CLPHA Comments on Choice Neighborhoods Initiative, April 2010

April 29, 2010

The Honorable Barney Frank
Chairman
Committee on Financial Services
U.S. House of Representatives
2129 Rayburn House Office Building
Washington, DC 20515

Dear Chairman Frank,

Since many Council of Large Public Housing Authorities (CLPHA) members are likely to be affected by the Administration’s draft legislative proposal, “The Choice Neighborhoods Initiative Act of 2010” (CNI), were it to be enacted, we are writing to offer our comments for the record. 

The CNI bill is predicated upon the model and accomplishments of the HOPE VI program, which successfully turned severely distressed public housing into mixed-income, mixed-use, mixed-financed and revitalized communities.  The Administration’s broad policy objective under CNI is to expand and extend the scope, stakeholders, services and activities within neighborhoods in order to “transform neighborhoods of extreme poverty into communities that will improve the quality of life of current and future residents.”  According to the U.S. Department of Housing and Urban Development (HUD), CNI is a holistic approach to transform neighborhoods of poverty and despair into sustainable communities of hope and opportunity.  CNI proposes place-based strategies in order to better coordinate and collaborate on programs, policies, initiatives and federal, state and local resources in distressed neighborhoods. 

CNI’s historical antecedent is HOPE VI, and since the program’s inception, CLPHA has been a staunch supporter and champion of HOPE VI.  For the past 16 years, CLPHA members have been principal users of the HOPE VI program.  Through HOPE VI, CLPHA members have demonstrated substantial housing and community revitalization achievements through innovative and creative uses of the program.  Using HOPE VI, CLPHA members have led the way in establishing new partnerships and leveraging additional resources; and HOPE VI has been a pioneer and laboratory for neighborhood place-based redevelopment.

In a recently published MacArthur Foundation study entitled “The Economic Benefits of HOPE VI”, HOPE VI redevelopments are found to have significant economic and fiscal impacts on their surrounding areas. The HOPE VI neighborhoods in the study showed major drops in violent crime rates, increases in household income and rising home values. The study concludes that HOPE VI is a useful and cost-effective approach for catalyzing positive economic change in local communities.

Given our history and success with HOPE VI, CLPHA is supportive, in principle, of CNI.  We support its broad conceptual objectives.  We believe in place-based strategies as an effective approach to promoting sustainable communities for succeeding generations.  We know that broad-based solutions to address the housing, transportation, energy, education, workforce, environmental, health, business and development needs of neighborhoods and communities is vitally important to long-term livability and sustainability.  We recognize these imperatives.  However, we have concern with some of the specific approaches taken to achieve these objectives as outlined in the Administration approach.

General Concerns:

Our general concerns can be broadly defined as: 1) the magnitude of need; 2) the status of public housing authorities (PHAs); and, 2) coordination and collaboration with other federal partners.

Magnitude of Need

We are concerned that the draft bill does not adequately address the needs of public housing.   According to HUD, more than 75 percent of distressed assisted housing is public housing as compared to other assisted housing. Yet, the draft bill does not reflect this reality.  If we only consider the sheer size of the remaining numbers of units requiring attention--revitalizing public housing should be a priority of CNI.  However, this is not reflected in the draft bill.  If HUD believes that federal dollars should be appropriately targeted to the areas of greatest need, public housing should be granted either lead applicant status, a funding set-aside, or a higher priority in the rating and ranking of eligible applicants.

Status of Public Housing Authorities

According to HUD, CNI builds upon the success of HOPE VI; PHAs have great experience in fashioning place-based redevelopment initiatives, particularly in building partnerships; and a preponderance of the initial grant applications are expected to be from PHAs.  As stated above,  HUD acknowledges that public housing has a much higher level of need than assisted housing.  

However, PHAs are only listed as one of several eligible entities to receive competitive grants in the bill.  There is neither a separate status, a priority, a funding set-aside, or a designated lead applicant status for public housing agencies under CNI.  CLPHA believes this is a serious flaw in the construction of the legislation which will be exacerbated upon implementation of the program. 

