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104th Congress                                            Rept. 104-461
                        HOUSE OF REPRESENTATIVES

 2d Session                                                      Part 2
_______________________________________________________________________


 
                   UNITED STATES HOUSING ACT OF 1996

                                _______


                 April 25, 1996.--Ordered to be printed

_______________________________________________________________________


   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                          SUPPLEMENTAL REPORT

                        [To accompany H.R. 2406]

    The CBO cost estimates are now being filed to supplement 
the report originally filed on February 1, 1996.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, April 9, 1996.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office (CBO) 
has prepared the enclosed federal cost estimated and 
intergovernmental mandates statement for H.R. 2406, the United 
States Housing Act of 1996, as reported by the House Committee 
on Banking and Financial Services on February 1, 1996. The bill 
would impose no new private sector mandates as defined in 
Public Law 104-4.
    CBO estimates that enactment of H.R. 2406 would not affect 
direct spending or receipts. Therefore, pay-as-you-go 
procedures would not apply to the bill.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Brent Shipp.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).

               congressional budget office cost estimate

    1. Bill number: H.R. 2406.
    2. Bill title: The United States Housing Act of 1996.
    3. Bill status: As reported by the House Committee on 
Banking and Financial Services on February 1, 1996.
    4. Bill purpose: The bill would eliminate or significantly 
change the programs through which the bulk of federal low-
income housing assistance is currently provided. The United 
States Housing Act of 1937, which authorizes the public housing 
program and the section 8 rental assistance program, would be 
repealed. H.R. 2406 would establish new public housing and 
rental assistance programs and would authorize appropriations 
to fund them.
    5. Estimated cost to the Federal Government: H.R. 2406 
would authorize appropriations of almost $34 billion for the 
five fiscal years 1996 through 2000 beyond what has already 
been provided in appropriations for 1996. CBO assumes that the 
bill would be enacted by July 1, 1996, and that the authorized 
amounts would be appropriated by the beginning of each fiscal 
year starting after 1996. We estimate that enactment of the 
bill would not affect direct spending or receipt. Therefore, 
pay-as-you-go procedures would not apply. The estimated 
budgetary impact of this bill is summarized below.

                                TABLE 1: ESTIMATED BUDGETARY IMPACT OF H.R. 2406                                
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                              1995     1996     1997     1998     1999     2000 
----------------------------------------------------------------------------------------------------------------
Spending under current law:                                                                                     
    Budget authority......................................    8,241    9,423        0        0        0        0
    Estimated outlays.....................................   16,555   15,708   13,851    7,928    3,933    2,069
Proposed changes:                                                                                               
    Authorizations of appropriations......................        0    1,001    8,213    8,215    8,216    8,218
    Estimated outlays.....................................        0      127    2,930    5,592    6,354    6,955
Spending Under H.R. 2406:                                                                                       
    Budget authority/authorizations.......................    8,241   10,424    8,213    8,215    8,216    8,218
    Estimated outlays.....................................   16,555   15,797   16,781   13,520   10,287    9,024
----------------------------------------------------------------------------------------------------------------


    The costs of this bill would fall within budget function 
600.
    6. Basis of estimate: Title II of the bill would 
significantly revise the provisions of the federal public 
housing program. The existing program is administered by local 
public housing agencies (PHAs) that own and manage low-income 
housing projects. The activities of the PHAs are supervised 
closely by the Secretary of the U.S. Department of Housing and 
Urban Development (HUD). The Congress provides funds in two 
separate budget accounts: one to cover operating costs and 
another for new construction or project modernization.
    Under the program established by the bill, the functions of 
PHAs would be handled by local housing and management 
authorities (LHMAs). Initially, these LHMAs would replace the 
existing public housing authorities in many areas. They would 
retain most of the responsibilities of the PHAs, but would have 
greater flexibility as to how to fulfill these 
responsibilities. In order to keep operating, however, the 
LHMAs would have to be accredited pursuant to the requirements 
of Title IV of this bill. Once accredited, the LHMAs would 
receive their funding as a block grant. With certain 
constraints, a LHMA could then choose to use the grant to cover 
operating expenses or capital needs. The bill would authorize 
the appropriation of $6.3 billion for each of the fiscal years 
1996-2000 for these block grants and for other costs under 
title II (see Table 2). In the first year that funds are 
available, 50 percent must be allocated to operating costs. We 
assume that this requirement would apply to 1997. For later 
years, we expect that the LHMAs would use increasing amounts 
for operating expenses as costs increase.

