Voluntary Conversion

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Voluntary Conversion of Developments from the Public Housing Stock

On September 17, 2003, HUD published a final rule covering the program for voluntary conversion of developments from the stock of public housing, as part of the implementation of the changes made to Section 22 of the U.S. Housing Act of 1937 by Section 533 of the Quality Housing and Work Responsibility Act of 1998. This rule (Federal Register 68 page 54612) will become effective March 15, 2004, forming part of 24 CFR 972. It follows the rule issued June 22, 2001 governing the initial assessments, which these statutes require PHAs to perform, addressing the suitability of certain of their developments for conversion from the stock of public housing. Conversion in this context means the removal of developments from public housing Annual Contributions Contracts, and the provision of tenant-based or project-based assistance, and/or relocation to comparable housing, for residents.

Voluntary conversion may be undertaken only where it would be beneficial to the residents of the development being taken off public housing and to the surrounding area, and where it would not have an adverse impact on the availability of affordable housing in the area.

Further, conversions are permitted only 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 also published as a final rule on March 20, 2006. Notice PIH 2008-35 (HA), which was extended by Notice PIH 2009-42 (MS-Word) assists PHAs in completing the cost-test analysis and in complying with the applicable cost-test requirements. 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, 27 MB)
	Notice PIH 2008-35 (HA) Subject: Cost-Test and Market Analyses Guidelines for the Voluntary Conversion of Public Housing Units Pursuant to 24 CFR Part 972
	Notice PIH 2009-42 (MS-Word) Subject: Extension of Cost-Test and Market Analyses Guidelines for the Voluntary Conversion of Public Housing Units Pursuant to 24 CFR Part 972
	Cost Comparison Spreadsheet (MS-Excel)

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

Sample completed Cost Comparison Spreadsheet (MS-Excel)

The Department will not accept any applications for Voluntary Conversion until the HA has performed an assessment, and included it in an HA Plan.

Conversion Assessments

After the rules become effective, PHAs who wish to convert voluntarily public housing developments or units must perform a conversion assessment and (unless they are exempt) submit it as part of the next PHA Annual Plan and 5-Year Plan submissions. PHAs that are "high performers", or who manage less than 250 public housing units, may submit conversion assessments directly to the Special Applications Center (SAC) and local Field Office independent of the PHA Agency Plan process. The conversion assessment must contain a cost analysis using the cost methodology final rule.

Conversion Plans

After the conversion assessment is performed, a conversion plan may be developed. In the conversion plan the PHA must address comments received from affected residents after the plan is distributed to them and meetings are held with them to discuss it.

The conversion plan must be submitted no later than one year after the conversion assessment is performed. It may be incorporated in the same Annual PHA Plan as the assessment or the following year's Plan, or incorporated as a significant Plan amendment, (unless the PHA is exempt due to high performance or small size). Exempt PHAs may submit conversion plans directly to the SAC for review, with copies provided to the HUD Field Office and maintained as available for on-site public inspection.

The conversion plan shall describe the future uses or disposition of the development after it is no longer public housing. HUD approval of voluntary conversion plans that address future uses of the site will make it unnecessary for PHAs to also apply for disposition or demolition approval under Section 18 of the U.S. Housing Act of 1937.

Details of the content of conversion plans will be available at this site in the future.

HUD review of conversion plans will be treated separately from the PHA Annual Plan. A PHA needs a written approval from HUD in order to proceed with conversion. Applications for voluntary conversion will be made electronically by PHAs through the PIC system demolition/disposition submodule. After the rules become effective, the HUD Special Applications Center will provide all PHAs with at least a preliminary response within 90 days of their submitting a conversion plan.

Initial Assessments

The final rule governing initial assessments (Section 22(b)(2) of the United States Housing Act of 1937) issues a new 24 CFR 972.200. Under this final rule, a PHA must certify that it has reviewed each covered development's operations as public housing; considered the implications of converting the public housing to tenant-based assistance; and concluded that conversion of the development may be: (i) appropriate because removal of the development would meet the necessary conditions for voluntary conversion; or (ii) inappropriate because removal of the development would not meet the necessary conditions. Necessary conditions for conversion are 1)that it would not be more expensive that retaining the units as public housing; 2)that it would principally benefit the residents, and 3)that it would not reduce the availability of affordable housing in the community.

The required initial assessment is a non-binding evaluation of the appropriateness of voluntary conversion for each property. The assessment is intended to consist of a common sense review of relevant factors for each covered development, and does not require a market study or application of a cost test. Rather, a PHA should consider whether voluntary conversion may be appropriate or inappropriate, taking into account factors such as modernization needs, operating cost, ability to occupy the development, FMR levels and/or workability of vouchers in the community, or other considerations the PHA deems relevant. A PHA may decide to undertake detailed studies regarding potential voluntary conversions, but this is not required. In addition, PHAs are cautioned that the cost test and other assessment criteria laid out in the Proposed Rule of September 17, 2003 are subject to change; as such, there is no advantage to adopting this methodology for the initial assessment.

A PHA must retain and have available for public review a brief narrative description (which may be as short as a few sentences) to document its reasoning with respect to each covered development. PHA are required to report, as an attachment to the PHA Plan template, on their efforts to assemble initial assessments in PHA Plans, commencing with Plan fiscal years covering January 1 - December 31, 2002. Notice PIH 2001-26 (HA), issued August 2, 2001, identifies five questions PHAs must address regarding voluntary conversion as a part of the PHA plan:

Component 10 (B) Voluntary Conversion Initial Assessments

a. How many of the PHA's developments are subject to the Required Initial Assessments?
b. How many of the PHA's developments are not subject to the Required Initial Assessments based on exemptions (e.g., elderly and/or disabled developments not general occupancy projects)?
c. How many Assessments were conducted for the PHA's covered developments? d. Identify PHA developments that may be appropriate for conversion based on the Required Initial Assessments: Development Name Number of Units
e. If the PHA has not completed the Required Initial Assessments, describe the status of these assessments.

The "initial assessments" themselves need not be submitted to HUD, except as elements from them may be incorporated into conversion assessments of those developments for which the PHA may elect to apply for voluntary conversion.

If you have any questions please contact SAC Management: