[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
LEGISLATIVE OPTIONS FOR PRESERVING
FEDERALLY- AND STATE-ASSISTED
AFFORDABLE HOUSING AND PREVENTING
DISPLACEMENT OF LOW-INCOME,
ELDERLY, AND DISABLED TENANTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
July 15, 2009
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-59
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53-239 WASHINGTON : 2009
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Housing and Community Opportunity
MAXINE WATERS, California, Chairwoman
NYDIA M. VELAZQUEZ, New York SHELLEY MOORE CAPITO, West
STEPHEN F. LYNCH, Massachusetts Virginia
EMANUEL CLEAVER, Missouri THADDEUS G. McCOTTER, Michigan
AL GREEN, Texas JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri GARY G. MILLER, California
KEITH ELLISON, Minnesota RANDY NEUGEBAUER, Texas
JOE DONNELLY, Indiana WALTER B. JONES, Jr., North
MICHAEL E. CAPUANO, Massachusetts Carolina
PAUL E. KANJORSKI, Pennsylvania ADAM PUTNAM, Florida
LUIS V. GUTIERREZ, Illinois KENNY MARCHANT, Texas
STEVE DRIEHAUS, Ohio LYNN JENKINS, Kansas
MARY JO KILROY, Ohio CHRISTOPHER LEE, New York
JIM HIMES, Connecticut
DAN MAFFEI, New York
C O N T E N T S
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Page
Hearing held on:
July 15, 2009................................................ 1
Appendix:
July 15, 2009................................................ 23
WITNESSES
Wednesday, July 15, 2009
Alitz, Katie, Vice President, The Council for Affordable and
Rural Housing.................................................. 18
Halliday, Toby, Vice President for Public Policy, National
Housing Trust, on behalf of The National Preservation Working
Group.......................................................... 10
Isbitz, Allan, President, National Leased Housing Association
(NLHA)......................................................... 13
Leung, Ricky, Treasurer, National Alliance of HUD Tenants........ 15
Mehreteab, Ghebre Selassie, Chief Executive Officer, The National
Housing Partnership Foundation................................. 12
Metherell, Sarah, Vice President, Institute for Responsible
Housing Preservation........................................... 21
Myer, Joe, Board Member, National Rural Housing Coalition........ 16
O'Donnell, Vincent F., President, Citizens' Housing and Planning
Association.................................................... 19
Trevino, Tammye, Administrator, Rural Housing Service (RHS), U.S.
Department of Agriculture (USDA)............................... 5
APPENDIX
Prepared statements:
Alitz, Katie................................................. 24
Halliday, Toby............................................... 29
Isbitz, Allan................................................ 40
Leung, Ricky................................................. 45
Mehreteab, Ghebre Selassie................................... 58
Metherell, Sarah............................................. 63
Myer, Joe.................................................... 69
O'Donnell, Vincent F......................................... 76
Trevino, Tammye.............................................. 85
Additional Material Submitted for the Record
Waters, Hon. Maxine:
Written statement of the American Association of Homes and
Services for the Aging (AAHSA)............................. 93
Written statement of the Housing Assistance Council (HAC).... 99
Letter from the Institute of Real Estate Management, the
National Affordable Housing Management Association, the
National Apartment Association, the National Association of
Home Builders, and the National Multi Housing Council,
dated July 14, 2009........................................ 104
Written statement of the National Affordable Housing
Management Association (NAHMA)............................. 107
Written statement of the National Low Income Housing
Coalition.................................................. 125
LEGISLATIVE OPTIONS FOR PRESERVING
FEDERALLY- AND STATE-ASSISTED
AFFORDABLE HOUSING AND PREVENTING
DISPLACEMENT OF LOW-INCOME,
ELDERLY, AND DISABLED TENANTS
----------
Wednesday, July 15, 2009
U.S. House of Representatives,
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:15 p.m., in
room 2128, Rayburn House Office Building, Hon. Maxine Waters
[chairwoman of the subcommittee] presiding.
