HUD's FY 99 Budget
Congressional Justifications
Public and Indian Housing

Public Housing Capital Fund

PROGRAM HIGHLIGHTS

a/ In fiscal year 1997, Public Housing Modernization activities were funded under the "Preserving Existing Housing Investment" account. b/ Includes carryover from fiscal year 1996. c/ Fiscal year 1997 outlays include outlays from the "Preserving Existing Housing Investment" account and the "Annual Contributions for Assisted Housing" (ACAH) account, for all capital improvement programs including Indian. Fiscal year 1998 outlays include obligations of ACAH (excluding Public Housing Service Coordinators), the "Preserving Existing Housing Investment" account, and the "Public Housing Capital Fund." Fiscal year 1999 outlays include obligations of ACAH (including Public Housing Service Coordinators), the "Preserving Existing Housing Investment" account, and the "Public Housing Capital Fund". Excluded are obligations and outlays attributed to the Native American programs which, beginning in fiscal year 1998, were transferred to the "Native American Housing Block Grants" program. SUMMARY OF BUDGET ESTIMATES 1. SUMMARY OF BUDGET REQUEST The Budget proposes an appropriation of $2.55 billion for the Public Housing Capital Fund (Capital Fund) in 1999. This program consolidates all public housing capital programs (except HOPE VI) into a single program, allowing greater local flexibility in decisions on major capital initiatives and management improvements undertaken by Public Housing Authorities (PHAs). The Capital Fund is intended solely to address the requirements of PHAs and their residents. Beginning in fiscal year 1998, the resources and programs that support Native Americans were consolidated into a single new program, the Native American Housing Block Grants. A more detailed justification for that program is provided separately in this Budget under the heading, "Indian Housing Block Grants." The 1999 Budget proposes that all balances reflected in the ACAH account for the Public Housing Service Coordinator program be transferred to the Public Housing Capital Fund. 2. CHANGES FROM 1997 ESTIMATES INCLUDED IN THE 1998 BUDGET The 1998 Budget assumed that all the funds available would be obligated in 1997. Approximately $38 million of the available funds remained unobligated at the end of fiscal year 1997. Outlays in 1997 were $87 million higher than estimated in the 1998 Budget. 3. CHANGES FROM ORIGINAL 1998 BUDGET ESTIMATES The fiscal year 1998 current estimate reflects the transfer of unobligated balances from the ACAH and Preserving Existing Housing Investment accounts. Outlays are $87 million higher than the $4,296 million estimated in the 1998 Budget. EXPLANATION OF INCREASES AND DECREASES The 1999 request of $2.55 billion represents an increase of $50 million above the 1998 appropriated amount. PROGRAM DESCRIPTION AND ACTIVITY The Capital Fund, a comprehensive formula-driven program based on need, is designed to respond to the capital and management improvement requirements of public housing. In conjunction with local officials and residents, the Capital Fund provides PHAs with maximum flexibility in determining the most appropriate strategies for meeting local low-income housing needs. The Capital Fund consolidates the following programs: public housing modernization, public housing development, Major Reconstruction of Obsolete Public Housing (MROP) Projects, public housing amendments, lease adjustments, and Family Investment Centers. The Budget request of $2.55 billion includes $2.45 billion for capital improvement grants, and up to $100 million for technical assistance, contract expertise, training, intervention with respect to troubled authorities, independent physical inspections, and management improvements in support of Management 2020. The technical assistance request includes up to $1.2 million for related travel. Modeled after the Comprehensive Grant Program (CGP), the Capital Fund shifts decisions on funding capital needs to the local level and allows PHAs to make funding decisions based on the needs of their housing inventories. The block grant can be used for several purposes. PHAs can upgrade their viable housing inventory, demolish the worst units, and/or provide replacement units, and continue assistance for eligible families. Through new development and focused demolition, lower-density, mixed-income housing is encouraged. New accountability requirements will ensure that funds will be utilized in a timely manner. Providing a steady stream of funding through a formula-driven system allows PHAs to develop realistic plans for their long-term needs in a systematic and cost-effective manner. PHAs will be able to leverage funds with other public and private partnership entities to meet affordable housing goals. Capital Improvements. Under the Capital Fund, funds are provided by formula for both capital improvements, i.e., developing, rehabilitating and demolishing units, replacement housing, and for management improvements. The formula basis accelerates the allocation and use of capital improvement funds by replacing the former competitive process for small PHAs (fewer than 250 units), which may include a complicated, time-consuming, staff-intensive application process. The Department has offered a technical budget amendment that would permit the flexible use of capital funds. PHAs may use capital funds for any eligible activity authorized by section 5 or by section 14 of the U.S. Housing Act of 1937, or by applicable appropriations acts. This flexibility will enhance PHAs� ability to respond to local needs. Reserve for Disasters and Emergencies. Coincident with the transition to a formula-driven program, the