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The Issues> Programs & Policies> Deconcentration> Comments on HUDs Proposed Rule on Public Housing Deconcentration
Comments on HUD's Proposed Rule on Public Housing Deconcentration Draft -
VIA COURIER
Rules Docket Clerk
Office of General Counsel, Room 10276
451
RE: Comments on Proposed Rule to Deconcentrate Poverty and Promote Integration in Public Housing. Docket Number FR-4420-P-08, RIN2577-AB89
Dear Rules Docket Clerk:
The Council of Large Public Housing Authorities (CLPHA) is a non-profit organization representing approximately 60 large public housing authorities (PHAs) that collectively own and manage 40 percent of the nation's public housing. All CLPHA members and the residents they serve will be adversely impacted by the Proposed Rule to Deconcentrate Poverty and Promote Integration in Public Housing (the Proposed Rule).
CLPHA believes that residents should be allowed to exercise informed choice about their housing options so that PHAs can provide a quality housing environment that supports and encourages economic self-sufficiency.
HUD's Proposed Rule to deconcentrate poverty and promote integration in public housing accomplishes none of these laudable goals. In fact, the Proposed Rule will accomplish the opposite: it will undermine informed resident choice in housing options and it will violate both the spirit and letter of the authorizing statute from which it stems, the Quality Housing and Work Responsibility Act of 1998 (QHWRA).
Implementing this Proposed Rule will result in the most undesirable outcomes, sabotaging locally determined strategies for addressing local conditions in public housing.
The most fundamental flaw of the Proposed Rule is that it provides a dubious remedy for a phantom problem that HUD has failed to define. The Proposed Rule inexplicably ignores the fact that virtually all families in public housing are very poor. A rigorous analysis of the most recent data shows that public housing developments house families with incomes around a narrow band of approximately $9,000 per year. Variations across family developments are typically the result of variations in family size and unit size. The tangled admissions policy required by this Proposed Rule would exhaust resources needlessly to no meaningful end. This is a "one size fits all" remedy that fits no one.
The rule also conveniently forgets these demographic facts are the direct consequence of federal law and policy, whether intended or unintended. Statements in the preamble flagrantly misrepresent the historical and policy context for the rule, pointing to discriminatory local political processes and siting choices as the reason for concentrations of poverty and racial segregation in public housing. The preamble goes on to posture that public housing would not meet the expectations of the "founding fathers" and the first framers of federal housing policy. This rewriting of American history distorts the real and complex historical record. The "founding fathers" were committed to "One America" only for some Americans and federal housing policy was shaped at a time that not only sanctioned economic and racial segregation but also promoted it. Unfortunately, this shameful legacy was nourished by many conspirators including the executive, judicial and legislative branches of federal government in addition to local government practices.
In more recent years, well-intentioned policies, such as federal admissions preferences, have served to increase concentrations of deep poverty throughout public housing. Economic conditions and national policies beyond the scope of PHAs have had a profound impact, such as the loss of urban jobs and disinvestment in urban neighborhoods. While significant shifts in the demographics of public housing took place, physical conditions deteriorated due to disinvestment policies that did not cover the cost of maintaining public housing. The result is a housing stock in need of $23 billion in modernization.
The passage of QHWRA in 1998 culminated over four years of vigorous policy debates on how to address statutory and regulatory obstacles that stood in the way of improving public housing. The long-debated legislation grappled with what tools could meet these challenges. The reforms in the legislation were based on the following premises that are effectively overturned by the Proposed Rule:
- Public housing applicants should be allowed to exercise the same choice as applicants in the private or subsidized housing market through site-based waiting lists.
- Private investment in public housing should be encouraged to improve the quality of housing and result in a broader range of incomes.
- Key management and policy decisions should be made through a local public planning process with mandated participation of residents to reduce unnecessary federal regulatory burdens and to make policies responsive to local conditions.
The Proposed Rule not only directly contradicts provisions of QHWRA, it also far exceeds the statutory authority provided by the legislation. Both the intent and language of QHWRA make plain that each PHA should develop a deconcentration policy as part of the agency planning process based on local housing circumstances. Furthermore, nothing in the statute requires that such a deconcentration policy be based solely on admissions. There are opportunities to deconcentrate properties including marketing, incentives, added amenities, and investment that may be more appropriate given local circumstances and resources. While QHWRA authorizes HUD to collect data on a PHAs implementation of its deconcentration policy, it neither requires nor permits HUD to dictate the necessary outcomes of an agency's deconcentration policy as described in the Proposed Rule. The "one-size-fits-all" approach taken in the Proposed Rule reduces resident housing choices and circumvents the statutorily mandated resident and public participation required to develop such a deconcentration policy.
For the multitude of reasons stated in these comments, this Proposed Rule should be withdrawn and the current provisions of the Agency Plan should be implemented and enforced.
