project managers, clerical personnel, and maintenance foremen from the above LHAS were interviewed. Physical inspection of LHA housing projects, buildings, and individual units was accomplished by the Investigative Staff.

In addition to the HUD officials and LHA representatives mentioned above, the Investigative Staff discussed operating subsidies with the Mayor of Waukegan. Illinois; representatives of the Mayors of Boston, Massachusetts, and San Francisco, California; a police official in charge of security at one large LHA; an official of the Urban Institute, Washington, D. C.; an official of the National Tenants Organization, Incorporated (NTO), Washington, D. C.; and officials of the National Association of Housing and Redevelopment Officials (NAHRO), Washington, D. C.

Numerous documents from HUD Central Office, HUD regional offices, and area offices, as well as information from the LHAS visited, were reviewed by the Investigative Staff for data pertaining to legislation, appropriations, policy, and management procedures as they affect the issue of operating subsidies. Included in this data were documents concerning audits and budgets.

A. Background

II. HISTORY OF LOW-RENT PUBLIC HOUSING

The public housing program was established by the United States Housing Act of 1937 for the purpose of providing decent, safe, and sanitary dwelling units for low-income families. From 1937 to 1942, the Federal agency in charge of public housing was the United States Housing Authority. In 1947, an Executive Reorganization Plan decreed that the Authority should be renamed the Public Housing Administration. The functions of the Public Housing Administration were

transferred to HUD in 1965.

There are today approximately 2,700 LHAs throughout the country, the vast majority of which are small (some have as few as 6 to 8 housing units) and lack full-time staffs. Often, the executive directors who work on a part-time basis at these small LHAs must, themselves, deal with the complex development and management problems that arise. The Investigative Staff was advised that in some areas executive directors may be in charge of several small LHAs, are poorly paid (as low as $30 per month), and thus lack the incentive necessary to direct efficient operations.

With regard to HUD, many officials who worked in public housing since its inception have left the Federal Government. This situation, together with the fact that HUD recently decentralized its operations by creating area offices within its 10 regional offices and, by so doing, shifted primary responsibility for administration of the LHAS from the regions to the areas, has magnified the management problems. The end result has been that less experienced HUD officials have been required to take on additional responsibilities not only in public housing but for Federal Housing Administration (FHA) programs as well,

since both programs have been intermeshed at the area office level. In this regard, it should be pointed out that many area office personnel contacted by the Investigative Staff seemed genuinely concerned with the problems confronting LHAS but stated they do not have sufficient staff to adequately assist them in all facets of their operations.

HUD area offices (and insuring offices) are responsible for operating and decision-making functions in the field and are the Department's principal point of contact for program participants and sponsors. In most instances, delegations to take final action have been decentralized to the area office level. The actual supervision, coordination, and evaluation of the 39 area offices is the responsibility of the 10 HUD regional offices. HUD Central Office, of course, makes and interprets policy; establishes priorities; promulgates standards, criteria, and procedures for all levels of field operation; and directs program administration.

LHAS are under the direction of an executive director who is usually appointed by a board of commissioners and is directly responsible for carrying out the policy they establish. The commissioners are appointed in accordance with state or other enabling legislation, and usually serve without pay. LHAS operate under local governments and are regulated by state laws which enable them to carry out low-rent public housing programs in their respective communities. As of the end of FYs 1974 and 1975, the number of low-rent public housing dwelling units estimated by HUD to be under management are as follows:

lease, own,

With financial and technical assistance from HUD, LHAs plan, build, acquire, and operate low-rent public housing projects. Annual Federal contributions are made to cover the debt service on local authority bonds or notes sold to pay for the development or acquisition of public housing and to maintain the low-rent character of the dwellings. Federal loans or federally guaranteed

private loans are made available to LHAs for the planning and construction of the dwelling units. Such loans are repaid from the proceeds of the bonds sold

to permanently finance the project.

1. Basic Types of Public Housing

There are several basic types of dwellings provided by LHAs which are

within reach of the low-income people. They are:

Conventional

Under this format, an LHA acquires land and engages an

architect to plan a project. The plans are then put out for bid and awarded to the lowest bidder. Until 1965, nearly all public housing was built by this method. The primary problem with this method was that it took too long to complete, up to 5 years in some cases.

Turnkey

In 1965, in order to expedite availability of public housing, HUD devised the Turnkey procedure. Under this format, the developer/builder purchases the site, retains his own architect to design the plans, and offers to sell the project to the LHAs at a stipulated price upon its completion.

Leased Under this method, LHAs lease standard dwellings from private owners and make them available to low-income families. LHAS may also use the

leasing authority to encourage developers to rehabilitate structures or build

new structures, and likewise lease them to low-income tenants.

2. Federal Funding

Authorization for the payment of annual contributions to assist LHAS

to attain and maintain low-rent public housing is derived from the United States Housing Act of 1937, as amended. The basis for these payments is the contract authority utilized, and they are generated through appropriated funds. LHAS receive these funds in the form of fixed annual contributions.

a. Fixed Annual Contributions

These are payments on an annual basis and are limited to the amount of funds necessary to liquidate capital indebtedness. For leased housing, the fixed annual contributions are limited to the equivalent of that which would be established for newly constructed housing designed to accommodate the like number, sizes, and types of families. Such payments are made in accordance with contracts entered into under the law and are backed by the full faith and

These annual contribution requirements are based on amendments to

annual contribution contracts. Payments finance debt service on needed capital improvements to projects.

C. Operating Subsidies

These funds are paid to LHAS pursuant to the HUD Act of 1970, which authorized the payment of additional annual contributions to LHAs to (1) assure the low-rent character of the projects, and (2) to achieve and maintain adequate operating services, maintenance services, and reserve funds. Also included in this category are the special family subsidy payments of $120 per year for