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October 23, 2015

Rural Development Staff Testify in Senate On Wednesday, October 21, the Senate Appropriations Agriculture Committee’s Subcommittee on Rural Development, Food and Drug Administration held a hearing to review recent activities within the U.S. Department of Agriculture’s Rural Development (RD) Office. Numerous RD programs were discussed throughout the hearing, but both Subcommittee Chairman Jerry Moran (R-AR) and Ranking Member Jeff Merkley (D-OR) were able to ask pointed questions on the ongoing crisis in the Section 521 Rental Assistance (RA) program. Two separate panels of witness testified at the hearing. The first panel consisted of RD staff which including the Under Secretary of RD, Lisa Mensah, and Administrator of the Rural Housing Service, Tony Hernandez. The second panel consisted of industry stakeholders like Tony Chrisman, Vice President and Owner of Chrisman Development, an affordable and market rate housing development/management company in Enterprise, Oregon. Chairman Moran was the first to ask about the RA program and began by highlighting the growing expenses in the program and questing the Under Secretary on the amount of RA needed to renew all expiring rental assistance contracts in fiscal year 2016. Ms. Mensah acknowledged the challenges in the agency’s forecasting for RA payments, but she did not provide a direct answer on the amount necessary to fund all contracts. Senator Merkley picked up on this line of questions later in the hearing, stating that RD had notified the Subcommittee previously that $101.5 million was necessary to cover the RA shortfall amount for FY 2015, and that an additional $120 million would be necessary for FY 2016. He then mentioned that language was included in the recently passed Continuing Resolution to allow RD to retroactively pay underfunded contracts from FY 2015 with FY 2016 RA funding, but that properties are still not receiving their RA; Senator Merkley wanted to know if the agency intended to fill the RA funding gap. Administrator Hernandez replied that RD is currently using funding provided under the continuing resolution to pay contracts renewing in FY 2016 and that they do not currently have the legal authority to pay FY 2015 contracts despite the continuing resolution language. Senator Merkley asked for the direct citation of this legal authority, but Hernandez was unable to provide a final answer, replying that he would follow up with the Senator’s office with a response later on. It was revealed by Senator Merkely that this was the first time that the subcommittee was made aware of this legal issue. Merkley concluded his questioning by stating the tremendous financial risk to properties caused by the lack of RA, and that the current situation was unacceptable. There were no more question about RA during the first panel, and the agency staff left the hearing room after fielding questions on rural broadband connectivity and energy initiatives. The second panel then took over. Again the discussion covered numerous RD programs, but in his opening testimony, Tony Chrisman was provided time to outline how the RA shortfall has impacted his company and properties. Of the 100 properties owned and managed by Chrisman, 75 percent have been funded through RD multifamily housing programs and receive RA. This summer, he received a single notice from RD that one project was going to run out of RA in 30 days and would not be eligible for further payments for five months. He also learned that since RD budgeted each project’s RA payments based upon a state-wide average and not their actual budgets, any projects which had higher than the state-wide average of Rental Assistance faced a shortage. But now as of October 15, Chrisman’s company has 17 projects representing 770 low income households that have not received RA for at least one month. The total amount of the RA not paid to him to date is $365,000. For a small companies such as ours, the consequences of this situation could bring an end to our business. Yet Chrisman received no official notice or any indication from RD that payments would not be made with one exception. Since these payments generally represent about 80% of the total monthly revenue for each affected property, he noted that the consequences of this situation could bring an end to his business. Chrisman was asked about the effect this situation could have on the tenants residing in his properties. He shared that the average household income in the Chrisman portfolio is less than $10,000 per year, and that without regular RA payments, most of these tenants cannot afford the full rent on their own. These tenants face being displaced and possible homelessness due to the lack of RA. Included in Chrisman’s written testimony is a request that language limiting the ability of RD to renew contracts only once a year must be removed from funding legislation for FY 2016. NAHMA and its industry partners share this sentiment, and we have spoken with lawmakers on the complications it injects into the RA program. Though this language barring contracts from renewing within their 12-month terms has been in effect for a short time (first implemented in FY 2015), it has caused significant damage in the RA portfolio. NAHMA will continue to pursue removal of this language from law and we will also continue to follow up with RD staff on the exact legal situation which is preventing them from repaying the shortfall on FY 2015 RA contracts. The agency has not been forthcoming with crucial information throughout this crisis, and NAHMA understands the frustration and concerns of property owners and managers. To view an archived webcast of this hearing, please click here House Hearing on Federal Housing Reforms that Create Housing Opportunity On Wednesday, October 21, the House Financial Services’ Housing and Insurance Subcommittee held a hearing entitled “The Future of Housing in America: Federal Housing Reforms that Create Housing Opportunity.” The main subject of this hearing was the recently introduced bill, H.R. 3700, the Housing Opportunity Through Modernization Act of 2015. This bill was introduced by Representative Blaine Luetkemeyer (R-MO) on October 7, 2015; Representative Luetkemeyer is the Chairman of the Housing and Insurance Subcommittee. There were many witnesses for this hearing, each representing a different facet of the housing industry. The witness panel included (the links below will direct you to the individual witness testimony): Representative Roger Williams (R-TX) was one of the Subcommittee members to ask about the reforms included in H.R. 3700 and what effect they will have on housing in the United States. He prefaced this question by highlighting the excellent public-private partnership created by the Housing Choice Voucher program, but stating that the program has become bogged down by inefficient and duplicative regulations. He asked Stephen Merritt of the Norwood Housing Authority to describe the most critical issues facing the broad assisted-housing portfolio and how H.R. 3700 will make improvements. Mr. Merritt noted the benefit of