Coordination and Collaboration of Federal Agencies

CNI is an ambitious proposal that envisions crossing jurisdictional lines of funding and authority in order to target resources to the most intractable problems in local neighborhoods.  While the transformation plan anticipates coordination of multiple funding resources, there are no specific programs, policies, funding levels or identified federal departments or agencies in the draft bill which commit such resources. 

CLPHA believes that in order for CNI to be effective, there must be a commitment of funding resources from other agencies.  A joint notice of funding availability (NOFA), or similar joint funding strategy, with other federal departments and agencies may be the appropriate method of obligating multi-source funding.  This would allow HUD to focus its scarce resources on the housing and community development needs of neighborhoods, with an accompanying share of education, transportation, health-related and other funding needs flowing from other agencies of jurisdiction.

Specific Concerns:

Our specific concerns and comments are listed in the section-by-section review below:

Section 2.  Findings and Purposes. Overall, CLPHA agrees with the statement of needs and policy goals described in this section. Treating the affordable housing mission holistically, without regard to HUD program cylinders, and in a neighborhood context, is critical and is consistent with the original goals of the HOPE VI program. We note, however, that this broader approach to affordable housing has significant implications for program costs and design, as discussed further below. 

Section 4.  Eligible Entities. Each of the entities listed has an integral role to play in CNI and in neighborhood redevelopment generally, and any of them could be a lead applicant in a neighborhood revitalization proposal. However, CLPHA believes that with respect to proposals to revitalize public housing, the PHA which owns the project should be the lead applicant.

Section 6.  Authorized Activities.  CLPHA agrees that the required and eligible activities described in this section are essential to a neighborhood revitalization approach that addresses the complex, interrelated needs of distressed neighborhoods, including those with public housing. In particular, we agree that linkages with education and providing supportive services that foster self-sufficiency go hand-in-hand with the physical improvements that are necessary.

We agree with the restriction prohibiting HUD funding for construction or rehabilitation of a K-12 school building or a higher educational institution.  Housing authorities should have the flexibility to use some CNI funds for nonhousing activities, such as commercial facilities and public transit, that enhance the neighborhood redevelopment.  However, these funds should be capped at no more than 15 percent, and the waiver authority granted to HUD in this subsection should be eliminated so as not to erode scarce housing resources for nonhousing activities. 

Alternatively, CNI could be structured in a manner which leverages federal funding from other departments under other authorizing and appropriations laws.  Obviously, there are substantial administrative hurdles to overcome in coordinating such federal assistance from a variety of programs.  Also, given the relatively limited funding amount proposed to be authorized for CNI, it is hard to imagine that more than a handful of grants could be made if they are to achieve the large-scale program objectives described.

Section 8.  Program Requirements.  CLPHA generally agrees with the provisions on Housing Choice Opportunities for Returning Residents. In particular, using lease compliance as a condition for return is fair and sensible, as is permitting residents the options of on-site or off-site replacement housing or keeping a tenant-based voucher.

CLPHA supports a one-for-one replacement housing policy which ensures that adequate funds are available to create the replacement units and that there is flexibility in how and where replacement housing is supplied. In general, CLPHA believes that the policy set forth in the bill is a sound approach. It would require one-for-one replacement while allowing flexibility on the location of hard replacement units and permitting vouchers to be used as replacement housing under certain circumstances.  We applaud the recognition of the fact that in some housing markets, using tenant-based vouchers to replace hard units is more appropriate than building hard replacement units that are not needed and could even distort the local housing supply. We strongly believe that a market analysis as described in Sec 8(b)(6)(C) should suffice as documentation. 

