The Performance Funding System (PFS) is the basis for determining the level of operating subsidies for those units in the Public Housing Program that do not cover all of their operating costs through rents charged to tenants. Subsidies are allocated to Public Housing Authorities (PHAs) on the basis of a formula that relates legitimate or acceptable operating expenditures to each PHA's characteristics, including the basic configuration of its units, regional cost variations and local rates of inflation.

As of the early 1980s the operating subsidy system is in crisis. A steady growth in subsidy amounts, fueled by inflation in costs and lag in tenant-paid rents behind the general inflation rate, has produced growing reluctance to pay the total bill estimated by the PFS. PHAs have expressed dissatisfaction with the system and an evaluation has asserted that the system unfairly penalizes some types of PHAs. In 1981, Congress wrote into the HUD authorization act a requirement that HUD analyze and report on alternatives to the PFS by March of 1982.

This report is part of the collection of scanned historical documents available to the public.