Last year, HUD threatened to strip PHA of its Moving to Work status. The Housing Authority warned that the move would have jeopardized about $40 million in direct or indirect funds.
Sen. Arlen Specter (R, Pa.) said the rancor between PHA and HUD had held up a settlement and threatened the needs of 84,000 low-income clients.
"In my long service, this is one of the toughest battles that I've had to fight," Specter said in an interview.
He said there was "bad blood" between PHA and the staff of former HUD Secretary Alphonso Jackson. Jackson resigned last March in the heat of the PHA dispute, amid allegations that he used his office to help friends.
Specter, who worked with Sen. Bob Casey (D., Pa.) to broker a settlement, said the two sides "lost their civility."
"I felt like I was a referee in the middle of a boxing match who was getting hit myself," Specter said. "[PHA director] Carl Greene is a good friend of mine, but I had to wrestle him to the ground."
Greene called the agreement "a fair deal."
The tension between the agencies began escalating last year, when HUD ruled that PHA did not provide enough accessible housing. Under law, at least 5 percent of its housing stock must be appropriate for people with disabilities.
HUD took away the PHA's Moving to Work status, which provides federal aid in a block and allows an agency to spend it as it sees fit.
In December, Greene filed a federal lawsuit here accusing Jackson of retaliation. Greene said Jackson and his staff were punishing the city for not accommodating Philadelphia music producer and developer Kenny Gamble. At the time, a real estate nonprofit run by Gamble was embroiled in a dispute with PHA over the ownership of several parcels of land.
Gamble complained to Jackson. Greene held firm.
In the lawsuit, Greene warned that the loss of Moving to Work status would result in layoffs, a freeze on construction, and the loss of self-sufficiency programs for residents.
Under this week's deal, PHA will keep Moving to Work status for 10 years.
"This agreement is good for the city of Philadelphia," Greene said. "It allows us to continue rebuilding outdated communities in distressed neighborhoods."
HUD Secretary Steve Preston said in a statement that when he took office last June, he pledged to Specter and Casey that he would "seek an equitable resolution" of the dispute with PHA.
Of the agreement, he said: "Now resources can be focused on housing families in need."
PHA is the nation's fourth-largest public-housing agency, with 16,623 units in 107 developments throughout the city.
Under the Moving to Work program, PHA has the flexibility to use federal funds for rent subsidies - so-called Section 8 vouchers - for other purposes.
In recent years, PHA has used some Section 8 funding to borrow against for development projects.
Casey said the agreement would give PHA and its leadership "the flexibility they need to marshal resources to provide many low-income families a roof over their heads."
Contact staff writer Jennifer Lin at 215-854-5659 or email@example.com.