II. Disparities In The Income of Public Housing Residents: The Phantom Problem
CLPHA is perplexed as to what the Department has in mind in its Proposed Rule to deconcentrate public housing developments. As the data below describes, public housing residents are very poor. Developments in public housing are made up of families with low incomes that are within a narrow range, and that show little variation among families - either those already in developments or those on the waiting lists. Moreover, where they do exist, variations in family income across developments are typically the result of variations in unit/or family size (i.e. larger units house larger families with the possibility of higher incomes). In short, CLPHA's data analysis fails to show significant differences in the incomes of public housing residents by development that would justify the convoluted scheme described in the Proposed Rule.
- People Who Live In Public Housing Are Poor
According to HUD's database, The Picture of Subsidized Households, families in public housing have average incomes of $8700. HUD's Multi-family Tenant Characteristics System (MTCS) database available on HUD's website show average incomes in public housing of $9600, however these data include elderly residents whose incomes are higher than those of families in public housing. Even so, an income level of $9600 is still very low, representing only 25% of the national median income. When one removes the elderly, as one must do under this Proposed Rule, the median income falls even further. In communities across the country including Chicago, Contra Costa, CA., the District of Columbia, Miami-Dade, Los Angeles, San Francisco, Houston, Wilmington, DE, to name a few, median income of families in public housing is less than 20% of that for the city at-large. And in many communities, the income of public housing families represents only 10-15 % of the area median income.
Public housing family developments are located in census tracts that also are poor. In the Chicago Housing Authority, for example, developments are located in census tracts in which 67% of the population live in poverty. In
These demographics clearly show what most in the housing industry, and most of the general population, already know - that public housing houses very poor and poor families and that public housing family developments, generally speaking, are located in census tracts where there are large numbers of very poor and poor families. Moreover, data from individual PHA waiting lists also indicate that very poor and poor people are waiting to get into public housing. In
Collectively, these data indicate a narrow range of incomes in public housing. Families in public housing and those waiting for public housing hover around an average income of $9000. There are no rich or high income buildings as fantasized by the Proposed Rule.
- HUD's Claim That There Are Widespread Income Discrepancies In Public Housing Is Not Accurate
Data from a Picture of Subsidized Households, which is the most recent data set available, does not support HUD's claim that there is widespread segregation by income in public housing. In fact, CLPHA's analysis of a large number of member PHAs shows that there are no statistically significant differences in family incomes across developments. We have included a number of examples in the Appendix to these comments. Our analysis clearly shows that when "outliers"-- defined as families with especially low or particularly high incomes --are removed from the analysis in smaller, more statistically sensitive developments, average incomes cluster around the PHA average. As described below, HUD's methodology for income analysis as contained in the Proposed Rule is critically flawed. When fair and accurate statistical comparisons among developments are made - no such income differences exist.
It is important to note that HUD has provided no data, no analysis, and no methodology to support the implementation of this Proposed Rule. Aside from the rhetoric of the preamble, we are left to wonder where these areas of "concentration" lie and where great income disparities in public housing exist. CLPHA's analysis, based on reasonable and statistically sound methodological principles, does not indicate significant variations in income across developments. Again, we suggest that once comparable developments - in terms of both unit and family size are considered, there are no statistically significant income disparities. Moreover, our members, in performing their own analysis have indicated that they too find little income variation across developments in their portfolio. Residents of public housing are poor and income differences fall into a very narrow, statistically insignificant range.
One additional flaw in HUD's deconcentration prescription is that there is no provision in this Proposed Rule to identify the source of income. Thus, this proposed admissions policy could very well skip over a family with wage earners in favor of a larger family with higher incomes derived form various subsidies. This would not serve to create functional developments and surely, this cannot be the intent of HUD's deconcentration policy.
C. The Use Of Average Incomes And Failure To Adjust For Variations In Family And Unit Size Distort The Results Of Income Analysis
CLPHA strongly opposes using the measure of "average income" as the means by which to make income determinations under this rule. PHA development average household incomes are significantly affected by "outliers"- or extremely low and high household incomes that bias a development's "true" household income average. This is especially true among small developments. Household incomes that greatly exceed the other incomes in a development will tend to pull their development's total average income towards the higher or lower value, creating a false average. These outliers, then, have the capability to create a false picture of inequality when in fact there is none.
To illustrate the effect of the outliers, CLPHA performed an analysis of a number of PHAs and developments within the PHA. We have included examples in the Appendix to these comments. These examples show clearly that once the extreme values are removed, there is very little variation among incomes across developments. (See Appendix for illustrations and explanation).
As many statisticians and researchers have demonstrated, averages, especially average incomes are an inadequate and unreliable statistical measure. In a recent paper on inequality for the World Bank, Julie Litchfield argues that variance or averages is the least desirable method in which to measure income inequality. (See www.worldbank.org/poverty/inequal/index.htm).