Members present: Representatives Waters, Cleaver, Green,
Clay, Ellison; Capito, and Jenkins.
Also present: Representative Castle.
Chairwoman Waters. This hearing of the Subcommittee on
Housing and Community Opportunity will come to order. But
before we start with any opening statements from our witnesses,
one of our members wanted very much to be here today to
introduce someone who is very important to him and his work and
his community, and I would like to ask the Honorable Michael
Castle to please go ahead and make your introduction.
Mr. Castle. Thank you very much, Madam Chairwoman. And let
me also thank you for this hearing. Although I cannot be here
for the hearing, I think it is a very important subject, and I
am glad that you are delving into it.
I would like to thank you for the opportunity of
introducing a witness in the next panel, Joe Myer, who serves
as a board member of the National Rural Housing Coalition and
the past president of the Coalition. Joe and I have worked
together for many, many years now.
In addition to his duties on behalf of the Coalition, Joe
Myer serves as executive director of NCALL, the National
Council on Agricultural Life and Labor, which is a nonprofit
located in my home State of Delaware that specializes in
affordable housing development, education, and lending. Mr.
Myer worked in the nonprofit housing development for 37 years.
He helped found NCALL in 1976 and went on to become NCALL's
executive director in 1981.
During this time, NCALL has reached 6,500 first-time home
buyer mortgage closings in Delaware, has been particularly
responsive with their foreclosure prevention counseling
service, and has achieved an exemplary rating as a chartered
NeighborWorks America organization as a top 10 affordable
housing producer nationwide within the network.
NCALL has also provided development assistance for 45
affordable apartment communities serving rural families,
elderly, and farm workers throughout the Delmarva Peninsula.
Mr. Myer is the founding president and current board member
of the Delaware Housing Coalition. He has received the Housing
Ambassador Award from Delaware, NADO, the National Association
of Housing and Community Development Officials, and also served
on the Governor's Council on Housing as well as the Delaware
Housing Trust Fund Study Commission.
Prior to his work with NCALL, Mr. Myer worked for Freedom
Village, Inc., as a Church of the Brethren volunteer and Delta
Housing Development Corporation in the Mississippi Delta.
He received his Bachelor's in business administration from
Elizabethtown College and his master's degree in business
administration from Delaware State University.
Mr. Myer clearly brings a great deal of experience to the
table, and the committee should look forward to his testimony
today.
And if I could ask him just to stand for a moment after all
that fancy introduction, this is Joe Myer, ladies and
gentlemen.
[applause]
Mr. Castle. I yield back, Madam Chairwoman. Thank you very
much for the privilege.
Chairwoman Waters. Thank you very much. And I would like to
note that without objection, Representative Castle will be
considered a member of the subcommittee for the duration of the
hearing even though he cannot stay. Thank you very much.
Good afternoon ladies and gentlemen. I would like to thank
our ranking member, Shelley Moore Capito, and the other members
of the Subcommittee on Housing and Community Opportunity for
joining me for our second hearing on legislative options for
preserving federally- and State-assisted affordable housing and
preventing displacement of low-income, elderly, and disabled
tenants.
At our first hearing, we were joined by HUD Secretary Shaun
Donovan who testified about the need for this legislation and
its importance in preserving federally-assisted housing and
protecting the residents of that housing.
At this hearing, we will hear from Rural Housing Service
Administrator Tammye Trevino about the preservation issues
facing rural America. We will also hear from residents of
assisted housing, housing developers, housing advocates, and
others.
From 1995 to 2003, our Nation lost 300,000 subsidized
affordable apartments through conversion to market-rate housing
or physical deterioration. Over the next 5 years, contracts on
more than 900,000 project-based Section 8 units will expire.
Moreover, the Affordable Housing Incentive Programs, like
Section 236 and Section 221D, are essentially a thing of the
past and 200,000 units in these programs are at risk of
conversion to market rate over the next 10 years.
