Required Conversion

Purpose

Section 33 of the United States Housing Act of 1937 requires PHAs to identify developments (or parts of developments) that must be removed from the stock of public housing operated under an Annual Contributions Contract (ACC) with HUD. This site explains the process of Mandatory Conversion, in general, and provides an overview of the portion of the background preparation the Department will undertake for all PHA’s to identify required conversion candidates as part of the implementation of Section 33.

Background

Section 537 of the Quality Housing and Work Responsibility Act of 1998 (QHWRA) (Title V of P.L. 105-276) added a new Section 33 to the United States Housing Act of 1937 (42 U.S.C. 1437z-5). In addition, Section 533 of QHWRA amended Section 22 of the 1937 Act. Section 33 of the Act governs the required conversion of developments from the public housing stock and Section 22 of the Act governs voluntary conversions. The term conversions in this context means the removal of public housing units from the inventory of a Public Housing Agency, and the provision of tenant-based, or project-based assistance for the residents of the public housing being removed.

Separate final rules implementing Section 537 of QHRWA covering required conversion and Section 533 of QHWRA covering voluntary conversion, were published in the Federal Register on September 17, 2003, with an effective date of March 15, 2004. These rules amend 24 CFR Part 972. Public housing developments where the cost of modernizing and operating them as public housing exceeds the cost of providing tenant-based assistance to residents must be removed from the public housing inventory. Public housing developments that will not be viable over the long term must also be removed from the public housing inventory.

Conversions will have to be carried out if they are cost-effective. The cost methodology that PHAs must use to compare the cost of continuing to operate developments as public housing to the cost of providing tenant-based assistance was published as a final rule on March 20, 2006. Excel spreadsheets containing the calculations associated with the cost methodology are available below. The cost methodology for Required Conversion is different than that for Voluntary conversion.

	Calculator Rule 24 CFR 972 (Large file - Adobe PDF, 27MB)
	Cost Comparison Spreadsheet (MS-Excel)

A sample of a completed spreadsheet has been included as well.

Sample completed Cost Comparison Spreadsheet (MS-Excel)

HA's must address all clusters on the "Candidates" list on this site as part of their HA Plan submission. As part of the HA Plan the submission, HA's must

• explain why the cluster in question should not be on the list, or
• certify that it has done the calculations, and determined it is more cost effective to continue operating the cluster as low-income housing or,
• submit a conversion plan because the calculations showed the cluster is not cost effective to maintain when compared to the cost of Section 8

Implementation

Since April 20, 2006, PHAs (6 months after the effective date of the Calculation Rule), at the start of their fiscal year, PHAs are now required to review their inventory annually to determine whether any of their ACC units must be removed from the public housing inventory. The affected developments will have to be discussed as part of the PHA’s Annual Plan.

Baseline Data

As a first step in identifying the universe of public housing units potentially subject to mandatory conversion, the OPHI’s Special Applications Center (SAC) created, in the form of a report, information from HUD Field Offices identifying public housing developments that contain clusters of at least 250 dwelling units on one site or on contiguous sites. Since the movement to AMP groupings this system has been updated. Although the cluster configurations should not change, the clusters are now defined down to the building level. Development numbers are included in the report for clarity, but they have no bearing on a particular building being in a cluster. This gives us the flexibility to refine the cluster listing to be more in line with the definition of contiguous units: "Units are contiguous if they share a border, or are separated by no more than a street"

This report is being posted (in MS-Excel format, and in PDF) for review by PHAs and Field Office staff for accuracy and any required changes. It includes the HA Name, the project Development Number, and an assigned “cluster” number. The Excel report can be filtered by State and Housing Authority. Some clusters have multiple Development numbers that contain contiguous units; other clusters of 250 or more units are entirely within one Development. The PDF report is a static executive summary based on the data in the Excel file.

This report is being posted with the expectation that it will be verified and refined with the benefit of further data from Field Offices and PHAs, especially with regard to projects that individually have more than 250 units and are not contiguous to other projects. For example: some of these individual developments are identified in (PIC as “scattered site”. Because occasionally a nominally scattered site development will have a cluster of 250 units on contiguous sites, a number of these developments have been left on the list until more definitive information is obtained as to whether they meet this threshold or not.

This list attempts to include all clusters of 250 or more public housing units, even if the developments in question are otherwise exempt from required conversion. Please let us know via Email if any changes are needed. We can add/delete building from clusters, or add clusters. We need the building numbers in the format they are identified in PIC as well as the development they are currently associated with.

Cluster data is filtered against information in PIC to come up with a Candidate Cluster List. The SAC staff will run this report monthly on the first business Monday of the month, and post it here as Rich Text and Excel Files on Friday. An HA with a cluster on the list two months before submission of their HA Plan will have to address the issue in the plan they submit to their local Field Office. Cluster Candidate Data.

If an HA feels its units do not belong on the candidate list because 250, or more, units are not contiguous, the occupancy information is not correct, or other data needs correction, it must contact the field office and SAC to make the needed corrections.

SAC will rerun the report the next month, and if the cluster still appears on the report, there are two ways to address having a cluster candidate, and both require running the cost viability test.

• If the test result show it is more cost effective to keep the cluster as low-income housing with ACC subsidy, say so in the HA Plan and maintain a copy of the cost analysis in the HA files. Nothing needs to be done till the next plan submission.
• If the result shows it is more cost effective to provide the residents with Vouchers and remove the facility from ACC subsidy, say so in the HA Plan and submit an application for Required Conversion per 24 CFR 972.

From the preamble of the final rule:

PHA Plan. As provided in the July 23, 1999, proposed rule, this final rule requires that a PHA must submit any required conversion plan as part of the PHA’s Annual Plan. Since the cost methodology necessary to conduct the required cost comparisons has not yet been finalized, this final rule provides that this requirement will not become effective until PHA fiscal years commencing six months after the effective date of the cost methodology.

Since the calculator rule is effective April 30, 2006, HA’s with fiscal years starting April 1, 2007, will be the first who will have to address any developments that show up on the candidates list.

Feedback Required

Since this information will be used by HUD to monitor PHA compliance with the Required Conversion regulation, SAC encourages PHAs and HUD Field Offices to examine the current list of clusters to ensure that it is complete and accurate. The information required is to identify any developments/units that should be included on the list as additional clusters, or as part of existing clusters, as well as pointing out any developments/units that should be removed from the existing list because they are not part of contiguous sites with 250 units or more. If the SAC receives no response from a PHA, it will assume the data is correct as presented. When the program is in its implementation stage, SAC will be the final arbiter in deciding if unit/developments are contiguous. Appeals may be made to the Deputy Assistant Secretary for the Office of Public Housing Investments.

Also, since the data on this website will be used by PHA’s to prepare their HA Plans, SAC needs to know the optimal time to refresh the data. The current plan is to run the refresh program about every three months and inform those PHA’s and Field Offices if any clusters in their jurisdictions are potential conversion candidates, prior to posting the information on the website. Which months would be the best to provide PHAs with data for their PHA Plan preparation?

Feedback and questions should be directed to SAC management:

	Director - Ainars Rodins, ainars_rodins@hud.gov
	Deputy - Tammy Gray, tamara_s._gray@hud.gov