In addition, we are concerned that HUD has failed to consider that comparisons on a development by development or building by building basis may not be fair and accurate comparisons. For example, it makes no statistical sense to compare a development of 50 units with a development of 500 units. For statistical purposes, they are not equal and are not comparable. In a development of 50 units, a small number of families with 3 or 4 wage earners can skew the results in a way that would not be possible statistically in a 500 unit development. In short, a simple statistical analysis of developments in a PHA using average income might show that one development has a lower or higher average income than another - at least at first glance. However, if the relatively small number of "outliers" are removed from the analysis, the size of the building is "factored in", and the size of families is also considered, then the two developments may look quite similar in terms of their average incomes.
The CLPHA analysis raises not only a statistical flag, but also calls into question the entire premise of this Proposed Rule: If there are only narrow differences in incomes across developments and on waiting lists, what essentially is the purpose of this rule? In fact, an admissions policy based on these minute income differences will not have the salutary effect of creating more viable, functional communities. Rather, the goal of creating functional communities would be better served from the bottom up - that is, by improving the incomes of all families in public housing - not through this top down admissions approach advocated by HUD. Furthermore, until the Administration and Congress are willing to invest in modernizing and improving public housing developments, it is unlikely that any meaningful mix of incomes can be achieved. Public housing developments are already, for the most part, overwhelmingly populated by very low-income families. The attraction and integration of higher-income families is made more difficult given the current poor condition of much of the stock due to the consistent underfunding both for operating and capital costs.
III. The Proposed Rule Violates The Spirit And Letter Of QHWRA
A. The Proposed Deconcentration Rule Denies Public Housing Residents Housing Choice And Impedes Local Planning Initiatives As Intended By The QHWRA
1. The Proposed Rule Will Result In Fewer Housing and Economic Opportunities for Very Low Income Public Housing Residents.
Despite the intent of Congress, the Proposed Rule creates a burdensome regulatory scheme, which not only reduces housing and economic opportunities for those most in need of assistance, but also stigmatizes existing public housing residents. QHWRA is clear in its aim to reform public housing by reducing statutory and regulatory dictates and by giving local agencies and their residents more choices. The stated purpose of the reform measure is to promote affordable housing by "deregulating and decontrolling PHAs [and] providing for more flexible use of Federal assistance to PHAs . . ." QHWRA at - 502(b)(1) & (2). Section 502(a) further states:
[that] the Federal method of overseeing every aspect of public housing by detailed and complex statutes and regulations has aggravated the problem and has placed excessive administrative burdens on PHAs; and the interests of low-income persons, and the public interest will be best served by a reformed public housing program that . . . vests in PHAs that perform well the maximum feasible authority, discretion, and control . . ."
The rigid scheme for deconcentrating poverty described in the Proposed Rule will have the perverse effect of reducing the number of housing units available to very low income residents. In virtually all of the communities served by CLPHA agencies, the waiting lists are made up almost exclusively of very low income families who have waited, in many cases, years for public housing assistance. The Proposed Rule would require PHAs to skip these families once they came to the top of the waiting list, if the only unit available at the time was in a "low income" building. The more distressed public housing developments tend to contain more units and have the higher vacancy rates than properties that have had the benefit of recent modernization or better locations. Under the Proposed Rule, very needy families will not be eligible for these units in these lower income buildings, which often make up the majority of public housing vacancies. Even if a family is desperate for housing, it will continue to wait while vacant units are offered to applicants with higher incomes, even though only marginally higher.
By denying or delaying the admission of very low income residents to public housing, the Proposed Rule also denies these applicants the opportunities to participate in self-sufficiency programs offered by public housing authorities. Job training, day care, stable housing and similar kinds of assistance are key factors in enabling residents to move from welfare to work. Again, it is the residents that most need to enhance their economic well-being who are least able to participate.
One of the intents of providing PHAs more regulatory flexibilty was to help public housing and public housing residents shed their unfavorable public image. The QHWRA encourages PHAs to act more like private sector property owners to enable them to attract a broader income mix. Unfortunately, the Proposed Rule undermines this notion by stigmatizing residents and buildings as "high income" and "low income." Not only does it needlessly identify the residents of those property by their economic status (and inaccurately, in some cases), but it implies that roughly half the public housing stock is made up of undesirable "low income" buildings. Even under the best of circumstances, it is difficult for public housing to attract and maintain higher income working families needed to create income mixing in its developments. By stigmatizing these buildings and their residents, the Proposed Rule will make the marketing of these buildings to ensure economic mix even more challenging.
2. The Proposed Rule Undermines The Site-Based Waiting List Provisions Of The QHWRA.
One of the centerpieces or the QHWRA reforms was the ability of PHAs to enact site-based waiting lists, "notwithstanding any other law, regulation, handbook, or notice to the contrary." QHWRA, - 525(a)(1). For the first time, the site-based waiting list provision in the QHWRA gave public housing residents the opportunity to choose where they want to live. Unlike participants in other assisted programs, who are able to apply to the particular building or unit they desire, applicants for public housing had always been forced to accept the first public housing unit offered or risk being placed at the bottom of the waiting list. Numerous studies have found that living nearby to support systems is a significant factor in helping low income families successfully and permanently move from welfare to work. QHWRA's site-based system allows public housing residents to apply for and get housing near family, places of employment, social services, churches, schools, and other institutions that can assist them in meeting self-sufficiency goals.
Contrary to the statutory prohibition in 42 U.S.C. - 1437n(a)(3)(B)(iii), proposed - 903.2 will interfere with the implementation of site-based waiting lists. ("An agency implementing an admission policy [encouraging deconcentration] shall implement that policy in a manner that does not prevent or interfere with the use of site-based waiting lists authorized under [QHWRA]).") Specifically, given the mandatory skipping provisions in the Proposed Rule, HUD's action creates substantial uncertainty among site-based waiting list applicants as to whether and when they might be given a unit in the development of their choice. That is, if an applicant for public housing has an income lower than the PHA-wide average and wishes to find a unit in a "lower income" property, that applicant must wait not only until he or she becomes first on the waiting list for that property, but must also wait until either the property attains a "higher income" designation or all higher income applicants on the waiting list receive units in the development. Given this uncertainty, the lower income applicant will be effectively denied the property of his or her choice in favor of a property where he or she is more likely to obtain a unit in a timely fashion.
3. The Proposed Rule Creates Illegal Quotas For Income and Race of Public Housing Residents As Specifically Prohibited By QHWRA
The QHWRA specifically prohibits the imposition of income or racial quotas in the creation and implementation of a PHA's deconcentration policy. The clause in the QHWRA mandating the development and submission of deconcentration policies "may not be construed to impose or require any specific income or racial quotas for any project or projects." 42 U.S.C. - 1437n(a)(3)(B)(i).
The Proposed Rule, however, creates a specific quota for each building to have an income mix equal to the PHA average income. Notwithstanding the direction in proposed - 903.2(b) that a "PHA may not require any specific income or racial quotas for any development or developments," Steps 1-4 contained in - 903.2(a)(1)(i)-(v) of the Proposed Rule do precisely that, at least with respect to income. They require PHAs to designate buildings and developments as "higher income" or "lower income" based upon the average income for PHA residents, then mandate that PHAs admit waiting list applicants to available units based almost exclusively on reaching an income balance exactly at the point between "higher income" and "lower income."
In this regard, the Proposed Rule runs contrary to the express language of QHWRA and is therefore violates the Administrative Procedure Act. 5 U.S.C. - 706(2)(A) (administrative action invalid when "not in accordance with law"); 5 U.S.C. - 706(2)(C) (administrative action invalid when "in excess of statutory jurisdiction, authority, or limitations").
4. The Proposed Rule Prevents Localities From Fully Implementing Local Preferences As Intended By QHWRA.
Another important aspect of the QHWRA was the removal of Federal preferences for public housing admission to be replaced with locally based criteria. The Proposed Rule undermines the implementation of a local preference system and forces PHAs to repeat the mistakes of the past by following an admissions policy dictated by
5. The Proposed Rule Illegally Requires Skipping Which Results In Fewer Housing Choices For Very Low Income Public Housing Residents
In the Proposed Rule, - 903.2(a)(1)(v) provides that, "[w]hen a unit becomes available for occupancy in a higher income building, the PHA must skip families on the waiting list if necessary to reach a lower income family to whom it will offer the unit" in a building or development exceeding the average income for the PHA population as a whole. The following sentence in the Proposed Rule provides the converse, i.e., that PHAs must skip lower income tenants to reach higher income tenants on the waiting list for buildings or developments falling short of the PHA-wide average income.
The authorizing statute, by contrast, permits, but does not require, PHAs to use skipping to achieve poverty deconcentration. 42 U.S.C. - 1437n(a)(3)(B)(ii) (PHAs may offer incentives); 42 U.S.C. - 1437n(a)(3)(B)(iii) (skipping is permissible).
HUD cannot construe the use of the permissive "may" in QHWRA to create a mandate that PHAs skip waiting list applicants, to say nothing of skipping in the fashion HUD proposes. Unless the statutory context reflects a contrary intent, "may" will have its traditional, non-mandatory meaning. CITE. Here, the context does not dictate such a reading. Rather, the Act gives PHAs a substantial amount of discretion in crafting deconcentration policies in light of local conditions. See 42 U.S.C. - 1437n(a)(3)(B)(ii) (PHAs "may"offer incentives to waiting list applicants). Further, elsewhere in the relevant portion of the Act, Congress employs mandatory language. See 42 U.S.C. - 1437n(a)(3)(B)(i) (PHAs "shall" submit a deconcentration policy). Where, as here, the Congress uses both "may" and "shall," the two words are deemed to have two meanings - the former permissive and the latter mandatory. CITE. Accordingly, it is contrary to law for HUD affirmatively to require skipping.
