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The budget submitted to Congress for fiscal year 2005 includes a new reform demonstration program for the nation's Public Housing Authorities (PHAs) called "Freedom to House." Intended to maximize the ability of PHAs to make decisions affecting their tenants, the proposal would allow participating agencies to combine use of their capital and operating funds, set locally determined rent structures, free themselves from many administratively burdensome federal reporting requirements, and shift to an asset-based management practice.
Freedom to House is meant succeed the U.S. Department of Housing and Urban Development's (HUD's) Moving to Work (MTW) demonstration, enacted in 1996 and still ongoing. Like the smaller-scale older demonstration, the new one would waive certain regulations in order to ease federal restrictions on participating PHAs. The budget proposal declares, "The Moving to Work Program has shown that residents and PHAs have benefited from increased local flexibility. These PHAs are convinced that their reforms have encouraged residents to seek work, work more hours and pursue opportunities to increase their incomes."
The Urban Institute recently completed Housing Agency Responses to Federal Deregulation: An Assessment of HUD's "Moving to Work" Demonstration [http://www.hud.gov/utilities/intercept.cfm?/offices/pih/programs/ph/mtw/evalreport.pdf] that places the demonstration into its policy context, details its legislative history, describes the activities participating housing agencies undertook, and assesses their effects to date-as best can be determined with limited information. Among other things, the report observes that:
- Participating agencies choosing to take advantage of unique merged funding opportunities under MTW made limited, yet strategic uses of their funding fungibility authority, with some (although not all) of them considering this authority to be essential to their ability to respond effectively to local market conditions and consumer preferences;
- Most participating agencies experimented with a range of alternative approaches to the percent-of-income method of calculating tenant rent contributions, with some completely detaching the determination of rents from incomes; and
- Some participating agencies used MTW to alter specific HUD procedural and reporting requirements considered by them to be redundant, unresponsive to local housing markets, or inconsistent with local needswhich sometimes produced modest improvements in efficiency and cost savings.
I urge you to read the report itself to better understand these and other observations, as well as the wide range and character of the activities undertaken by different MTW agencies. I also urge you to read it to appreciate the demonstration's limitationsincluding the extent of its evaluability.
While we report some interesting findings about the MTW experience, these may be less significant than our broader observation that the initial demonstration was too constrainedbecause of its history, design, and implementationto be able to demonstrate convincingly the benefits (or pitfalls) of federal deregulation. Waivers of federal statutes and regulations may, indeed, produce desirable effects but, unfortunately, there is relatively little hard evidence to show this, or to show that such effects are the result of having greater local autonomy as opposed to other causes. That is undoubtedly why HUD's budget proposal asserts that "PHAs are convinced" of the benefits of their MTW reform activities, a standard considerably lower than that which might persuade otherwise neutral, much less skeptical, observers, of such benefits.
The Freedom to House demonstration intends to correct the fact that there is little hard or independent evidence showing federal deregulation of public housing to be a net benefit to local communities and program beneficiaries. As proposed, 50 participating PHAs would be compared to a "control group" of 50 others abiding by current public housing laws and regulations, using such parameters as financial health, physical safety and soundness, and other performance measures. How this is to be done is yet to be determined, but it is clear that only by building evaluation into the design of a new demonstration is there a possibility of validating the benefits (as well as determining any negative consequences) of federal deregulation.
Beyond program design, there is yet another important lesson to emerge from MTW that speaks to whether a successor deregulation demonstration can achieve more definitive results. With all due respect to the parties involved, Freedom to House needs to be approached very differently than was MTW by both housing agency and HUD players. Conversations with federal and local officials in the course of assessing the demonstration made clear that MTW was spawned and implemented under conditions of excessive mutual cynicism and distrust. This promoted, from the very beginning, an adversarial climate that helped to undermine a potentially instructive experiment. It also contributed to premature promotion of alleged good results and excessive spin and posturing on the part of some deregulation advocates, as well as a dismissive attitude on the part of some opponents. Acceptance of the presumption that deregulation is either inherently good or bad for public housing appeared to far overshadow any interest in actually demonstrating this effect.
