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Housing Agencies Protest Rules for Stimulus

Many of the nation's largest public housing authorities fear they will be left out when the government distributes hundreds of millions of dollars for new plumbing, roofing and other capital improvements sought by Congress in the name of economic stimulus.

Housing authorities in New York City, Los Angeles, Chicago and Baltimore are examples of agencies that fail to meet the threshold that federal officials have established for getting some of the stimulus dollars, says the Council of Large Public Housing Authorities, a trade group.

Those agencies will still get money for capital improvements because $3 billion will be spent through a formula that gives something to each of the nearly 3,200 housing authorities around the country. Still, larger agencies are unhappy about potentially missing out on a separate grants program that will distribute another $1 billion later this year.

Only housing authorities designated as "high performers" will be eligible during the first round of the competitive grants program. Also, the housing authorities must have shown an ability to spend past grant money quickly. The trade group said the new requirements for getting stimulus dollars go beyond what was required by Congress.

"In fact, some housing authorities do not plan to apply for these funds given these newly imposed and arbitrary thresholds," said Sunia Zaterman, executive director of the trade group.

Zaterman's comments appeared in a letter to Housing and Urban Development Secretary Shaun Donovan. The trade group declined to comment further, stating the letter spoke for itself.

HUD spokeswoman Melanie Roussell said the eligibility criteria provide accountability to the taxpayer.

"Because of the need to ensure Recovery Act funds are spent quickly, and the commitment to ensuring the money is well spent, HUD has given priority to those public housing authorities that have a track record of high performance and strong expenditure rates," Roussell said.

Housing authorities are evaluated based on the physical condition of their properties, customer satisfaction, their financial condition and management. "High performers" get public recognition and relief from some federal regulation. The council for large housing authorities also wants "standard performers" to get grant money.

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John King, director of planning and intergovernmental affairs for the Housing Authority of the city of Los Angeles, said his agency is only two points away from being a high performer.

"We could put that money to good use," King said. "In no way are we saying they're wrong or off, but could you potentially reconsider this as it relates to large housing authorities."

King said that larger housing authorities have a tougher job because they've had to make cuts in recent years while maintaining a massive, aging housing stock. The city's housing authority has about 7,000 units serving 21,000 people. The agency will still get $25 million regardless of how it fares with the competitive grants, but it has a backlog of capital needs that exceeds $500 million. He said the competitive grants could allow the city's housing authority to replace some complexes completely rather than remodel them.

"Where a housing development has really, really worn out its welcome, we want to look at how to redevelop the stock and not just put a Band-Aid on a bullet wound," King said.

At least $395 million is at stake in Round 1 of the competitive grants, with that money going toward facilities serving the elderly and disabled, for projects that have been stalled because of a lack of financing, and for redevelopment. Roussell said subsequent rounds of grants will open up to all housing authorities, but the council argued that it's possible little money will be left by then.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.