SEC-501 -- PREFERENCE RULES.


 Section 6(c)(4)(A) of the United States Housing Act of 1937 (42 U.S.C.
1437d(c)(4)(A)) is amended to read as follows:

 "(A) except for projects or portions of projects specifically
designated for elderly families with respect to which the Secretary has
determined that application of this subparagraph would result in
excessive delays in meeting the housing need of such families, the
establishment of tenant selection criteria which-

 "(i) for not less than 70 percent of the units that are made available
for occupancy in a given fiscal year, give preference to families that
occupy substandard housing (including families that are homeless or
living in a shelter for homeless families), are paying more than 50
percent of family income for rent, or are involuntarily displaced at the
time they are seeking assistance under this Act;

 "(ii) for any remaining units to be made available for occupancy, give
preference in accordance with a system of preferences established by the
public housing agency in writing and after public hearing to respond to
local housing needs and priorities, which may include (I) assisting very
low-income families who either reside in transitional housing assisted
under title IV of the Stewart B. McKinney Homeless Assistance Act, or
participate in a program designed to provide public assistance
recipients with greater access to employment and educational
opportunities; (II) assisting families in accordance with subsection
(u)(2); (III) assisting families identified by local public agencies
involved in providing for the welfare of children as having a lack of
adequate housing that is a primary factor in the imminent placement of
a child in foster care, or in preventing the discharge of a child from
foster care and reunification with his or her family; (IV) assisting
youth, upon discharge from foster care, in cases in which return to the
family or extended family or adoption is not available; and (V)
achieving other objectives of national housing policy as affirmed by
Congress;

 "(iii) prohibit any individual or family evicted from housing assisted
under the Act by reason of drug-related criminal activity from having
a preference under any provision of this subparagraph for 3 years unless
the evicted tenant successfully completes a rehabilitation program
approved by the agency, except that the agency may waive the application
of this clause under standards established by the Secretary (which shall
include waiver for any member of a family of an individual prohibited
from tenancy under this clause who the agency determines clearly did not
participate in and had no knowledge of such criminal activity or when
circumstances leading to eviction no longer exist); and

 "(iv) are designed to ensure that, to the maximum extent feasible, the
projects of an agency will include families with a broad range of
incomes and will avoid concentrations of low-income and deprived
families with serious social problems.".