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HUD Unveils Choice Neighborhoods Proposal

HUD formally circulated its Choice Neighborhoods Initiative (CNI) proposal on November 6, and held a stakeholders’ meeting on its plan on November 10. CNI, as envisioned by the Administration, would be the next iteration of HOPE VI and would broaden the scope of the program to include a focus on neighborhoods. HUD is accepting comments on the proposal until November 24.

According to HUD materials, CNI will “provide competitive grants to assist in the transformation, rehabilitation and preservation of HUD public and assisted housing.” HUD’s proposal seeks $250 million in FY10 for grants that HUD would award competitively to local governments, public housing agencies, community development corporations, assisted housing owners, and other for-profit and nonprofit entities. The current HOPE VI program provides grants to housing agencies to revitalize severely distressed public housing.

“We all see Choice Neighborhoods as a celebration of HOPE VI,” HUD Secretary Shaun Donovan said on November 10. “We want to expand these successes to other types of housing,”

The Senate’s FY10 HUD appropriations bill includes $250 million for CNI, as HUD requested in March. The House HUD appropriations bill does not including funding for CNI, but would fund HOPE VI. The House and Senate bills are now in conference to iron out their differences, including whether to include CNI in the final FY10 HUD appropriations bill. (Absent an enacted FY10 bill, HUD programs are operating under a continuing resolution that runs through December 18; see Memo, 10/30).

“Whatever happens in appropriations,” Secretary Donovan said, “we want to have a full authorizing conversation” on this proposal. NLIHC opposes including CNI in the appropriations bill, believing instead that the House and Senate authorizing committees should shepherd such major legislation toward enactment.

The proposal released November 6 is consistent with what NLIHC earlier understood to be in the proposal (see Memo, 10/2); it is described here in greater detail.

Purposes and Eligibility. The purposes of CNI, as laid out in HUD’s proposal, are:

• to transform neighborhoods of extreme poverty into mixed-income neighborhoods of long-term viability by revitalizing severely distressed housing, improving access to economic opportunities, and investing and leveraging investments in well-functioning services, educational opportunities, public assets, public transportation, and improved access to jobs;

• to grow communities and metropolitan areas by concentrating and coordinating federal funding for public transportation, education, housing, energy, supportive services, and environmental programs and initiatives; and

• to support positive outcomes for families, including improvements in educational achievements and economic self-sufficiency.

In order to be eligible for CNI, a neighborhood would have to have a concentration of extreme poverty, defined as a place where a high percentage of a neighborhood’s residents are estimated to be in poverty or have extremely low incomes and be experiencing distress because of high crime rates, high rates of vacant, abandoned, or substandard homes, or high rates of failing or poorly performing public schools. In addition, the neighborhood would have to have severely distressed public or assisted housing, and a potential for long-term viability once key problems are addressed.

HUD Secretary Donovan explained that the current CNI proposal does not include a hard definition of “distressed,” noting that definitions in the proposal were intentionally left vague to allow for local flexibility for measures of distress. “Distressed can look different in different communities,” he said.

NLIHC would like to see more specificity in these definitions, to ensure that properties and communities most in need are funded, and will urge HUD to improve its CNI proposal in order to require an engineer or architect’s certification of severe distress. One of the lessons to be learned from HOPE VI is that land values and gentrification goals alone drove some communities’ decisions to pursue HOPE VI redevelopment, not whether the public housing redeveloped was indeed severely distressed.

Secretary Donovan said that if HUD were to use Real Estate Assessment Center (REAC) scores of below 80 to identify distressed assisted housing, and Census tracts where more than 40% of residents live in poverty as “high poverty” communities to identify eligible CNI neighborhoods, then 325,000 public and assisted housing units, out of a total of about 2.5 million nationwide, would be eligible for CNI. HUD’s REAC assesses the physical and financial health of HUD’s public and assisted housing stock.

Secretary Donovan worked to allay housing authorities’ concerns that, if CNI replaces HOPE VI, housing authorities will lose access to funds that have been exclusively set aside for public housing redevelopment. He noted that of the eligible neighborhoods, those in which there is a high concentration of poverty and a high concentration of distressed public and/or assisted housing, there are three times as many public housing units than assisted housing units. And, where there are assisted housing units in these eligible neighborhoods, Secretary Donovan said, in half of them there are also public housing units.

Required Activities. Under HUD’s proposal, CNI would authorize certain required and eligible activities to be carried out by CNI grantees. Required activities include:

• the transformation of housing through rehabilitation, preservation, and demolition and replacement of severely distressed housing that incorporates energy efficient principles, and activities that promote economic self-sufficiency;

• activities that demonstrate that each resident who wishes to return to the revitalized on-site housing or replacement housing outside of the neighborhood can return and must be provided a preference in the new housing;

• replacement housing;

• fair housing activities;

• service coordination, support services, mobility counseling and housing search assistance for residents displaced as a result of revitalization of severely distressed projects;

• resident involvement in planning and implementation of the transformation plan;

• tracking of residents relocated during redevelopment throughout the life of the grant or until full occupancy of the replacement housing, whichever is longer; and

• links to local educational efforts.

