Senate Votes Reform in Formula for HUD Rehabilitation Aid

The Senate moved Thursday to correct a glitch in a federal formula that denies housing rehabilitation aid to Santa Ana, Anaheim and other middle-class communities but makes it available to such wealthy cities as Laguna Beach and Beverly Hills.

Rep. Robert K. Dornan (R-Garden Grove), Orange County lobbyists and Santa Ana city officials pushed for the action after the Department of Housing and Urban Development unveiled a new eligibility formula in June for its troubled rehabilitation program for moderate-income housing.

Under the formula, Laguna Beach became the only county city eligible to apply for federal rent subsidies used to support the private rehabilitation of aging apartment buildings, despite the city’s relative affluence.

Gap in Per-Capita Income

Annual per-capita income in Laguna Beach is estimated at $28,109; it is $11,588 in Santa Ana and $14,611 in Anaheim. In Los Angeles County, Beverly Hills is eligible to apply for the low-income housing funds, while such communities as Compton and Whittier are not.

Housing experts have attributed the problem to an eligibility formula borrowed from another HUD program. Some experts have said the formula unfairly favors communities where rents are high, even if they also boast high income levels.

The Senate approved by a 92-8 vote a $67-billion appropriations bill for HUD and the Department of Veterans Affairs that includes language instructing HUD to take its moderate rehabilitation formula back to the drawing board. The bill will next be debated by a House-Senate conference committee.

“The committee directs the department to issue no new awards under this program until it has revised its new regulations to more properly target these moderate rehabilitation funds to lower-income communities,” the bill states.

The Senate took special note of problems faced by Orange County. “The most pointed example of this unintended negative consequence (of the new formula) is in California, where the cities of Laguna Beach and Beverly Hills can qualify for funds under the new regulations, but a community with a lower per-capita income like Santa Ana cannot,” the appropriations bill notes.

The directive would affect $220 million in Section 8 rent subsidies not yet allocated in the current fiscal year, which ends Sunday. Neither the House nor Senate included money to continue the moderate rehabilitation program next year.

HUD Secretary Jack Kemp suspended the program April 26 after the agency’s inspector general reported widespread favoritism and abuse in contract awards. It was reinstated, with the new formula, in early June.

HUD Withdraws Commitment

Before the program was halted, HUD officials agreed to provide Santa Ana with rent subsidies to provide financial backing for renovation of 100 more housing units. HUD withdrew the commitment when Kemp suspended the program.

The HUD bill was fashioned by the Senate Appropriations Committee’s subcommittee on HUD, whose chairwoman is Sen. Barbara A. Mikulski (D-Md.).

Dornan, Santa Ana city officials and the city’s lobbyists in Washington pushed hard for the order to change the formula.

The measure will go to a House-Senate conference committee, which will draft the final version of the bill. The House did not include the order to change the moderate rehabilitation formula in its version of the HUD appropriations bill.

“We will write to every conferee to make sure that this thing doesn’t get lost in conference,” Dornan said. “This (formula) is absurd.”