Notice
are several examples of HUD regulations for which HUD would
consider expedited requests. Among those regulations is a
provision providing for tenant participation that is set forth
at 24 CFR 964 (Tenant Participation). While the authority to
seek waivers from certain HUD regulations, including tenant
participation, is not new, tenant advocates contend that
tenants should be involved in the discussions on asset
management and that the limited rights tenants have should not
be further eroded.
Under the bill, HUD would be required to ensure that PHAs
involve tenants in the local decisions that affect their
housing.
Hearings
The Committee did not hold any hearings on H.R. 3521 in the
110th Congress.
Committee Consideration
The Committee on Financial Services met in open session on
September 25, 2007, and ordered H.R. 3521, Public Housing Asset
Management Improvement Act of 2007, as amended, reported by a
voice vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Frank to report the bill,
as amended, to the House with a favorable recommendation was
agreed to by a voice vote.
During the consideration of the bill, the following
amendments were considered:
An amendment by Mr. Sires, No. 1, a manager's amendment
making various technical and substantive changes, was agreed to
by a voice vote.
An amendment by Ms. Velazquez, No. 2, striking prevention
of certain PHAs from participation in negotiations, was agreed
to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
The goal of H.R. 3521 is to ease the regulatory burden on
public housing agencies of complying with the Department of
Housing and Urban Development (HUD) regulations requiring
certain public housing agencies to convert to asset management
through the inclusion of important regulatory relief reforms.
These reforms would: (1) ensure that the management and related
fees established by HUD are reasonable and that such fees
become effective on or after January 1, 2011, the date by which
public housing authorities are required under the Public
Housing Operating Fund Final Rule to demonstrate conversion to
asset management; (2) restate provisions of current law that
permit public housing authorities to use a portion of their
capital fund grant for operating expenses; (3) increase the
number of public housing authorities that are exempt from
mandatory conversion to asset management; and (4) encourage the
participation of public housing residents in the implementation
of asset management.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 2, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3521, the Public
Housing Asset Management Improvement Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Chad Chirico.
Sincerely,
Robert A. Sunshine
(For Peter R. Orszag, Director).
Enclosure.
H.R. 3521--Public Housing Asset Management Improvement Act of 2007
CBO estimates that H.R. 3521 would have no significant
impact on the federal budget. Enacting the bill would not
affect direct spending or revenues.
H.R. 3521 would alter the Department of Housing and Urban
Development's (HUD's) implementation of a new system for
allocating operating subsidies to public housing authorities
(PHAs). Historically, HUD has provided funding to PHAs in an
aggregate amount for each authority. Under the agency's new
operating fund formula, PHAs will receive a separate subsidy
for each housing project under their control. The bill would
prevent HUD from imposing a limit on the amount of funding that
can be used for management fees, increase the unit threshold
under which smaller PHAs are exempt from asset management
requirements, and prevent HUD from limiting the use of Public
Housing Capital Fund assistance for PHAs' central office costs.
H.R. 3521 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act. State,
local, and tribal governments that participate in housing
assistance programs would benefit from management activities
authorized in the bill.
The CBO staff contact for this estimate is Chad Chirico.
The estimate was approved by Keith J. Fontenot, Deputy
Assistant Director for Health and Human Resources, Budget
Analysis Division.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 3521 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-By-Section Analysis of the Legislation
Section 1. Short title
This section establishes the short title of the bill, the
``Public Housing Asset Management Improvement Act of 2007.''
Section 2. Revisions to asset management rules and related fees
Prohibits HUD from establishing restrictions or limits on
the amount of management and related fees with respect to a
public housing project if the fee is determined reasonable by
the PHA before January 1, 2011. Requires HUD to establish fees
pursuant to negotiated rulemaking that would commence on or
after April 1, 2009 and would include interested stakeholders.
This prohibition is also applicable to public housing agencies
that are seeking a discontinuance of the reduction in their
operating fund reductions.
Increases the threshold for exemption from asset management
requirements for medium-sized public housing authorities. Thus,
agencies that own or operate fewer than 500 public housing
units may elect to be exempt from asset management
requirements.
Section 3. Prohibition on restriction of fungibility of capital fund
amounts
Clarifies that notwithstanding HUD guidance, public housing
agencies are permitted the flexibility allowed by the Qualify
Housing and Work Responsibility Act to transfer up to twenty
percent of their capital funds for operations with no further
restrictions.
Section 4. Tenant participation
Encourages HUD to ensure that public housing agencies
encourage the reasonable efforts of resident tenant
organizations to represent their members and the reasonable
efforts of tenants to organize.