Once these units leave the affordable housing stock, they
are not replaced. In fact, according to the study by the Joint
Center for Housing Studies, for every new affordable housing
unit constructed, two affordable units are lost. The loss of
these units negatively impacts communities and residents, many
of whom represent our most vulnerable populations. According to
HUD, 50 percent of people in federally-subsidized housing are
elderly or disabled. In addition, about 77,000 veterans depend
on this critical housing resource.
The Federal Government's continued commitment to the
preservation of subsidized affordable housing takes on more
importance in light of the decrease in the number of non-
subsidized affordable units. According to a recent HUD study,
from 2005 to 2007, the number of units that are affordable to
households at or below 50 percent of area median income fell by
7 percent for a loss of over 1.5 million units. During this
time period, the number of units that are affordable to
households with incomes of over 100 percent of area median
income increased by 34 percent.
Preservation not only makes sense for residents and
communities, it should also make economic sense for owners and
developers, because it is significantly more cost-efficient to
preserve existing housing than to build new housing. It costs
approximately 40 percent less to preserve an existing unit than
to construct a new one.
In addition, it is far more energy-efficient to preserve
existing housing; renovating an existing building produces less
construction waste, uses fewer new materials, and requires less
energy than demolition and new construction.
The bill before us today would ensure that preservation of
affordable housing becomes a reality by providing all tenants
of federally-assisted properties with enhanced vouchers,
converting rent supplement and rental assistance program
properties into project base Section 8, providing a first right
of purchase to tenants of assisted properties, preserving
State-financed affordable housing, and preserving rural housing
and housing for the elderly.
I look forward to hearing from our witnesses on this much-
needed legislation. And now I would like to recognize Ranking
Member Capito for her opening statement.
Mrs. Capito. Thank you. I would like to thank the
chairwoman and thank our witnesses for the hearing today. I
would like to also welcome Rural Housing Service Administrator
Trevino. She paid a visit to my office, I certainly appreciate
that, and I look forward to your first appearance here at the
subcommittee.
One area I would like to discuss--and we talked about this
earlier--is the effect of a recent change to the Section 538
Program is having on development and rehabilitation of
affordable multi-family housing in rural communities.
The stimulus legislation from earlier this year
fundamentally changed this program in no longer allowing
developers to use the interest credit subsidy in tandem with
the loan guarantee. I have significant concerns as this will
lead to fewer units being developed in rural areas.
I also have some concerns about changes in this legislation
for owners of subsidized housing units, which may cause them to
leave the program after a property sale or mortgage prepayment.
Private owners of multi-family housing units are essential to
the supply of affordable housing and legislation should
encourage their participation in the government program. HUD
programs to incent owners to maintain affordable housing units
have preserved over 3,500 projects with about 300,000 units.
Those programs could be undermined by this legislation because
it requires a 24-hour--excuse me, a 24-month notice before a
sale, imposes a formula on the owner for determining the sales
price, forces the owner to sell properties on less than
favorable terms, and creates a new private right of action for
the tenant.
It is my hope that we can work together on ways to make the
housing benefits provided by these programs a temporary stop
for individuals. I think we can all agree that the goal of many
of these programs is to provide families and individuals with a
stable home so that they can focus on improving their skills to
become self-sufficient.
I know that extensive work has been done on this draft
legislation, and I look forward to working with the chairwoman
and the witnesses on many of these provisions.
I yield back. Thank you.
Chairwoman Waters. Mr. Cleaver is recognized for 3 minutes.
Mr. Cleaver. Thank you, Madam Chairwoman. This is a serious
issue that we absolutely must address, and we must address it
now. I left office as mayor of Kansas City in 1999. There has
not been one single unit of affordable housing constructed
since that time.
The problem is exacerbated by the fact that we now have
legions of men and women who have lost houses due to
foreclosure in the urban core. So as we are thinking about
affordable housing, I think one of the things that we must
focus on is preserving the affordable housing units we
currently have because of the decimation of the urban core.
