Affordable housing preservation pilot program

(a)

Establishment

The Secretary of Housing and Urban Development shall establish a pilot program under which funds in the residual receipts account of an eligible multifamily housing property are transferred, at the time of a qualified sale or exchange, to a preservation entity. (b)

Purpose

The purpose of the pilot program established under this section is to facilitate the transfer of multifamily housing projects with expiring section 8 housing assistance payments contracts to preservation entities that are committed to maintaining the affordability and preservation of such projects by allowing expanded access to existing residual receipts to assist with the acquisition and rehabilitation of the project. (c)

Use of funds

A preservation entity that acquires an eligible multifamily housing property through a qualified sale or exchange shall use the funds in the residual receipts account transferred to it— (1)to pay for rehabilitation costs approved by the housing agency; (2)to deposit funds into the replacement reserve account of the property; (3)to pay for social and other services that directly benefit the tenants of such property, but in any 1 year such payments may not exceed 10 percent of the balance of the residual receipts account of the property at the end of the prior fiscal year; (4)to pay for costs associated with the acquisition of the property, but such payments may not exceed 50 percent of the amount in the residual receipts account of the property at the time of acquisition; and (5)to pay for any other costs that have been approved by the housing agency and will directly benefit the tenants of the property. (d)

Responsibilities of the Secretary

The Secretary of Housing and Urban Development, or his or her designee, shall— (1)determine whether the plan for rehabilitation and operation of a preservation entity— (A)maintains and restores the decent, safe, and sanitary condition of the eligible multifamily housing property; and (B)is viable for not less than 30 years; and (2)monitor the affordability and use restrictions for the eligible multifamily housing property. (e)

Penalty for noncompliance

If the Secretary of Housing and Urban Development determines that all or a portion of an eligible multifamily housing property acquired by a preservation entity under this section is not in compliance with the requirements of this section, the preservation entity shall reimburse the Secretary an amount equal to the amount originally transferred from the residual receipts account at the time of acquisition, less the product of 3.33 percent of such amount, multiplied by the number of years after the qualified sale or exchange that the property was in compliance with the requirements of this section. (f)

Designation

The Secretary shall, not later than 6 months after the date of enactment of this Act, designate not less than 3 States in which the program established under this section shall be carried out. In selecting the States in which to carry out the program, the Secretary shall— (1)consider States with the greatest number of units receiving project-based housing assistance payments under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) where such units are located in active multifamily housing projects whose section 8 housing assistance payments contracts are set to expire between fiscal years 2009 and fiscal years 2011; (2)consider States with eligible multifamily housing properties that have residual receipt account balances that can provide a meaningful preservation resource; (3)aim for a regionally diverse sample of States; and (4)consider the extent to which market forces may drive the conversion of eligible low-income housing to market-based rents. (g)

Report to Congress

(1)

Timing of report

Not later than 3 years after the initiation of the pilot program established under this section, the Secretary of Housing and Urban Development shall submit a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives. (2)

Content of report

The report required under paragraph (1) shall include an analysis of— (A)the effectiveness of expanding the use of amounts in the residual receipts accounts of eligible multifamily housing properties to include preservation activities; and (B)which States or regions of the United States could most benefit from the expansion of such eligible uses. (h)

Effective date

This section shall apply to qualified sales or exchanges made during the period beginning December 31, 2007 and ending December 31, 2013. (i)

Definitions

In this section, the following definitions shall apply: (1)

Affordability and use restrictions

The term affordability and use restrictions means the affordability and use restrictions in connection with project-based housing assistance payments made under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (2)

Extended use period

The term extended use period means the period beginning on the date of sale and ending on the earlier of— (A)30 years after the close of the sale; or (B)the date that the property is acquired by foreclosure (or instrument in lieu of foreclosure). (3)

Eligible multifamily housing property

The term eligible multifamily housing property means a project that— (A)is receiving project-based housing assistance payments under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f); and (B)was financed pursuant to part 883 of title 24, Code of Federal Regulations, on or after February 29, 1980. (4)

Housing agency

The term housing agency means, with respect to any eligible multifamily housing property, the housing agency which administers housing assistance with respect to such property. (5)

Preservation entity

The term preservation entity means a housing agency, organization, or entity (for profit or nonprofit) approved by the Secretary of Housing and Urban Development, or his or her designee, that has the capacity and commitment to successfully acquire and preserve an eligible multifamily housing property. (6)

Qualified sale or exchange

(A)

In general

The term qualified sale or exchange means the sale of an eligible multifamily housing property to, or an exchange of such property with, a preservation entity which agrees to maintain affordability and use restrictions regarding the property that are— (i)for a term of not less than the extended use period; and (ii)legally enforceable. (B)

Future applicability of restrictions

The restrictions under subparagraph (A) shall be— (i)binding on all successors of the preservation entity; and (ii)recorded as a restrictive covenant on the property pursuant to State law. (C)

Certification by program Administrator

The term qualified sale or exchange shall not include any sale or exchange of property unless the housing agency certifies that— (i)the transferee with respect to such property is a preservation entity; (ii)affordability and use restrictions will be maintained with respect to such property during the extended use period; and (iii)new capital will be expended that— (I)maintains or restores the decent, safe, and sanitary condition of the property; and (II)funds adequate reserves. (7)

Residual receipts

The term residual receipts means funds generated by a property in excess of the amount needed for operating expenses, operating reserve requirements, and allowable distributions to project owners. (j)

Residual receipts not treated as Federal funds

For the purposes of section 42 of the Internal Revenue Code of 1986, residual receipts used pursuant to the pilot program established under this section shall not be considered Federal funds.