increasing access to Project-Based Vouchers as included in H.R. 3700, and how this provision will allow the federal government to better provide for underserved populations. Representative Williams also turned his attention to the financing challenges present in affordable housing development and if it is always necessary for developers to seek multiple streams of financing to complete a project. Kevin Kelly of the National Association of Home Builders responded that securing financing for affordable housing projects is a tremendous challenge. Mr. Kelly did promote the critical importance of project-based vouchers and the Low-Income Housing Tax Credit (LIHTC) in securing financing during his response. Representative Keith Ellison began his allotted time for questions by noting that while the reforms included in H.R. 3700 can address many housing assistance needs, the demand for affordable housing is ever increasing and that he would like to see the federal government pursue a dramatic increase in funding for housing programs. He asked Will Fischer of the Center on Budget and Policy Priorities to explain a chart on the need for affordable housing. Fischer’s chart showed that families with the worst-case housing needs (as reported by HUD) has skyrocketed since the 2008 financial crisis but that the number of families receiving rental assistance from HUD has seen a marginal increase. The written testimony delivered by the witnesses provided a more detailed analysis of the reforms included in H.R. 3700. Generally, the groups praised the bill and plugged support for specific provisions. For example, Chris Polychron of the National Association of Realtors commended provisions that will allow tenants in Section 8 properties to occupy their unit prior to the Public Housing Authority (PHA) inspection, if the property had been inspected in the last 24 months. His testimony stated that this will expedite tenancy and eliminate fiscal concerns since the unit remains vacant pending the inspection. Mr. Polychron also praised the bill’s inclusion of language on certifications that will ease burdens on landlords and tenants alike by lengthening the time between income certifications for tenants on a fixed income to once every three years. This language is derived from a previously introduced bill, H.R. 5776, the Tenant Income Verification Relief Act, submitted by Representatives Ed Perlmutter (D-CO) and Steve Stivers (R-OH) in December of 2014. NAHMA also supports many of the provisions included in H.R. 3700. It can be seen as a broad, bipartisan reform bill which will incorporate several positive changes into HUD assisted-housing programs. We will continue to support this bill and urge lawmakers to pass it into law. To view an archived webcast of this hearing, please click here House Hearing on the Impact of HUD’s Federal Housing Policy Following the hearing on H.R. 3700, the full House Financial Services Committee held a hearing on Thursday, October 22 entitled “The Future of Housing in America: 50 Years of HUD and its impact on Federal Housing Policy.” This hearing also had a variety of witnesses including: In his opening remarks, Committee Chairman Jeb Hensarling (R-TX) criticized HUD for its growing budgetary needs, and, as Hensarling sees it, few measurable successes in reducing overall homelessness and generational cycles of poverty in the United States. He stated that the Financial Services Committee will have several hearings on HUD and its programs, noting that the Committee wants to identify bipartisan options to improve the Department. Hensarling has also recently requested public input on reforms HUD can make to improve efficiency and reduce the time families spend in federally-assisted housing programs. Ranking Member Maxine Waters (D-CA) contested Hensarling’s remarks and used examples of successful homelessness assistance program that she has seen first-hand. Representative Blaine Luetkemeyer (R-MO), chairman of the Financial Services’ Housing and Insurance Subcommittee, followed and he too criticized HUD for its high costs and regulations, which he cited as an obstacle to affordable housing development. Representative Luetkemeyer also criticized HUD Secretary Julian Castro for failing to deliver housing reforms and metrics to measure the Department’s success. The discussion initially centered on the Moving to Work (MTW) program and the effect it has in helping low-income tenants of public housing find jobs and training. Representative Carolyn Maloney (D-NY) then asked about the panelists to describe how the Department can improve its operations considering the declining funding resources and increasing demands for affordable housing. However, the panelists did not have sufficient time to address her questions. Representative Nydia Velazquez (D-NY) then asked about the Rental Assistance Demonstration (RAD) program, particularly on its effect on low-income tenants and whether expansion of the program is justified considering the limited knowledge of what impacts residents face. Orlando Cabrera replied that the focus within RAD is the condition of properties and the turnaround time to renovate units to make them habitable. Velazquez then turned her attention to the Housing Trust Fund and asked Xavier Briggs of the Ford Foundation to describe the importance of the fund in efforts to create housing for the extremely low-income. Mr. Briggs replied that it is an available stream of resources outside of the appropriations process, which has been insufficient to meet the growing needs for affordable housing, and the targeted financing it provides which the private market does not typically provide. Much of the ensuing discussion again focused on work requirements and MTW, but later in the hearing, Representative Randy Hultgren (R-IL) asked the panelists to describe how Low-Income Housing Tax Credit (LIHTC) dollars can be leveraged to create more affordable housing. Howard Husock, of the Manhattan Institute suggested that lawmakers consider altering the time that residents are allowed to live in LIHTC units, considering waiting lists and the limited supply. Representative Hultgren then asked Mr. Cabrera to describe if the termination of Section 202 Capital Advances has dissuaded new investment in developing housing for low-income seniors. Mr. Cabrera replied that yes, the lack of Capital Advances has stagnated the development of 202 senior units, but that the program will become more important in the coming years considering an aging population. Overall, the emotions were high in this hearing and there was much debate over how work requirement can be enforced when considering the largest groups served by HUD programs, namely senior citizens and persons with disabilities. NAHMA will continue to monitor the House Financial Services Committees’ hearings on HUD and the reform legislation being considered by the committee. We will also soon be submitting our own recommendations for how lawmakers can reform HUD to improve efficiency and maximize its funding. To view an archived webcast of this hearing, please click here        

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