B. The Proposed Deconcentration Rule Exceeds Its Statutory Authority
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The Proposed Rule makes clear that HUD's purported authority to issue a Proposed Rule regarding economic deconcentration and racial deconcentration are derived from different statutes. ("The requirements for poverty deconcentration, in paragraph (a) of this section, and for fair housing, in paragraph (b) of this section, arise under separate statutory authorities and are independent." Proposed Rule, - 903(c)). Despite attempts in the preamble to the Proposed Rule to use race and economic status interchangeably, only the provisions regarding income deconcentrations are derived from the QHWRA. Any references to racial concentrations in public housing are subject to the provisions of the Fair Housing Act and various civil rights laws.
The QHWRA requires that PHAs develop and implement policies toward deconcentrating poverty in public housing developments. See 42 U.S.C. - 1437n(a)(3). Although the QHWRA provides HUD with a role in monitoring compliance with this mandate, 42 U.S.C. - 1437n(a)(3)(A) ("The Secretary shall review the income and occupancy characteristics of the public housing projects and the buildings of such projects of such agencies to ensure compliance with the provisions of this paragraph and paragraph (2)."), it does not authorize HUD to mandate outcomes in furtherance of the QHWRA's deconcentration provisions in the fashion HUD proposes. In view of the QHWRA's permissive language regarding the measures a PHA may employ toward deconcentration, as well as the specific statutory prohibition against income or racial quotas in the implementation of deconcentration policies, the Proposed Rule is not consistent with the clear intent of the QHWRA.
The Proposed Rule far exceeds its statutory authority as it seeks to impose an outcome-based, one-size-fits-all methodology for deconcentrating poverty in public housing, instead of the locally-based policy approach clearly intended in the plain language of the statute. The section of the QHWRA addressing the deconcentration issue is part of the provisions authorizing the PHA agency plan. In fact, the Proposed Rule simply adds deconcentration provisions to the existing PHA plan rule. As part of the Annual Plan, PHAs are required to conduct a needs assessment which is intended, among other things, to "address the housing needs of the low-income and very low-income families who reside in the jurisdiction served by the PHA and other families . . . [on the] waiting lists. . ." 24 C.F.R - 903.7(a). It is through this process that PHAs can best identify concentrations of poverty in their communities and develop strategies for addressing the needs of the poor given local conditions. The Agency Plan further mandates substantial community and resident input so that effective policies can be developed that will take into account unique local circumstances. It is only through such locally-based policies that PHAs can effectively address the needs of the public housing population in a comprehensive and consistent way.
- The Fair Housing and Civil Rights Laws Do Not Authorize the Implementation of the Proposed Deconcentration Rule As It Relates to Race
1. The Proposed Rule Misinterprets HUD's Obligation to Affirmatively Further Fair Housing Under the Fair Housing Act Contrary To The Law
PHAs engage in a variety of activities to promote fair housing, including, but not limited to, mobility counseling programs designed to place low income residents in non-minority impacted neighborhoods, training on the Fair Housing Act requirements for residents, staff, and landlords, and development of housing opportunities in areas which did not historically have a minority presence. As the vast majority of the public housing resident population is made up of families who are protected by the Fair Housing Act, PHAs are particularly sensitive to ensuring fair housing compliance in the operation of their units. PHAs constantly monitor their own staff through the use of testers, grievance procedures, and other methods to ensure that the law is followed. Many PHAs also have worked with local fair housing organizations and HUD in locating and bringing to justice property owners who violate these laws.
Section ___ of the Fair Housing Act imposes a duty on HUD to "affirmatively further fair housing". (Quote) . Although neither HUD nor the courts have ever clearly defined this standard, - 903.2(b)(2) of the Proposed Rule indicates that PHAs must adopt tenant eligibility, selection, and admissions policies that "affirmatively further fair housing." CITE While HUD is subject to a duty affirmatively to further fair housing under 42 U.S.C. - 3608, PHAs have no independent statutory duty to take affirmative actions. Nevertheless, as illustrated above, PHAs have many existing incentives to be pro-active regarding fair housing even in the absence of a statutory requirement.
While Section ____ of the Fair Housing Act describes HUD's responsibility to "affirmatively further fair housing", the full extent of PHA responsibility under the Fair Housing Act appears in 42 U.S.C. - 3604, which demands that PHAs and other entities subject to the Fair Housing Act not discriminate on the grounds contained therein. CITE. It is only in the face of prior discrimination or current discrimination over which the PHA exercises some control or for which it bears some blame that a PHA must take action to remedy such discrimination. CITE. If an applicant believes that the PHA has discriminated, the law provides for the aggrieved party to file a complaint with HUD and/or seek redress through the court system. CITE These are the sole remedies provided by the law.