These houses need to be in some kind of condition that might be
attractive to developers or builders.
I am hopeful that we can reverse this negative trend. And
it is chilling when I think that we could possibly lose almost
a million units of affordable housing over the next 5 years. So
I think a great emphasis, and I hope we can get into this after
your comments, but a great emphasis needs to be placed, I
think, on trying to preserve every single affordable unit we
have presently, particularly in the urban core.
I look forward to talking with you. I yield back the
balance of my time, Madam Chairwoman.
Ms. Waters. Thank you very much. Mr. Green for 3 minutes?
Mr. Green. Thank you, Madam Chairwoman. And I thank all of
the witnesses for appearing. I would echo what has been said
thus far. I am concerned about the possibility of losing
900,000 units. I am very much concerned that the process of
construction appears not to be sufficient such that we can
maintain. Construction alone will probably see us losing
ground. It is important that we not lose ground, especially in
areas where we are talking about those who are disabled and
those who are seniors.
This country is unlike many other places in the world
because of the way it treats people in the twilight of life. We
do not just allow people to live on the streets in the twilight
of life.
I look forward to hearing from the witnesses so as to get
some intelligence in terms of how they perceive we should
proceed to do what we have always done, not nearly to the
extent we should have done, but that is to take care of those
in the twilight of life and are disabled.
I yield back.
Ms. Waters. Thank you very much. Our first witness will be
Ms. Tammye Trevino, Administrator, Rural Housing Service. I
would like to thank you for appearing before the subcommittee
today. And without objection, your written statement will be
made a part of the record. You will now be recognized for a 5-
minute summary of your testimony.
STATEMENT OF TAMMYE TREVINO, ADMINISTRATOR, RURAL HOUSING
SERVICE (RHS), U.S. DEPARTMENT OF AGRICULTURE (USDA)
Ms. Trevino. Thank you, Chairwoman Waters, Ranking Member
Capito, and members of the subcommittee. Thank you for the
opportunity to appear before you to discuss multi-family
housing preservation in rural America.
I would like to thank all those involved with this
legislation, both in this session of Congress and in previous
years, for their hard work.
I am pleased to testify before you today and I look forward
to working with you and the committee to further the
preservation agenda.
At USDA, we advocate a strong national housing policy that
both supports the American dream of homeownership and provides
affordable rental opportunities. We are greatly encouraged by
the committee's focus on legislation that will create national
housing preservation standards for all government agencies that
specialize in housing assistance, especially in rural
communities.
During this recess and the foreclosure crisis, RHS-assisted
multi-family housing facilities have served as a critical
resource for some of our most vulnerable rural residents who
would otherwise lack proper housing alternatives.
Unfortunately, the foreclosure rates of our RHS-assisted
multi-family properties have remained variably unchanged when
compared to rates of previous years. As multi-family housing
facilities age and deteriorate, it is vital that we work
together everyday in every way to preserve these units for the
most vulnerable in our communities.
The benefits of focusing on preserving the existing housing
portfolio rather than on building additional units are clear:
It is less expensive, roughly a third to a quarter of the cost
of new construction. It can be accomplished faster with the
site and acquisition issues already resolved. It presents many
opportunities to upgrade energy conservation systems and it
minimizes the NIMBY effect since most communities welcome an
upgrade to existing rental properties in their neighborhoods.
We are still studying the proposed legislation and may have
questions regarding the implementation of certain aspects.
However, the legislation appears to give the Agency a number of
revitalization tools that would provide cost-effective
preservation options for the existing multi-family rental
housing portfolio.
We look forward to working with the committee to ensure
that these tools provide the best possible mechanisms to
support the revitalization efforts. Currently, our
revitalization program is authorized only as a demonstration
program, not in permanent authorization legislation. This makes
it difficult for the Agency to promulgate permanent program
regulations and to address long-term issues, including the
length of vouchers.