NLIHC will urge HUD to provide significantly more specificity relating to resident involvement in planning and implementation of CNI required activities. NLIHC will also urge HUD to include mechanisms for non-public and assisted housing residents to participate in such consultations. Building on lessons learned from resident displacement and neighborhood upheaval in HOPE VI, NLIHC will also want to ensure that residents are provided with adequate relocation assistance over the long term.

Another critical aspect of redevelopment is the right of residents to return to revitalized housing. Since none of the revitalized housing in CNI would have to be built on site, residents would have no right to return to their neighborhoods. A resident who was lease-compliant before and during redevelopment, the required activities say, must receive  preference for a replacement unit before any such units are made available to any other eligible households, or the resident may choose a Housing Choice Voucher instead. The proposal does not provide details on how residents will be offered the opportunity to make such a choice and whether they will be able to change their minds.

Instead, many activities related to relocation are included in a long list of eligible activities. Activities designated as eligible under CNI include relocation assistance, Housing Choice Vouchers, and supportive services for families that are displaced, including mobility and relocation counseling over multiple years, reasonable moving costs and security deposits. NLIHC expects these to be required activities, rather than only eligible activities, under CNI.

The proposal makes clear that the Uniform Relocation and Real Property Acquisition Policies Act would apply to all CNI relocation activities. Furthermore, the demolition, relocation, replacement, and reoccupancy of housing under CNI must be carried out in a manner that affirmatively furthers fair housing. Grantees must adopt affirmative marketing procedures and require affirmative marketing activities of project owners and managers. Units must meet federal accessibility requirements and, according to HUD officials at the November 10 briefing, would have be meet universal design standards, which incorporate barrier-free and accessible principles into the design, as well.

The replacement housing can be rebuilt on the original project site or within the metropolitan area up to 25 miles from the original project site. Any off-site replacement housing must offer access to economic opportunities and be accessible to social, recreational, educational, commercial, and health facilities and services that are comparable to a benchmark that the bill leaves undefined. Any off-site housing rebuilt outside of the immediate neighborhood must not be located in areas of minority concentration or extreme poverty. Replacement housing can be in the form of public housing, other types of project-based assistance, or project-based vouchers. The bill does not require or incentivize phased redevelopment, which many think would better ameliorate the negative impacts of housing redevelopment on residents.

“There is no one-size-fits-all policy,” regarding one-for-one replacement of the revitalized housing, Secretary Donovan said. “In a world where we’ve lost extremely low income housing, we need a standard that protects and preserves extremely low income housing,” he said. One hundred percent of the hard units would be replaced, Secretary Donovan said, “in a large majority of cases.”

Secretary Donovan added that there are communities in which vouchers can be a tool to help families, and that there are some cases in which vouchers are an acceptable replacement for hard units. In the proposal, tenant-based housing choice vouchers can be used to replace up to half of the public housing or other assisted housing that are demolished or disposed of under the transformation plan. Using vouchers as replacement for the loss of hard units can occur only in cases which:

• the grantee can demonstrate that a minimum of 80% of vouchers issued over the last 24 months to comparable families were successfully leased within 120 days of issuance;

• existing voucher holders are widely dispersed geographically among the available private rental stock, including in areas of low poverty; and

• the grantee provides a market analysis demonstrating that there is a relatively high vacancy rate within the market area with rent and utility costs not exceeding the applicable payment standard, which dictates the value of the voucher.

NLIHC is currently analyzing the potential universe of units that could be lost by such a waiver from one-for-one replacement. One of NLIHC’s top priorities for the CNI proposal is that it not result in a net loss of homes affordable to extremely low income people.

Award Criteria. The proposal would direct the HUD Secretary to establish criteria for the award of CNI grants. These criteria would have to include 16 factors described in the proposal. The proposal does not weight or rank them. These selection criteria include:

• the ability of the applicant’s plan to further CNI’s purposes;

• inclusive local planning;

• coordination of multiple funding sources;

• data sufficient to demonstrate need, potential benefits and the neighborhood’s potential for long-term viability;

• incorporation of green building and energy-efficient design principles;

• availability of public transportation and other services;

• support for displaced residents, including assistance in obtaining housing in areas with low concentrations of poverty and minority populations;

• sufficient housing to accommodate displaced residents;

• assessment of, and plan to address, special needs for ongoing supportive services;

• the ability to leverage funds; and

•  replacement of units already demolished or disposed of pre-CNI.

Up to 10% of CNI funds can be used for planning grants and up to 5% can be used for technical assistance and program evaluation efforts

The proposal includes a mechanism for HUD to withdraw CNI funding from a grantee if it does not proceed, within a “reasonable time frame,” in implementing the transformation plan or do not otherwise comply with its grant agreement.

An annual report must be submitted to Congress by HUD on the number, type and cost of affordable housing units revitalized under CNI and the amount and type of financial assistance provided through CNI, and on “the impact of grants made under this Act on the original residents, the target neighborhoods, and the larger communities within which they are located.”

HUD will be taking comments on its CNI via choiceneighborhoods@hud.gov .

Link to HUD’s CNI at http://www.nlihc.org/doc/HUD-CNI-bill.pdf

Link to a “Quick Facts” on CNI from HUD at http://www.nlihc.org/doc/CNI-Quick-Facts.pdf