The MTW experience reinforced what was observed in a series of national surveys conducted for HUD by the Urban Institute in late 2000 and early 2001-that PHA officials were the most disaffected of all of HUD's major program implementation partners. They exhibited a level of dissatisfaction with HUD that was extraordinary by comparison (How's HUD Doing? Agency Performance As Judged By Its Partners). [http://www.huduser.org/publications/polleg/hows_hud.html] In some instances HUD's motives, and in most instances its systems, were perceived to be antithetical to local expression, and suffocating in their effects. Regardless of etiology, such an attitude certainly did not contribute to the development of an MTW demonstration climate dedicated to honest discovery. MTW was viewed by many as a strictly adversarial contest, with multiple housing agency executives opining that HUD's only obligation under a deregulation regimen should be to write a check, do some limited due diligence, and then disappear. Likewise, some agency executives considered requirements to collect information for purposes of evaluating MTW to be antithetical to the spirit of deregulation.
In mirror image fashion, many in HUD as well as some external advocates were suspicious of the public housing industry's deregulation motives, believing housing agencies wanted nothing more than to get away with whatever they could at the expense of federal agency accountability and, possibly, resident interests. Citing instances of fraud, waste, abuse, or mismanagement on the part of some agencies, and recognizing an inability on HUD's own part to administer a national program involving thousands of local entities in anything but a standardized, formalistic manner, institutional reaction in some quarters was to see deregulation as a violation, rather than an opportunity for innovation and demonstrating improved program effectiveness.
That these attitudes need to be adjusted under a Freedom to House demonstration seems self evident, but it is certainly not clear how to legislate or otherwise bring about such change. Each party has its own legitimate perspectives, which cannot be expected to always be in harmony. What is desirable, however, is that a genuine deregulation experiment whose purpose is to assess impacts be built on creative synergy between the parties. That would be a vast improvement over the mutual antagonism that burdened much of the Moving to Work experience.
Housing agency executives wishing to participate in a new demonstration should not be able to sign on unless they commit, at minimum, to collecting and supplying information and access that allows evaluation of results. Representing the lager public housing community's interests, their cooperation is necessary to demonstrate what can be accomplished through deregulation. Yet it is probably less accepting the burden of information collection and allowing access, than it is exhibiting a genuine interest in using the opportunity to learn, which would be most helpful. If there is a way to reserve participation for those agencies whose leadership shows such an interest, the demonstration is likely to improve considerably upon the MTW experience. Also, should local agencies make bad decisions, they should not be expect to be bailed out by the federal government: the consequences of more local autonomy, be they good or bad, need to be real.
HUD too needs to adjust its attitude toward local agencies, as well as its standards and procedures for monitoring participants in a new demonstration. This requires suspending the view that only through strict federal regulation and oversight of process can public housing benefits be distributed fairly, effectively, and efficiently, and stepping back to genuinely release local agencies from a regulatory grip. In essence, HUD must somehow rid itself of a condescending attitude that promotes treating housing agencies as if they are incapable of making good decisions on their own. Conversely, HUD must not be liable for every local program misstep that may occur in this experimental mode. Undoubtedly some of the experiences to result from greater local control and autonomy will not be positive, but the new demonstration is proposed as a means of informing policy makers about the value of current practices versus having increased local flexibility. As a learning experience, HUD has to accept the fact that some adverse consequences may not necessarily be worse than a regulatory environment that stifles innovation, deflates morale, and promotes programs that are out of step with community interests.
Unless the mutually antagonistic and counterproductive attitudes that surrounded a fair portion of the MTW demonstration are suspended, five years from today we will still be asking if deregulation is productive or counterproductive, and whether public housing is ready for freedom.
Note: This report is available in its entirety in the Portable Document Format (PDF).