Further, we must determine the resources needed to
accomplish the goals we established, and we will develop those
estimates during the budget formulation process. But,
specifically, we need to examine what types and amounts of
resources will be needed to work with a larger portfolio level
of transactions to assure quality assurance, and to provide for
consistent processing throughout the country.
The proposed legislation contains voucher authority that
will provide protection for tenants against rent increases or
relocation as a result of prepayment or foreclosure, as does
the current Rule Development Demonstration Voucher Program.
The early results of a restructuring demonstration are
extremely encouraging. When the initial application window
closed on April 17, 2006, approximately 4,000 Section 515
property owners applied for debt restructuring. This represents
25 percent of the total portfolio. In the 3 full years of
implementation as a demonstration program, USDA has obligated
over 300 transactions that will improve the housing conditions
of 10,000 tenants. These results indicate a tremendous interest
among the ownership community in seeking a resolution to the
revitalization challenge. Our goal is to reach 1,000
preservation transactions processed each year.
Madam Chairwoman, I was born, raised, and have lived most
of my life in rural communities. For 25 years, I worked and
advocated for the development of rural communities. I
understand the challenges that rural communities face. I know
the struggles that many families in rural America see everyday.
I feel thrilled and humbled by the opportunity that I have been
given by President Obama to provide housing development on a
national level. And I am committed to helping the President and
this committee and our private and public partners, along with
Secretary Vilsack in creating a lasting foundation in rural
housing in the heart of rural America everyday in every way.
Thank you for allowing me to address the committee. I am
available to answer your questions now or at any time in the
future.
[The prepared statement of Ms. Trevino can be found on page
85 of the appendix.]
Chairwoman Waters. Thank you very, very much. We are very
appreciative for your presence today. I would like to begin by
trying to get a little bit better understanding of the ability
to assist those residents who are in units that are at risk of
a conversion to market rate. USDA's 2004 report entitled, ``The
Comprehensive Property Assessment Portfolio, An Analysis of
Rule Rental Housing'' said that 10 percent of rural housing
units are at risk of conversion to market rate. In what ways
will this bill ensure that those units remain as affordable
housing?
Ms. Trevino. It will provide us with the funding that is
necessary to do the Section 515 Program and to do preservation
of a portion of that 10 percent. As I said, our goal, in order
to meet the need that is spelled out in that CPA report, I
believe that we should be doing about 1,000 transactions on a
yearly basis.
Chairwoman Waters. All right. Let me just raise one more
question with you about Section 515 that you just alluded to,
the Rural Loan Guarantee Program. One of the criticisms of the
Section 515 Rural Loan Guarantee Program is that most of the
loans have been provided to for-profit developments, not to
nonprofit developers. In what ways will this bill increase the
participation of nonprofit rural housing developers in this
program?
Ms. Trevino. I do not see that the bill distinguishes
between private development and nonprofit development. That may
be an issue that you may want to take up. I know that some
nonprofit developers have problems with initial advance costs
to try to do a deal but in terms of this legislation, I do not
believe there is a factor, at least for the rule development
portion. I may be wrong.
Chairwoman Waters. All right, thank you very much.
Mrs. Capito. Yes, thank you for your testimony. I would
like to ask just a couple of questions. I am going to go right
to the Section 538 question, since I raised that in my opening
statement. Do you have a comment about the inability of the
developers to use the interest credit subsidy in tandem with
the loan guarantee, and what kind of impact do you think that
this has had on these developers in the 538 program?
Ms. Trevino. I have seen 538 developments with and without
interest credit that work. We do not know what the implications
are going to be. Certainly, the interest credit subsidy has
been a very popular option in allowing these deals to go
forward.
So in terms of the impact and what it is going to do, I
think it is a little early to find out. We know that
statutorily it has been left out through the appropriations,
and so we are not sure what is going to happen. I believe that
it is a good tool, but obviously we are going to implement
whatever is in the appropriations bill.
