Congressional Justifications for 1998 Budget Estimates

Public and Indian Housing Revitalization of
Severely Distressed Public Housing

Program Highlight

NA = Not Applicable

Summary of Budget Request

1. Summary of Budget Request

The Department is requesting an appropriation of $524 million for the Severely Distressed Public Housing (HOPE VI) program in 1998. This level of funding is necessary to reach the Department's goal of demolishing 100,000 blighted and obsolete public housing units by the year 2000. In 1998, the Department plans to approve an additional 20,000 unhabitable units for demolition. Replacement units will be incorporated in economically diverse communities so as to foster healthy and stable environments in such communities. HUD is committed to changing the patterns of isolation, concentrations of very-low income families, and segregation of the past. The 1998 request includes funding to provide tenant-based rental assistance for approximately 10,000 units.

2. Changes from 1996 Estimates Included in 1997 Budget

The 1996 estimates in the 1997 Budget assumed that the $288.6 million would be reserved. This consisted of HUD's request of $280 million plus $8.6 million of carryover. However, the 1996 Appropriations Act provided the program with $480 million--$200 million more than requested. Consequently, actual reservations were $421.3 million.

3. Changes from 1997 Budget Estimates

The 1997 Budget estimates reflected an appropriation request of $650 million for this program. However, only $550 million was enacted for the year. The current estimate of $560 million in reservations reflects the lower funding level enacted--$550 million of new appropriations and $10 million of unused carryover. Since all 1997 expenditures represent the liquidation of prior year obligations, the lower funding level will not impact on 1997 outlays and the estimate remains at $283 million for the year.

Explanation of Increases and Decreases

The 1998 request for $524 million is slightly below the 1997 enacted level of $550 million. It is estimated that funding will be distributed as follows: $421 million for grants and $103 million for rental assistance. This represents a $59 million decrease in funding for grants but a $33 million increase in tenant-based assistance. Outlays are expected to increase to $409 million, reflecting the growing pipeline of obligated funding and the faster spendout associated with rental assistance.

Program Description

The Department has completely re-examined the purpose and context of public housing across the Nation and, as a result, has designed the HOPE VI program to be a radical departure from past HUD practice. The HOPE VI program has been the Department's vehicle for changing public housing rules in order to achieve efficient development, sound management, good design, and strong incentives for resident responsibility and self-sufficiency.

Revitalization of Severely Distressed Public Housing

During fiscal years 1993-1996, HUD approved the demolition of approximately 42,000 obsolete and distressed units, and is committed to approving 100,000 demolitions by the year 2000. Densely populated, badly designed, crime-ridden, overconcentrated developments have harmed communities and neighborhoods, trapped poor families in desperate conditions, drained operating subsidies, and blighted adjoining communities struggling to maintain their own viability. Many families are being rehoused with Section 8 certificates and vouchers, enabling them to choose their housing circumstances, but hard unit replacements are also necessary. First, in many cities it is an essential component of building the necessary consensus to demolish buildings which may presently be occupied. Without a promise of replacement, some cities will refuse to acknowledge the need for demolition. Moreover, funds are needed to rebuild the communities affected by the demolition of public housing.

The requested funding of $524 million will secure a majority of the planned demolition of approximately 20,000 severely distressed and obsolete public housing, and the construction or rehabilitation of approximately 4,100 units. The 1998 request includes funding to provide approximately 10,000 Section 8 tenant-based rental assistance.

The HOPE VI program is not limited to the physical demolition and reconstruction of uninhabitable public housing. HOPE VI also builds communities. PHAs are working in partnership with experienced public and private sector developers to create privately owned, economically integrated developments that include public housing by leveraging other resources such as low-income housing tax credits, bond financing, and other public and private resources. Because of the mix of income levels and the private investment in these leveraged transactions, public housing is benefitting from market incentives for good maintenance and management.

HOPE VI funds invest in the lives of people. A required program element is providing effective, targeted job training and other self-sufficiency initiatives so that public housing will regain its role as a stable platform for poor families determined to improve their status. HUD and HOPE VI grantees will emphasize 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.

Included in the request is a set-aside of up to $5 million for technical assistance, to be provided directly or indirectly by grants, contracts, or cooperative agreements. Funds will also be used for training and travel for participants. With the program now being national in scope, and not just available in select cities, the availability of technical assistance funds is even more important than in the past. Included in the $5 million for technical assistance is

$250,000 for travel expenses associated with site visits for program monitoring.

Funding Activity

Actual reservations and fund obligations of HOPE VI funding, for previous fiscal years 1993-1995, are at nearly 98 percent of the appropriated amounts. Previous years appropriations included funds for 39 implementation grants covering the demolition, rehabilitation, and/or replacement of nearly 20,000 units. The HOPE VI Urban Revitalization Demonstration program was created by the 1993 Appropriations Act (P.L. 102-389, approved on October 6, 1992); $300 million was appropriated by that Act. For fiscal year 1994, $778 million was appropriated by the 1994 Appropriations Act (P.L. 103-124, approved on October 28, 1993). In addition, $500 million was appropriated by the fiscal year 1995 Appropriations Act (P.L. 103-327). While the $480 million appropriated in fiscal year 1996 was not under the Urban Revitalization Demonstration Program, it has been treated as an evolution of HOPE VI and will result in the demolition of almost 17,000 distressed public housing units and the construction of over 4,500 public housing replacement units. The enactment of the HOPE VI program followed the report of the National Commission on Severely Distressed Public Housing in August, 1992.

Fiscal Year 1998 Performance Measures

The performance measurement indicator for the Revitalization of Severely Distressed Public Housing program is the number of distressed units approved for demolition. The benchmark established for this indicator is the approval of 100,000 units for demolition by fiscal year 2000. Interim goals include the approval for demolition of 20,000 units in both fiscal years 1997 and 1998.