                          TABLE 2: ESTIMATED BUDGETARY IMPACT OF H.R. 2406--BY PROGRAM                          
                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                  1996      1997      1998      1999      2000  
----------------------------------------------------------------------------------------------------------------
Title II--Public Housing:                                                                                       
    Public Housing Operating Subsidies:                                                                         
        Estimated Authorization...............................       485     3,051     3,123     3,201     3,281
        Estimated Outlays.....................................       112     1,772     3,059     3,158     3,237
    Public Housing Capital Assistance:                                                                          
        Estimated Authorization...............................       485     3,051     2,970     2,891     2,811
        Estimated Outlays.....................................        15       110       189       189       189
    Secretary's Reserve:                                                                                        
        Estimated Authorization...............................        30       189       189       189       189
        Estimated Outlays.....................................        15       110       189       189       189
    Other:                                                                                                      
        Estimated Authorization...............................         1        10        19        20        20
        Estimated Outlays.....................................         0         7        16        23        22
    Title II Total:                                                                                             
        Authorization.........................................  \1\ 1,00                                        
                                                                       1     6,301     6,301     6,301     6,301
        Estimated Outlays.....................................       127     1,937     3,679     4,439     5,039
Title III--Choice-Based Housing Assistance:                                                                     
    Tenant-Based Assistance:                                                                                    
        Authorization.........................................         2     1,862     1,862     1,862     1,862
        Estimated Outlays.....................................         2       968     1,862     1,862     1,862
    Disabled Families:                                                                                          
        Estimated Authorization...............................         2        50        52        53        55
        Estimated Outlays.....................................         2        25        51        53        54
    Title III Total:                                                                                            
        Estimated Authorization...............................         2     1,912     1,914     1,915     1,916
        Estimated Outlays.....................................         2       993     1,913     1,915     1,916
Total Authorization:                                                                                            
        Estimated Authorization...............................     1,001     8,213     8,215     8,216     8,218
        Estimated Outlays.....................................       127     2,930     5,592     6,354     6,955
----------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.                                                     
                                                                                                                
\1\ Authorized amounts for 1996 are computed as the difference between the bill's authorized levels and the     
  annualized amounts already provided by appropriations acts for the fiscal year. These net amounts have been   
  allocated in accordance with the bill's provisions.                                                           
\2\ The title III authorizations for 1996 are not shown in the table because they have been exceeded by 1996    
  appropriations through and including Public Law 104-99.                                                       