The Proposed Rule seeks to create a new fair housing enforcement mechanism whereby HUD may challenge a PHA's civil rights certification if it believes the PHA is not achieving the desired outcomes of its deconcentration policy. Section 903.2(b)(3) of the Proposed Rule indicates that HUD "will take action to challenge the PHA's certification under 903.7(o) where it appears that a PHA Plan or its implementation" do not achieve what HUD, in its sole discretion, determines are the desired outcomes. Not only is this provision contrary to the law which already provides for appropriate actions to be taken against PHAs for violations of the Fair Housing Act, but it fails to articulate a standard which PHAs need to achieve to avoid such a challenge. In addition, HUD seeks to shift the burden of proof under its enforcement action from HUD to the PHAs by requiring PHAs to demonstrate that they are complying with the deconcentration rule, without requiring HUD to delineate the standard to which the PHA is being held. HUD's "guilty until proven innocent" approach is illegal and undermines the ability of each community to develop and implement a deconcentration policy based on local needs instead of HUD dictates.
Certainly, PHAs are committed to ensuring against discrimination in housing and guaranteeing equal opportunity and meaningful choice in carrying out their mission. However, PHAs have no legal duty to take ill-defined or undefined steps affirmatively furthering fair housing. Rather, there is a clear statutory basis for holding the PHA accountable for its actions under the non-discrimination provisions of - 3604 where circumstances warrant. Consequently, HUD cannot impose its legal obligation to "affirmatively further" on PHA by developing its own enforcement mechanism in the absence of statutory authorization.
2. The Proposed Rule's Requirement That PHAs Take Affirmative Actions To Lessen Racial Concentrations In Public Housing Violates Civil Rights Laws.
On a related point, - 903.2(b)(3)(A) of the Proposed Rule suggests that PHAs will incur possible Fair Housing Act liability if implementing the Proposed Rule does not reduce racial or national origin concentration in public housing buildings and developments. If a PHA fails to effect a reduction in racial concentrations, HUD will challenge the PHA's civil rights certification. To this extent, HUD at least creates an incentive to engage in race-conscious admissions and, more likely, establishes a de facto racial quota, i.e., some lesser percentage racial concentration than currently exists in a given building or development.
This provision is both perplexing and problematic on a number of scores. First, it is unclear why HUD has included - 903.2(b)(3) at all in the proposed income deconcentration provisions. As the rule itself indicates, HUD does not view the poverty deconcentration language in the QHWRA to authorize racial or ethnic deconcentration. Rather, the rule states that its purported authority to require race deconcentration derives from separate, although unidentified, federal law. Therefore, notwithstanding the lengthy exegesis in the preamble to the Proposed Rule, there appears to be no reason or basis for the presence of the racial deconcentration language. HUD points to no data suggesting that income serves as a proxy for race or ethnicity in this circumstance. Rather, it seems that - 903.2(b)(3) is simply an unrelated afterthought.
Second, although the racial deconcentration provisions clearly contemplate some range of racial or ethnic mixing HUD would find acceptable (and thus not triggering a challenge to a PHA's civil rights certification), the Proposed Rule does not reveal what that range is. In spite of the fact that HUD seems to have in mind a level of performance in terms of integrating various racial and ethnic groups, - 903.2(b)(3) is silent as to how to satisfy HUD's concerns. Rather, PHAs are left to guess whether their buildings and developments are adequately integrated or whether some manner of affirmative action is necessary to avoid HUD scrutiny. In this regard, it seems that HUD still fears that PHAs will somehow "game the system" if they know what HUD expects of them.
Moreover, in light of recent federal case law, the racial deconcentration provision is, at best, constitutionally questionable. The Proposed Rule explicitly treats PHAs differently based on race-based outcomes. That is, if a PHA's implementation of HUD's income deconcentration measures fails to deconcentrate race, additional burdens attach to that PHA without any proof of discrimination. In the absence of such proof, courts have held that it is impermissible to attach any adverse consequences to an entity's failure to meet a percentage goal or quota for racial representation or otherwise to encourage race-conscious decisionmaking. See W.H. Scott Construction Co. v. City of Jackson, MS, 199 F.3d 206 (5th Cir. 1999); Monterey Mechanical Co. v. Wilson, 125 F.3d 702, 710-711 (9th Cir. 1997); Concrete Works of Colorado, Inc. v. City and County of Denver, 36 F.3d 1513 (10th Cir. 1994).
Finally, precisely because PHAs wish to avoid challenges to their civil rights certifications and the concomitant additional reporting requirements, PHAs will not only ensure that applicants and tenants have a broad range of housing opportunities available to them, but PHAs will also have a substantial inducement to circumvent the entire process by taking explicitly race-based steps to guarantee more even ethnic distributions in public housing at the same time they undertake poverty concentration. This, too, gives rise to substantial Equal Protection concerns.
D. The Proposed Deconcentration Rule Diminishes Opportunities to Revitalize Distressed Communities
1. The Proposed Rule Conflicts With the Policy Goals of Mixed Finance Development
One of the primary achievements of the QHWRA was to provide permanent authorizing language to enable PHAs to develop mixed finance public housing. As HUD and PHAs have demonstrated through the highly successful HOPE VI program, using public money to leverage private investment in affordable housing developments creates communities where low, moderate, and market rate residents choose to live together. HUD has recognized that employing private management, market amenities, "New Urbanism" designs and other methods found in market-rate developments have provided the incentives necessary to attract private funds, therefore, it has required these elements in its mixed-finance developments. It is the market-rate standards of construction and operation which create the incentives needed to attract residents of various incomes while preserving units for the very lowest income families.