CLPHA is concerned that the requirement that 80 percent of vouchers issued in the previous 24 months must be successfully leased within 120 days is an unreliable measure of the local need for tenant-based vouchers. This is because success rates are a performance measure and are not a measure of “an adequate supply of rental housing”.  Such a supply measure would require a market analysis.  In any case, CLPHA does not believe that local market conditions and measures of affordability can or should be assessed using a national standard and particularly not in the case of affordable housing supply.  Therefore, CLPHA believes that a recent market analysis is the proper method for measuring local affordable housing availability.  

In addition, we are perplexed by the 80 percent threshold and HUD has yet to share how it arrived at this percentage. In the most recent study of voucher success rates, a 2001 HUD study showed that the national success rate was 69 percent, dropping from 81 percent in 1993, but similar to the 68 percent estimate in the mid-80s.  If HUD wishes to use a performance measure which shows a PHA’s ability to administer the voucher program, then HUD should use a PHA’s Section 8 Management Assessment Program (SEMAP) rating. 

 

Geographic dispersal of current voucher holders is a clearer policy goal, but PHAs face a number of obstacles, not the least of which is that we are discussing a tenant-based program, where tenants have the ultimate choice as to where they choose to live.  This is why the current SEMAP “Expanding Housing Opportunity” benchmark measures a PHA’s efforts to reach out to landlords in opportunity areas and to provide voucher holders with full information about opportunities available to them.  Ultimately, where a voucher holder lives is a personal choice that does not necessarily reflect the supply of affordable housing in areas of low poverty.

In addition, CLPHA supports the provision that would permit HUD to require the use of project-based vouchers as replacement housing, assuming these vouchers would be separately appropriated and fully funded, as they are now in the tenant protections account, and not come from a PHA’s existing voucher inventory.

Section 9. Definitions. The term “extreme poverty” needs further definition in the bill, since there is no standard provided for what would constitute a “high percentage” of residents living in poverty or having extremely low incomes. 

Further, while we agree that poverty, crime rates, and failing schools are indeed measures of neighborhood distress, we urge HUD to place greater emphasis in the bill on the condition and needs of public or assisted housing in determining how to allocate resources. HOPE VI has been the major program through which PHAs have been able to address the needs of distressed public housing, especially given the chronic underfunding of the Capital Fund Program. With limited means of addressing these projects, we would be concerned if other indicators of neighborhood distress were to predominate over those characteristics which would cause a particular public housing development to qualify for CNI assistance.

In addition, we note our concurrence with HUD’s proposal to include in the definition of “severely distressed housing” projects which have been vacated or demolished, but for which HUD has not yet provided funding for hard replacement units.  This could be an important way to reinvest in neighborhoods where, essentially, only half the job is finished – distressed housing has been removed, but federal resources have been inadequate to replace needed housing units.

Section 11. Administration by Other Entities.  CLPHA is very concerned about the lack of any performance standard in this section under which HUD may decide to take away a CNI grant from the original grantee. By contrast, Section 12 on “Withdrawal of Funding” has such a standard. Similar language should be incorporated in Section 11 and provide that HUD may exercise discretion to require CNI activities be carried out by a different entity only if the original grantee has failed to meet stated performance criteria.

Section 14. Funding. CLPHA appreciates the increase in resources to $250 million under CNI compared to recent appropriations for HOPE VI, which have only been in the $100 million range. However, we have two concerns, as noted above. First, this increased funding would be spread over a very broad range of activities, meaning that the amount available to address what CLPHA believes should be the core of HOPE VI or CNI – addressing severely distressed housing – might be no more than is available now. Second, both public housing and assisted housing would be vying for the same appropriations, and there is no assurance that public housing, for which there is no other means of substantial reinvestment, would have access to its fair share of those resources. To address this, we believe that public housing should be granted lead applicant status, a funding set-aside, or a higher priority in the rating and ranking of eligible applicants.

In closing, we thank you for your consideration of our comments on the Choice Neighborhoods Initiative and look forward to working with Congress and HUD as the legislation moves forward.  Please do not hesitate to contact me if you have additional questions. 

Sincerely,

 

Sunia Zaterman

Executive Director

 

cc:  Members, Committee on Financial Services