Preservation Hearing
On July 20, the House Financial Services Subcommittee on Housing and Community Opportunity held a hearing to examine the GAO study entitled, “Multifamily Housing: More Accessible HUD Data Could Help Efforts to Preserve Housing for Low-Income Tenants.”
In this study, the General Accounting Office (GAO), the investigative arm of Congress, examined preservation issues related to maturing mortgages. GAO recommend that HUD provide more accessible data to state and local housing agencies to help them better track properties with maturing mortgages, as a means to preserve affordable housing for low-income tenants. The report focused on pre-1990 Section 202s, Section 236, Section 221(d)(3) BMIRs, Section 221(d)(3) and (d)(4)s, and Section 231 properties. The study notes there are 11,267 HUD subsidized properties with 91,441 units under these programs. Two thirds of these mortgages, or 2324 will mature over the next 10 years. HUD does not offer incentives to the owners to keep properties affordable when mortgages mature.
According to a press statement issued by Subcommittee Chairman Bob Ney, “Properties subsidized under these programs represent a significant source of affordable housing across the country. Many of the commitment periods will be completed within the next 10 years. When owners pay off mortgages, in most cases the subsidized financing ends and so does the requirement to keep the units affordable; raising the possibility that rents will increase. In many areas, families simply can’t find an affordable place to live. We must look for ways to keep units affordable.”
The hearing also presented an opportunity for Rep. Barney Frank to discuss his legislation, the Displacement Prevention Act (H.R. 4679), which is intended to help preserve the affordable housing which may be lost upon mortgage maturity. It authorizes HUD to use $675 million in previously appropriated, but unused, housing funds which owners could use to renovate units, or in some cases, to receive annual payments covering the difference between subsidized rent the tenant is paying and comparable market-rate rent. The money could also be used to help non-profits purchase the properties and maintain them as affordable housing. Recipients would be required to maintain the property as affordable for low-income households for at least 10 years beyond the original date of mortgage maturity as a condition of the assistance. Also, HR 4679 requires owners who will be paying off a mortgage to notify tenants at least nine months prior to making any changes to the low-income affordability restrictions.
Testimony was heard from GAO’s witness, David C. Wood, Director, Financial Markets and Community Investment, GAO; FHA Commissioner & Assistant Secretary of Housing John C. Weicher; and public witnesses, including Bill Kargman. Bill offered his perspective of the impending mortgage maturations as an owner of Section 221(d)(3) and Section 236 properties. He also endorsed HR 4679 as a tenant-protection measure when the HUD mortgages mature. Witness’ testimony can be found at
https://financialservices.house.gov/hearings.asp?formmode=detail&hearing=324&comm=5.
A copy of the GAO report is posted in the NAHMA member webpage, Government Oversight Agencies.
VA-HUD Appropriations
The House Appropriations Committee approved its 2005 VA-HUD spending bill. While the Committee has made an effort to fully fund the Section 8 program, it did so by cutting most other programs by 4%. Also, while the Committee did NOT authorize the proposed Flexible Voucher Program in the bill, it did direct HUD to continue a “budget-based” Section 8 voucher allocation to PHAs. In other words, the Committee is not interested in resuming the practice of reimbursing the PHAs based on cost. It also divided funding for project-based Section 8 and tenant based Section 8 into different accounts, “to provide better accountability and oversight,” according to a press release issued by the Committee.
Highlights of the bill follow (figures have been rounded):
Total HUD funding: $37.7 billion, $108 million below last year’s level ($37.9 billion) and $1 billion above the President’s 2005 Request ($36.8 billion)
Section 8 programs:
- Tenant-Based Rental Assistance: $14.7 billion, $491 million over last year ($14.2 billion) and $1.56 billion over the request ($13.1 billion)
Included in this figure is $13.3 billion for Section 8 voucher renewals, which represents $581 million, or 5% over 2004 funding and $1.5 over the request.
- Project-Based Rental Assistance: $5.3 billion, $270 million over last year ($5.1 billion) and $10 million below the request ($5.4 billion)
HOME: $1.9 billion, including $1.8 billion for HOME formula grants and $85 million for the American Dream Downpayment program. This figure for total HOME funding is a reduction of $86 million below the 2004 appropriation ($2 billion) and falls $164 million below the 2005 request ($2.1 billion)
Section 202: $741 million, roughly $33 million below the 2004 level ($774 million) and $32 million below the 2005 budget request ($773 million). The allocation appears to be:
- $654,550,000 for new capital grants and PRACs
- $3 million for one-year PRAC renewals
- $48 million for service coordinators
- $20 million for assisted living conversion
- $15 million for predevelopment grants
- at least $450,000 for the Working Capital Fund
Section 811: $238 million, an $11.1 million reduction below 2004 ($249.1 million) and about $11 million below the President’s request ($248.7 million). The allocation appears to be:
- $196 million for new capital grants and PRACs
- $2 million for PRAC renewals
- $10 million for incremental tenant-based 811 assistance
- $29 million for amendments to tenant-based voucher contracts entered into before FY 2004
- $450,000 for the working capital fund
Highlights of the committee bill can be found at
https://appropriations.house.gov/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=416.