    The estimated outlays are based on past spending patterns 
for operating expenses and the project modernization program. 
The proposed changes reflect the amount authorized for 1996 
less the amounts appropriated for public housing operating 
subsidies and project modernization through and including 
Public Law 104-99, the Balanced Budget Downpayment Act, I.
    Of the amounts appropriated for the Title II programs, the 
Secretary would be allowed to retain up to 3 percent for a 
headquarters reserve fund. This fund would be used for needs 
resulting from natural disasters or other unforeseen events. 
Based on the Secretary's previous use of reserved funds, we 
assume that the Secretary would retain all the funds allowed 
and that they would be disbursed within two years.
    Title III would establish a new tenant-based low-income 
rental assistance program that would replace the one in section 
8 of the Housing Act of 1937. Under the current program, HUD 
enters into contracts with PHAs to provide assistance to 
qualified households. The new grants would be given directly to 
LHMAs and would serve very similar purposes. LHMAs would be 
given greater flexibility, but the program would still be 
geared toward low-income tenants. Rental assistance contracts 
would be limited to one year but could be renewed annually.
    The bill would authorize appropriations of over $1.9 
billion for each year of the 1996-2000 period for Title III. 
Continuing resolutions already enacted this year have provided 
over $5 billion for contract renewals in 1996. Another 331,200 
tenant-based contracts will need to be renewed in 1997. We 
estimate, however, that the $1.9 billion authorized would renew 
only 304,240 units, a decrease in the assisted inventory of 
27,000 contracts. Units that are renewed would come up for 
renewal again each year because of the one-year contracts 
required by the bill. Because housing costs continue to rise 
with inflation, annual funding at the level of $1.9 billion 
would reduce the number of subsidized units from the 1997 
renewal cohort by an additional 29,000 units over the 1998-2000 
period. Moreover, the bill does not authorize funding for the 
1998-2000 renewal cohorts, totaling over 800,000 units.
    Title IV would create the Housing Foundation and 
Accreditation Board, an independent agency modeled after 
private accreditation boards for education and health care 
organizations. The board would evaluate LHMAs at least once 
every five years. The evaluation would determine whether a LHMA 
would be accredited to manage or continue to manage a public 
housing program.
    Based on the requirements of Title IV, information provided 
by the Joint Commission on the Accreditation of Healthcare 
Organizations, and the budgets of independent agencies that 
serve similar functions. CBO estimates that outlays for the 
board's expenses would be about $64 million over the 1996-2000 
period, assuming appropriations of the necessary amounts. The 
estimated funding for the board is provided out of the funds 
authorized in Title II. This estimate assumes that no outlays 
would occur in fiscal year 1996 and that the board would not 
begin accrediting LHMAs until fiscal year 1998. We expect that, 
to comply with the evaluation and accrediting requirements of 
Title IV, the board would need to survey and assess 
approximately 900 LHMAs each year, requiring between 100 and 
150 employees by 1998. This estimated workload assumes that the 
board would accredit most of the 3,400 LHMAs only once every 
five years--the maximum time between evaluations allowed by the 
bill.
    Title V would repeal the current housing programs. It also 
would revise part of the Anti-Drug Abuse Act of 1988, such that 
those provisions would terminate at the end of 1996. The bill 
would authorize appropriations of such sums as would be 
necessary for 1996, and Public Law 104-99 appropriates $290 
million for 1996. The costs of Title V provisions, therefore, 
are not included in this estimate.
    CBO estimates that the additional administrative costs of 
implementing H.R. 2406 would total about $50,000 in 1997, with 
no appreciable costs in any other year. This estimate is based 
on information from HUD concerning the staff time that would be 
necessary.
    7. Estimated impact on State, local, and tribal 
governments: CBO estimates that H.R. 2406 would impose an 
intergovernmental mandate costing less than $2 million a year. 
A mandate cost estimate is attached.
    8. Estimated impact on the private sector: The bill would 
impose no new private sector mandates as defined in Public Law 
104-4.
    9. Estimate comparison: None.
    10. Previous CBO estimate: On December 18, 1995, CBO 
prepared a cost estimate for S. 1260, the Public Housing Reform 
and Empowerment Act of 1995, as ordered reported by the Senate 
Committee on Banking, Housing, and Urban Affairs on October 26, 
1995. Both H.R. 2406 and S. 1260 would overhaul the nation's 
public housing system by consolidating programs and providing 
local housing authorities with additional flexibility. Unlike 
H.R. 2406, S. 1260 does not authorize appropriations for any 
housing programs, reduce administrative fees to housing 
authorities for administering the tenant-based housing program, 
or establish a Housing Accreditation Board. Therefore, whereas 
the estimated costs of H.R. 2406 total about $34 billion in 
budget authority, S. 1260 was estimated to have no budgetary 
impact.
    11. Estimate prepared by: Brent Shipp and John Righter.
    12. Estimate approved by: Robert A. Sunshine, for Paul N. 
Van de Water, Assistant Director for Budget Analysis.

                      congressional budget office

              estimated cost of intergovernmental mandates

    1. Bill number: H.R. 2406.
    2. Bill title: United States Housing Act of 1995.
    3. Bill status: As reported by the House Committee on 
Banking and Financial Services on February 1, 1996.
    4. Bill Purpose: H.R. 2406 would overhaul the nation's 
public housing system by consolidating programs and providing 
additional management flexibility to local housing management 
authorities (LHMAs--formerly known as public housing agencies 
or PHAs). As a condition of this new flexibility, LHMAs would 
be required to submit comprehensive housing plans to the 
Department of Housing and Urban Development (HUD) for review 
and approval. In particular, the bill would: consolidate many 
public housing programs into a single block grant; authorize 
funding for the block grant and set forth general provisions 
for its administration; implement the Choice-Based Rental 
Housing program (replacing Section 8) and reduce administrative 
fees provided to LHMAs for administering the program; create a 
housing board responsible for accrediting and overseeing LHMAs; 
and repeal the United States Housing Act of 1937 and many other 
public housing programs.
    5. Intergovernmental mandates contained in bill: H.R. 2406 
contains an intergovernmental mandate as defined in Public Law 
104-4. Specifically, section 224 would require the National 
Crime Information Center, police departments, and other law 
enforcement entities to provide information to local housing 
and management authorities regarding the criminal convictions 
of public housing applicants and residents. This section would 
allow, but not require, LHMAs to pay a reasonable fee for this 
information.
    6. Estimated direct costs to State, local, and tribal 
governments: (a) Is the $50 million Threshold Exceeded? No. (b) 
Total Direct Costs of Mandates: CBO estimates that the total 
direct costs of this mandate would be less than $2 million per 
year. (c) Estimate of Necessary Budget Authority: Not 
Applicable.
    7. Basis of estimate: CBO expects that LHMAs would make use 
of the authority to request information from law enforcement 
agencies regarding the criminal convictions of public housing 
applicants and residents. We assume that LHMAs would make a 
single request for such information for each new placement into 
public housing. The number of new placements should approximate 
the rate of turnover (15 percent) in the nation's 1.3 million 
public housing units. The cost of providing such information 
generally ranges from $10 to $20 per request. Thus, total costs 
for such requests would range from $2 million to $4 million. 
Because many state and local governments already allow LHMAs to 
request such information, CBO estimates that the incremental 
annual costs would be less than $2 million.
    8. Appropriation or other Federal financial assistance 
provided in bill: None.
    9. Other impacts on State, local, and tribal governments: 
CBO estimates that the provisions of H.R. 2406 would have other 
impacts on LHMAs that are not mandates, primarily by imposing 
new conditions on federal aid and by making changes in 
voluntary contracts.

