CLPHA highlighting my testimony to House staffers on Asset Management issues affecting public housing.

1. Directors Say Comparison With Private Sector is False
HUD’s rigid approach to asset management doesn’t recognize the real world in which housing
authorities operate, six PHA officials and representatives from CLPHA and its industry partners told
the June 14 congressional staff briefing on asset management (see related story, page one).
"Nothing in HUD’s skill set equips this Washington-based, highly centralized regulatory body to
make effective decisions about the organizational structure of the 3220 PHA owners of this
affordable housing stock," Jon Gutzmann, executive director of the St. Paul Housing Authority told
the group. "The HUD guidelines abound in ‘one-size-fits-all’ prescriptions about PHA organizational
structures masked under ‘sound asset management practices,’" said Gutzmann.
As a result of the Public Housing Operating Fund Final Rule issued in September 2005 (see
"Timeline," page 5), PHAs are in the process of transitioning to asset management. The rule
significantly alters the way public housing is funded. No longer will operating subsidies be
distributed centrally to PHAs. Under asset management, individual housing communities – rather
than PHAs – will receive funding.
To cover the costs of management and oversight functions, the rule envisions a system where PHAs
create central office cost centers, which will then charge those properties management fees, asset
management fees, and bookkeeping fees. HUD’s guidance to PHAs sets caps on allowable property
management fees which, say CLPHA and its industry partners, contradict the rule, which states that
public housing authorities must charge "reasonable" property management fees.
HUD’s management fee formula is especially flawed, said Dan Nackerman, executive director of the
Housing Authority of the County of San Bernardino, because it purports to mimic private sector
management practices and costs, but doesn’t really do so. With an owned portfolio that includes
both traditional public housing and non-HUD low-income units, Nackerman said the San Bernardino
authority has experimented with six outside management companies. Five of those companies were
ultimately let go, said Nackerman, and the sixth no longer wanted the business.
The private management was cheaper, said Nackerman, "but it just didn’t work out for us." He said
that the large number of elderly and disabled residents in public housing posed a challenge the
private companies couldn’t meet. "We’re helping a unique population," said Nackerman.
Further, noted a number of speakers at the briefing, the HUD management fee formula is based on
privately-owned FHA-backed multi-family properties. Thirty percent of those properties serve only
market rate residents and others have just a small number of subsidized occupants. And the owners
of those properties can generally increase rents to match additional costs, an option not available to
PHAs. Such apples-to-oranges comparisons will result in significant losses to PHAs if HUD’s
management fee plan is fully implemented, said several directors.
Among the additional objections voiced at the briefing: decentralization of services doesn’t make
sense for PHAs that operate in small geographic areas and restrictions on centralized procurement
don’t take into account a public entity’s purchasing requirements.
Though it is the "second highest gainer in the country" in terms of revenue under the new operating
fund formula, the New Bedford, MA Housing Authority sees the HUD plan as deeply flawed. Richard
Walega, Deputy Executive Director, noted that though the authority has approximately 1650 public

2. housing units, it operates within just a 17-square-mile area. The economies of scale that can be
gained by using, for example, centralized work crews would be lost under the HUD plan, Walega
said at the briefing.
"They’re [HUD] engaged in micro-management, there’s no doubt about that," said Walega.
How will residents be impacted if HUD’s plans are implemented as currently envisioned, asked a
congressional staff member.
In a response to a survey distributed electronically prior to the briefing, CLPHA members said that
the first area to be reduced would be security services at public housing developments. Other areas
survey respondents said would be affected include: capital planning, resident services, grounds and
facility mainteinance, minimum rents and timeliness of services.
Rating on a five-point scale (with "one" being totally insuffcient and "five" being sufficient) all
survey respondents said the fees established by HUD rate a "one" or a "two" given their missions
and business plans. Two-thirds said the fees would have to be increased by more than 15% to
enable their housing authorities to operate according to their mission and business plan.
And two-thirds also replied that they do not anticpate being able to operate within the cost control
standards created by HUD’s fees.
The two-hour briefing was requested by the staff of the House Financial Services Committee. HUD
will present its view of asset management to House Congressional staff June 29.