Department has proposed an increase in the amount of funds that are set aside each year in a reserve for disasters and emergencies. Historically, the reserve has been statutorily funded at $75 million, which has been adequate to meet the requirements of the larger PHAs funded through Comprehensive Grants. With the expansion of the universe of PHAs funded by formula to include smaller PHAs, the Department has proposed that this amount increase to $100 million. This proposal is included in the Department�s pending authorization legislation. Technical Assistance, and Intervention Funds. Up to $100 million is included in the 1999 request for technical assistance, intervention and management improvement support, and annual physical evaluations of assisted properties in support of Management 2020. This amount includes up to $1.2 million for related travel. The level of technical assistance funding requested represents a large increase over prior years� appropriations. However, implementation of the National Assessment Center and the Troubled Agency Recovery Center (TARC) requires a substantial increase in the level of support for unit inspections, and recovery efforts for small and medium housing authorities. These funds are required to support efforts to assist housing authorities that are designated as troubled, or in breach of the Annual Contributions Contract/Memorandum of Agreement demonstrating substantial default as defined under 24 CFR 901.05. The revised Public Housing Management Assessment Program (PHMAP) will rely on new or significantly modified performance indicators. Any PHA receiving a failing assessment score on the revised PHMAP will be referred to a TARC. The TARC will develop and implement an intervention strategy or technical assistance option to improve the PHAs� performance to a passing level. Such a strategy may include: (1) selection or participation in the selection of an alternate entity to provide technical assistance or other services up to and including contract management of all or any part of the public housing developments administered by the PHA; (2) assumption of possession and operational responsibility of all or part of those PHAs; (3) provision of technical assistance by HUD staff directly, including travel, training, workshops and conferences; (4) and any combination of the above. Technical assistance costs for the TARCs are based on an expected significant increase in the number of troubled PHAs as a result of assessments performed by the National Assessment Center, including independent physical inspections. Calculations assume that for PHAs not passing the revised PHMAP, the Department will petition for judicial receivership or appoint an administrative receiver. These measures will complement other efforts, such as statutory changes, to provide additional tools for dealing with troubled PHAs. The extremely short timeframe requires an intensive, aggressive recovery effort. One of the Department�s top priorities is implementing preventive measures, notably through additional technical assistance for near-troubled PHAs, to reduce the incidence of agencies being designated as troubled. The requested funding for technical assistance would enable the Department to continue this, especially for troubled and near-troubled PHAs. This is consistent with Congress� and the Department�s emphasis that troubled PHAs must bring their operations up to standard. Funds are proposed to allow PHAs to sustain the comprehensive inspection of public housing units, contract expertise, and training and technical assistance to support the oversight and management of public housing or tenant-based assistance. Among the activities included are the following: resident surveys; data collection and analysis; training and technical education for HUD employees, and PHA employees and residents. Moreover, under the Department�s Management 2020 initiatives for the National Assessment Center, technical assistance funds will also be used to provide on-site inspections of properties assisted by the Department. Such independent physical inspections would provide the Department with beneficial information to identify any potential structural or management problems that would require action by the Department. Inspections are a critical component of the Department�s evaluation and monitoring of PHA and owner performance, and ensure that both assisted households and the taxpayers are getting high quality, affordable housing. The Tenant Opportunity Program (TOP), which was funded in the Capital Fund during fiscal year 1998, is proposed to be funded under the Community Development Block Grants program for fiscal year 1999 as part of the Resident Opportunities and Supportive Services set-aside. Fiscal Year 1999 Performance Measures Note: Improved PHA administration of the modernization program, a critical performance component, is reflected on the PH Operating Fund goals regarding PHMAP improvements. Indicator: Approve 100,000 units for demolition by fiscal year 2000. Baseline: The demolitions approved through the end of fiscal year 1997 is 62,175 units. 30,000 units are expected to be approved for demolition between fiscal years 1998 and 1999. Goals: FISCAL YEAR FISCAL YEAR 1998 1999 15,000 units 15,000 units C. Comments: This measure will examine the progress of the demolitions approval process. Indicator: Demolish 95,000 units by fiscal year 2003. Baseline: The baseline through the end of fiscal year 1997 is 17,758 actual demolitions. This measure has been revised to extend the actual demolitions to 2003. Local conditions greatly impact the timing of the actual demolition after the approval process.

Content Archived: January 20, 2009