New reporting requirements

    H.R. 2406 would impose some new reporting requirements on 
LHMAs that could result in short-term costs totaling about $30 
million in the first year. These requirements, which are 
conditions of aid, are designated as an activity eligible for 
block grant funding. Part of these costs could continue into 
future years if LHMAs hire permanent staff to meet these 
requirements.
    H.R. 2406 would require each LHMA to submit a comprehensive 
plan to the Department of Housing and Urban Development (HUD). 
LHMAs currently provide most of the information that would be 
required by HUD in one form or another. LHMAs would have to 
provide some new information and aggregate existing information 
from various reports into a new document (possibly in a new 
format). CBO estimates that many LHMAs would hire consultants 
or additional staff as a result.
    We estimate that the nation's approximately 3,300 LHMAs 
would face additional costs to comply with these provisions 
although very few of them would be required to prepare a 
complete plan as envisioned in Section 107. Most LHMAs would 
submit either a streamlined plan or just such additional 
information as required by HUD. CBO estimates that costs to 
LHMAs would vary between $5,000 and $10,000 per agency. Small 
housing agencies (those with under 250 units) would likely 
incur costs at the higher end of the range because of limited 
staff resources. Approximately two-thirds of all housing 
agencies fall into this group. CBO estimates total compliance 
costs to be approximately $30 million in the first year.

Reduction to fees for administering choice-based rental housing

    H.R. 2406 would also affect LHMAs by reducing the fees that 
they receive for administering the Choice-Based Rental Housing 
Program on behalf of HUD. LHMAs voluntarily enter into 
contracts with HUD to provide these services. Under the bill, 
HUD would reimburse LHMAs between 6.0 percent and 6.5 percent 
of a base amount (generally related to the fair market rental) 
for each unit administered. Currently, HUD reimburses LHMAs 
about 8 percent of the fair market rental of a 2-bedroom 
dwelling or each unit administered.
    These reductions in the administrative fee would result in 
a loss of income for LHMAs. CBO estimates that LHMAs would 
receive about $35 million less per year for fiscal years 1997 
to 2000 (assuming the renewal of approximately 300,000 units). 
The effect of this provision in future years, as additional 
housing units are renewed, would be quite significant. When 
this proposal is applied to the renewal of all 1.4 million 
choice-based rental housing units (in fiscal year 2000 at the 
earliest), the loss to LHMAs would exceed $170 million a year.

Local housing and management authority flexibility

    H.R. 2406 would provide LHMAs flexibility by repealing the 
United States Housing Act of 1937, many other housing-related 
provisions, and all of the rules, regulations, and orders 
currently pertaining to these laws. The bill would require HUD 
to issue new rules and regulations implementing the revised 
program. To the extent that the new regulations are less 
restrictive than current regulations--and we expect that this 
would be the case--LHMAs could benefit. For instance, greater 
flexibility in setting rents might allow LHMAs to increase 
their rental income over the long term.
    10. Previous CBO estimate: On December 18, 1995, CBO 
prepared a cost estimate for S. 1260, the Public Housing Reform 
and Empowerment Act of 1995, as ordered reported by the Senate 
Committee on Banking, Housing, and Urban Affairs on October 26, 
1995. That cost estimate did not contain an analysis of 
intergovernmental mandates.
    11. Estimate prepared by: Marc L. Nicole.
    12. Estimate approved by: Robert A. Sunshine, for Paul N. 
Van de Water, Assistant Director for Budget Analysis.