The Proposed Rule represents a complete about face from HUD's current mixed finance policy. Instead of encouraging more mixed income/mixed finance development through the use of private sector tools, the Proposed Rule undermines the private management techniques, which have made these developments communities of choice - not force. The flexibility to use income tiering, private sector screening criteria, and site-based waiting lists in mixed finance development have maintained the necessary balance of incentives. HUD's Proposed Rule upsets this balance, as it forces owners to admit public housing residents that may not meet the screening criteria and may not even want to live in that particular development. If public housing residents are forced to live in a community they do not choose (or de facto forced to choose it, as they would be returned to the bottom of the waiting list if they rejected the unit), it will be difficult, if not impossible, for management to maintain the incentives needed to attract residents of all incomes, particularly market rate residents. Consequently, mixed-income/mixed finance communities would go from being communities of choice to concentrations of poverty.
2. The Proposed Rule Will Have A Chilling Effect on Private Investment In Mixed Finance Development
Not only will the Proposed Rule upset the incentives necessary to create real mixed income communities, it will all but eliminate the inducement for private funders to invest in these developments. As discussed above, the key to successful mixed-finance communities is the ability to ensure a healthy income mix. Income tiering, management screening criteria, and implementation of the site-based waiting list are some of the most carefully negotiated pieces of a mixed-finance transaction. As the Proposed Rule will leave this important element of mixed finance transactions largely to chance, private investors will see these transactions as too risky and choose not to invest.
3. The Proposed Rule Will Make The Development of Mixed Finance Scattered Site, Small Developments, and Homeownership Programs Virtually Impossible
Not only has mixed finance development been used successfully to deconcentrate large, distressed public housing properties, but it has also created opportunity for low income public housing residents to live in other neighborhoods through the development of scattered site, small developments and homeownership units. These developments often give residents the chance to live nearer to good jobs, schools and transportation centers in non-impacted communities where the very poor have not always been welcome.
The Proposed Rule makes it virtually impossible to successfully administer these developments, thus creating more disincentives to develop units to move residents toward economic opportunity. Under the Proposed Rule, scattered site developments would be evaluated as a single development for the purpose of determining whether it is a "high income" or "low income" development. This makes no sense as these developments are, by definition, spread in various neighborhoods with different income concentrations. In small developments, the average resident income can change significantly if even one family moves in or out. These buildings would likely be characterized alternately as "high" and "low" income with each vacancy, making them very difficult to manage. Finally, the Proposed Rule does not create an exemption for homeownership programs, which require residents to meet certain criteria in order to participate. Housing authorities will choose not to develop homeownership units as the income deconcentration requirements directly conflict with the public housing homeownership regulations.
4. The Proposed Rule Cannot Be Applied to Existing Mixed Finance Projects Where Investors, Developers, and PHAs Have Entered Into Contracts Approved By HUD Which Regulate the Income Mix In The Developments
The Proposed Rule states that it would apply to the public housing units in existing mixed finance developments, despite the fact that they are already subject to carefully negotiated income mixing requirements. As discussed above, the income mix of each mixed finance development is negotiated in the mixed finance evidentiaries and are approved by HUD.
PHAs and developers contractually obligate themselves to maintain specified income tiers and follow a prescribed admissions and occupancy policy in operating these properties. Investors rely on these documents in making financial commitments to these developments. Implementing the Proposed Rule in these developments would be completely contrary to these agreements. If HUD attempts to require these properties to admit public housing residents based on the Proposed Rule, both HUD and the PHAs could be susceptible to legal challenges from developers and investors under the terms of the mixed finance agreements.
On a side note, it appears that the application of the Proposed Rule to existing HOPE VI and HOPE VI-like projects would be legally impermissible. Because such transactions typically involve some manner of contract providing for income tiering, the income deconcentration measures HUD proposes would likely defeat such contract terms, and thus defeat the expectations of contracting parties, most prominently those of the private investors in a mixed-finance transaction. Such settled expectations are reasonable in view of the fact that HUD reviews and approves such income tiering contract terms.
In this regard, the Proposed Rule raises substantial retroactivity concerns on at least two grounds. As the agency is aware, regulations cannot apply retrospectively in the absence of specific statutory authorization to that effect. The Supreme Court held in Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988), that "a statutory grant of legislative rulemaking authority will not . . . be understood to encompass the power to promulgate retroactive rules unless that power is conveyed by Congress in express terms." Id. at 208. Here, the QHWRA confers no power on the Secretary to issue a retroactive rule, yet this is precisely what HUD has done if it assumes it can apply the income deconcentration provisions to directly abrogate contract terms that the agency itself has approved. Moreover, in view of HUD's role not only as a regulator of mixed-finance transactions but also as a party to many of the contracts in those transactions, HUD runs the risk of running afoul of the prohibition against the United States abrogating contracts to which it is a party contained in United States v. Winstar Corp., 518 U.S. 839 (1996).
