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Press Room

Proposed Public Housing Operating Subsidy Rule Reneges on Industry Negotiations

Contact: Liz Hennessy, 202-289-3500 ext. 280

WASHINGTON, April 15 - Yesterday, the Department of Housing and Urban Development (HUD) published a proposed rule that would change the methodology used to fund public housing operations. The proposed public housing operating fund rule significantly and negatively changes an agreement negotiated by HUD and public housing stakeholders during lengthy deliberations last year. The published rule reneges on several specifically negotiated points designed to aid public housing agencies as their amounts of subsidy shift under the new methodology, which is intended to more accurately reflect the cost of maintaining public housing.

"We're very concerned that the proposed rule deviates significantly from the negotiated rule and will mean serious adverse changes for public housing agencies," NARHO Executive Director Saul Ramirez said. "The apparent capricious and arbitrary changes to the negotiated rule reflect a lack of good faith and are counter to the way government should perform."

The rule was developed during an eight-year process that began in 1998 when Congress directed HUD to work with industry groups to create a new formula to determine the appropriate amount of operating subsidy necessary for housing authorities to manage well-run public housing. The process stalled because of lack of sufficient data; Congress then directed HUD to contract with Harvard University to conduct a study on the costs of operating well-run public housing. The resulting Harvard Cost Study, which found that public housing was under-funded by $250-300 million when benchmarked against privately owned subsidized housing, formed the basis of industry-HUD negotiated rulemaking.

The negotiated rule reflected consensus among the department and industry stakeholders on the amount of subsidy required and how agencies would be transitioned into the new system. The published rule, which reflects the Office of Management and Budget's (OMB) revisions, creates an inequitable funding system and alters or eliminates several of these transitional safeguards and doubles the period over which agencies with increases in subsidy would receive their gains.

"OMB has undermined a very public process that is necessary for our government to build trust in the way it works and deals with local agencies," NAHRO President Jim Inglis said. "The end result is a long-term detriment to the stability of public housing."

HUD claims that 80 percent of the nation's 3,100 housing authorities will gain subsidy under the new rule, but that assumes 100 percent occupancy of units, and that Congress will appropriate 100 percent of need -- two key points which are both unrealistic. Last year, agencies received 89 percent of need. Since 2001, funding for public housing has decreased by 20 percent.

"Public housing is a crucial national resource that serves more than 3 million low-income Americans who can't afford rent or mortgages in increasingly expensive housing markets," Ramirez said. "The program must be given the necessary funding and the respect it deserves."

NAHRO is calling on HUD and Congress to repeal the published rule and implement the negotiated rule. For more information, contact Liz Hennessy at 202-289-3500 ext. 280 or lhennessy@nahro.org.

NAHRO Members: Read more on the proposed rule in the April 15 NAHRO Monitor.