Mrs. Capito. Well, you know that I am interested in
restating that as an incentive to developers to create housing.
I would like to ask what is the breakdown, you said you have
seen in the 538 program, there are those who have used the
interest credit subsidy and those who have not, do you have any
idea how that breaks down percentage wise?
Ms. Trevino. No, I don't. I could not give you those
numbers. I am speaking from experience--
Mrs. Capito. Right.
Ms. Trevino. --just in Texas.
Mrs. Capito. Right. In your statement and in your letters
you mentioned, I got the sense that you envisioned some changes
of some of the provisions of the bill that might be more
helpful to you in your revitalization and in our revitalization
efforts. Can you say what types of changes you would make to
this bill and are there provisions that would make your job
harder or easier? And what specific additional tools would be
helpful to you to further the goal of affordable rural housing
preservation?
Ms. Trevino. Currently, I would like to address one
particular program and that is the Section 514 and 516 that
provides for farm labor housing. We believe that portion of the
portfolio in rural developments is an important component. I
would be very interested in working with the committee to try
to determine the types of resources that would be needed to
address that need.
Mrs. Capito. Other than that, you do not see any real
stumbling blocks in this bill to move forward with your
programs, to simplify them, to keep the public/private
partnerships active and to reach the ultimate goal, which is
preserving not only housing units but also the upgrade of a lot
of the housing units?
Ms. Trevino. I believe that we are going to have a few
concerns when it comes to how we implement the voucher, but,
again, we are willing to work with whatever the committee
proposes and try to figure out what the best mechanisms are in
terms of what is available under tools in the bill.
Mrs. Capito. Okay, and can you tell me what the physical
state of the existing 515 portfolio is? I am curious to know
how many of those units are in need of repair? How do they
break out? I know you cannot give me an exact number, but how
many of those are in need of repair percentage wise so I can
get a perspective on that?
Ms. Trevino. I can only tell you that the CPA report stated
that about 80 percent would need rehabilitation in the next 6
to 7 years.
Mrs. Capito. That is a large percent.
Ms. Trevino. It is.
Mrs. Capito. Yes.
Ms. Trevino. A huge portion.
Mrs. Capito. Thank you.
Ms. Trevino. Thank you.
Chairwoman Waters. Mr. Cleaver?
Mr. Cleaver. Thank you, Madam Chairwoman. The 515 program,
can you help me understand if a tenant moves out, that unit is
no longer eligible for the 515 program?
Ms. Trevino. The 515 program is more project based, and so
we determine ahead of time, based on the rental assistance that
we give that project, how many of those are going to be set
aside for the very low income. So it really does not have to do
with the tenant.
Mr. Cleaver. Okay. The demonstration program seems to be
very successful. I think you mentioned 90 percent of the
tenants choose to remain?
Ms. Trevino. Yes, 90 percent of the tenants have chosen to
remain.
Mr. Cleaver. Do you think that is due to the way the
program is now working or due to the economic situation in the
country right now?
Ms. Trevino. In rural America, I would--it is my opinion
that we do not have the housing stock many times that you find
in an urban community, so many times, there are not better
alternatives for the families. I believe that is one reason
that number is high.
Mr. Cleaver. I am curious about what if we compared it with
Section 8 or even 202, two programs, in terms of--well, maybe
not 202 but certainly Section 8, to draw a comparison to see
what the percentage would be of individuals who would choose to
remain. This just seems enormously high, which is good in a
way.
Ms. Trevino. I would not know what those percentages are,
but again the population in both the city, in the urban and the
rural areas, is pretty much the same. So in rural communities
we have the issue of the housing stock, but you also have the
issue that 60 percent of this population is an elderly
population. As you know, elderly people are creatures of habit;
they do not want to move. They do not like change and so that
may be part of what contributes to that number.
