PROGRAM HIGHLIGHTS

summary of budget estimates

1. SUMMARY OF BUDGET REQUEST

The Department is requesting an appropriation of $625 million for the Severely Distressed Public Housing (HOPE VI) program in fiscal year 2001. Grant funding will be used to assist Housing Authorities (HAs) respond to the significant unmet requirements of severely distressed public housing developments. The requested funding is expected to provide the requisite level of annual support for the Department to achieve the Administration's goal of revitalizing the nation's severely distressed public housing.

In fiscal year 2001, the Department plans to approve demolitions for at least 12,000 obsolete units, and fund 6,500 hard replacement units, as well as the major rehabilitation of an additional 3,500 family and elderly units. To stimulate healthy and stable communities, and to reverse past patterns of isolation, and over-concentrations of very low-income families, replacement units will largely be incorporated in economically diverse neighborhoods.

While continuing to address the urgent needs of Housing Authorities (HAs) with severely distressed public housing, the Department proposes to target some assistance in fiscal year 2001 to units identified through the Section 202 Mandatory Conversion process. Of the total funds requested, up to $180 million will be designated for Section 202 projects that meet the basic eligibility criteria, including up to $50 million for demolition with priority for Section 202 projects, and up to $5 million for capacity building in the selected cities. It is expected that such earmarking will be needed for 3 years to address developments that are covered by Section 202 Mandatory Conversion and not yet resolved.

The remainder will be competitively awarded for the revitalization or demolition of other severely distressed non-Section 202 family projects, and to carry out program activities, including relocation, demolition, new construction, community and supportive services, and general technical assistance.

Up to $15 million of the requested appropriations will be used for technical assistance which will be provided directly or indirectly by grants, contracts, cooperative agreements or private oversight. The complexities of the program, and its national scope underscore the need for funding to be used for data collection, and to provide on-site management expertise to monitor HA demolition and revitalization activities. The provision of such assistance, especially for the majority of HAs that are inexperienced with demolition, and the related redevelopment of new units, is critical to ensure that these activities are conducted in a timely manner in accordance with an established plan. Up to $800,000 of the technical assistance funding will be used for related travel.

Summary Of Program Strategic Objectives

The HOPE VI program is essential to achieve HUD objective 1.1-increasing home ownership; objective 1.2-making affordable rental housing available to low-income households; and objective 1.3-ensuring that America's housing is safe and disaster-resistant. In addition, funding for revitalization of severely distressed public housing assists in ensuring that low-income people are not isolated geographically, contributing to objective 2.2; and assists in ensuring that disadvantaged families and individuals become self-sufficient and develop assets, contributing to objective 3.2. HOPE VI funding also supports objective 4.2-reducing disparities in well-being among neighborhoods and within metropolitan areas, and objective 4.3-keeping communities and neighborhoods safe.

2. CHANGES FROM 1999 ESTIMATES INCLUDED IN 2000 BUDGET

Actuals for 1999 reflect the Department's transition to obligation-based accounting from the former reservation-based accounting for the increase of $601.6 million in the amount of carryover funds available during 1999. Actual 1999 obligations and outlays reflect respective decreases of $77.9 million and $200 million, due to slower than anticipated program activity.

3. CHANGES FROM 2000 BUDGET ESTIMATES

The current estimate reflects a decrease of $50 million in the amount of funds appropriated, and an increase of $678.4 million available for obligation in fiscal year 2000 based on the unobligated balance brought forward from 1999.

EXPLANATION OF INCREASES AND DECREASES

The fiscal year 2001 request of $625 million is the same as the fiscal year 1999 appropriation, and $50 million higher than the fiscal year 2000 appropriations. Outlays are estimated to increase in fiscal year 2001 to $597 million, an increase of $123.6 million from fiscal year 2000, reflecting the increased spend-out of obligations in the growing pipeline.

FUNDING ACTIVITY

In fiscal year 1999, a total of $571 million of HOPE VI grants were awarded to 21 cities. These awards are expected to support the demolition of 9,134 units of obsolete public housing, 5,079 hard replacement units; and the major rehabilitation of 408 obsolete public housing units. Of the 9,134 units to be demolished, about 7,800 are occupied, and 2,300 are vacant. The $571 million investment is expected to help generate a record $1.18 billion in additional investment in housing and jobs programs at public housing developments, including $854 million in private funds, and over $300 million in other government funds. This additional investment is projected to fund 4,232 units of affordable and market-rate housing to complement the HOPE VI replacement housing.

The Department also awarded $40.7 million to support 32 demolition-only grants which are expected to remove approximately 7,000 severely distressed units.

PROGRAM DESCRIPTION

Created 7 years ago to address the dire problem of severely distressed public housing, the program was initially chartered as a revitalization program, that allowed the selective demolition of buildings too costly to modernize and had high concentrations of poverty. The program has evolved dramatically over the years due to innovations by program grantees, i.e., fostering public/private partnerships, broadening community income ranges, improving the provision of services, etc. Due to the broader mix of income levels and the private investment made through leveraged transactions, public housing benefits from market incentives that promote good maintenance, better design, and more efficient management. These outcomes also promote incentives for resident responsibility and self-sufficiency, as well as the educational development of the younger population. For these reasons, HOPE VI has played an important role in the Department's efforts to revamp all public housing communities.

As a condition of participation, program applicants are required to develop a feasible, comprehensible, realistic strategy to implement local welfare reform objectives and programs. Approximately 12 percent of funds awarded to grantees were budgeted for community service and self-sufficiency activities. The provision of effective, focused self-sufficiency initiatives is a vital program element to enable public housing regain its role as a solid foundation for low income families who are determined to improve their economic standing. Working closely with HOPE VI grantees, the Department underscores resident responsibility as well as community and supportive services in order to meet the social and economic needs of the residents and the surrounding communities.

Two of the most common manifestations of promoting self-sufficiency in public housing are: (1) contracts between grantees and resident-owned businesses, and (2) negotiated agreements with construction trade unions so that residents receiving job training in construction work can qualify for union apprenticeships after a predetermined number of months of work experience.

A total of 104 HOPE VI implementation grants were awarded for family projects during the first 6 years. The average grant size for projects funded has dropped significantly since 1996 due to cost controls, and a stronger emphasis on leveraging HOPE VI funds with other funding sources. The approximate $2.9 billion appropriated for grants during the aforementioned 6-year period was used to leverage an additional $3.4 billion in non-HOPE VI funding. The leveraged financing is projected to augment over 33,000 revitalized public housing units by an additional 15,404 affordable and market-rate units. Of the total units funded or leveraged, 7,290 units were home ownership. This is expected to make a significant contribution to the creation of true mixed-income communities. In fact, 85 of the 104 HOPE VI sites will yield mixed-income developments.

To date, the Department has approved the demolition of approximately 95,000 obsolete and distressed units, and is committed to approving at least 100,000 demolitions by the end of fiscal year 2000. Of the total, the HOPE VI program will either fund or facilitate a substantial portion of these demolitions. Many families are being re-housed with Section 8 rental assistance, enabling them to choose their housing circumstances, but hard unit replacements are also necessary. Often, the inclusion of hard units in the redevelopment plan is vital to the cultivation of the requisite community support for the demolition of buildings which may still be occupied.

Fiscal Year 2001 Performance Measures

The HOPE VI Revitalization Development program for public housing relocates 2,300 families, demolishes 4,100 units, completes 13,500 new and rehabilitated units, and occupies 11,100 units.