E. The Administration of the Proposed Deconcentration Rule Will Be Burdensome and Costly to Public Housing Authorities.
In addition to violating both the spirit and intent of QHWRA, as well as specific provisions of the Act, the Proposed Rule imposes a severe administrative burden on PHAs that will have far-reaching implications. They include:
- Generation of new data systems not supported by MTCS
- Calculation of hundreds, and in some cases thousands, of building-average incomes annually
- Operation and maintenance of multiple separate waiting lists
- Decreased efficiency and competitiveness with the private market
- Reduced local discretion in management and operations
- Higher vacancy rates, and
- Increased fair housing complaints and litigation.
- Generation Of New Data Systems Not Supported By MTCS
The MTCS, HUD's own data collection system for public housing, does not capture the very income information that is required under the Proposed Rule. As a result, each PHA will be required to establish new systems and protocols for the collection and/or extraction of income data.
- Calculation Of Average Incomes By Building
Along with data collection, each PHA must ensure adequate staffing for the calculation of average incomes by building for hundreds, and in some cases thousands, of buildings annually. The task of calculating these incomes can be incredibly complex and time consuming. By way of example, many PHA developments consist of combined elderly and family buildings. Since the MTCS requires PHAs to report combined income data for developments, PHAs will now be required to meticulously extract income information in order to calculate averages only for specific (family) buildings within a development that are subject to the requirements of the Proposed Rule. Moreover, much like the private market, the management and operation of public housing is carried out on a project or development level, and not on a building level. Similarly, site-based waiting lists are implemented on a development level basis.
- Operation And Maintenance Of Multiple Waiting Lists
The Proposed Rule will effectively require PHAs to simultaneously operate and maintain at least two waiting lists - one for "higher-income families" and one for "lower-income families", thus doubling the administrative tasks associated with this function. In addition, the waiting list loses transparency for residents and PHA staff alike under the Proposed Rule. The ability to predict wait times and inform residents is diminished and informed choice, characteristic of site-based waiting lists, is completely subverted. This will cause housing authorities to spend more staff time and resources responding to inquiries from applicants confused about their status.
- Decreased Efficiency And Competitiveness
It is hypocritical to demand greater efficiencies and competitiveness from public housing authorities while simultaneously strapping them with burdensome new regulations and administrative requirements. It is impossible for even the highest performers among PHAs to achieve the same efficiencies as the private market when regulatory costs, such as those imposed by the rule's provisions, are not imposed on the private market or other assisted programs.
- Reduced Local Discretion In Management And Operations
In direct opposition to QHWRA, the Proposed Rule effectively strips the PHA, residents and local community of all discretion relative to issues of admissions and occupancy in family developments. To cite just one example, consider the fact that some PHAs utilize scattered site units as an incentive to self-sufficiency and a move toward independence from federally supported housing. Under the Proposed Rule, admission to scattered site developments is constrained by the same federally prescribed standards imposed on conventional family developments. In effect, local strategies and decision-making are completely supplanted by federal control.
- Higher Vacancy Rates
In direct contradiction with HUD's own management performance criterion under the Public Housing Assessment System (PHAS), the Proposed Rule will cause vacancy rates in public housing to increase. Given the new regulatory requirements contained in the Proposed Rule, its provisions can only have the effect of increasing turnaround time, and thus occupancy loss.
- Increased Fair Housing Complaints And Litigation
The Proposed Rule's complicated requirements and inadvertent consequences will raise the appearance of discrimination based on income and, perhaps, race. The Proposed Rule effectively requires PHAs to deny or delay housing assistance based on income. Surely, there will be cases where families that have been skipped over on waiting lists question the motives and/or legality of such action by the PHA. A mild instance of this type would require additional administrative time to explain the PHA's actions to applicants. More extreme instances would carry all of the time and costs associated with fair housing litigation.
F. HUD's Process for the Development of a Deconcentration Policy is Contrary to Law and HUD Regulations.
1. The Proposed Rule Violates the Administrative Procedures Act As It Is Arbitrary and Capricious
Under 5 U.S.C. - 706(2)(A), an action of an administrative agency is subject to reversal where such action is arbitrary and capricious. Where, for instance, an agency has issued a rule or decision without considering the relevant factors or without offering an explanation of its action, that action will be susceptible to challenge under the Administrative Procedure Act. CITE. Moreover, the agency's explanation of its action will be reversed if it reflects a clear error in judgment in the consideration of the relevant factors. CITE.
For the reasons set forth in Part ___, above, the proposed - 903.2 is arbitrary and capricious. Most significantly, HUD's methods are not statistically sound. HUD's failure to consider family size and size of unit in calculating the PHA-wide income thresholds grossly skews the picture of the average public housing resident. That is, by looking only to the average income per family, there is a strong possibility that HUD's proposed methodology will result in both the overestimation and the underestimation of the r
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