Mr. Cleaver. All right, thank you. I yield back the balance
of my time, Madam Chairwoman.
Chairwoman Waters. Thank you very much. Mr. Green?
Mr. Green. Thank you, Madam Chairwoman. And, again, I thank
the witness. Ma'am, public housing has been successful to the
extent that it has in my opinion because we have tried to have
a collaborative effort. We have tried to inculcate the NGOs
into the process. We have tried to access our intelligence from
a variety of sources and sometimes the pipeline to HUD
hopefully would go through the NGOs. Can you tell me, as we are
now looking at the various changes that we are making, how you
plan to have input from NGOs in this process?
Ms. Trevino. Okay, we work very closely with our partners.
In rural America, there are a lot of nonprofit providers. We
are willing to listen to their ideas and try to determine the
best ways to implement these programs. So I do not know how it
has been done in previous Administrations, but I can tell you
that we do have a goal within our Administration, within Rural
Housing, to continue that very important work.
Mr. Green. Thank you. This is very encouraging. Let me just
go a step further, however, and indicate that much time and
energy is necessary from persons who are familiar with
communities to acquire the intelligence that you need. It is
beneficial to have a means by which NGOs can have the assets,
the resources necessary to acquire this intelligence. Funding
for NGOs, in my opinion, is quite beneficial to HUD in
acquiring intelligence. We have from time to time provided
funding for NGOs. Chairwoman Waters had a piece of legislation
that we amended, H.R. 3965, this was the Mark-to-Market
Extension and Enhancement Act of 2007. And with assistance we
were able to--her assistance, we were able to add $10 million
in grants to tenant groups and not-for-profits. Are you
predisposed to continuing this type of relationship so that we
can have NGOs that are not only willing but also able to
perform the function?
Ms. Trevino. Yes, sir, I believe that we are. And, in fact,
across the country we have rural development offices, about 400
in the field, so that is quite a longer reach than perhaps HUD
in a rural area. So we are very amenable to working and trying
to see what--how our local offices can integrate with what the
NGOs are doing.
Mr. Green. Thank you very much. Madam Chairwoman, I will
yield back the balance of my time.
Chairwoman Waters. There are no more questions. The Chair
notes that some members may have additional questions for this
witness, which they may wish to submit in writing. Without
objection, the hearing record will remain open for 30 days for
members to submit written questions to this witness and to
place her responses in the record.
This panel is now dismissed. Thank you very much for
coming.
Ms. Trevino. Thank you.
Chairwoman Waters. I would like to welcome our second
panel. And I am going to announce each of you, but prior to
speaking, I would like you to give me your name, because I am
sure I am not going to pronounce some of these names correctly.
Our first witness will be Mr. Toby Halliday, vice president
for public policy, National Housing Trust, on behalf of the
National Preservation Working Group.
Our second witness will be Mr. Ghebre Selassie Mehreteab,
executive officer, The National Housing Partnership Foundation.
Our third witness will be Mr. Allan Isbitz, president,
National Leased Housing Association.
Our fourth witness will be Mr. Ricky Leung, treasurer,
National Alliances of HUD Tenants.
And, of course, you heard the introduction of our fifth
witness by Mr. Castle, Mr. Joe Myer, board member, National
Rural Housing Coalition.
Our sixth witness will be Ms. Katie Alitz, vice president,
The Council of Affordable and Rural Housing.
Then we will have Mr. Vincent O'Donnell, president,
Citizens' Housing and Planning Association.
And our final witness will be Ms. Sarah Metherell, vice
president, Institute for Responsible Housing Preservation.
Thank you again for appearing before the subcommittee
today. And without objection, your written statements will be
made a part of the record. You will now be recognized for a 5-
minute summary of your testimony.
Okay, Mr. Halliday?
STATEMENT OF TOBY HALLIDAY, VICE PRESIDENT FOR PUBLIC POLICY,
NATIONAL HOUSING TRUST, ON BEHALF OF THE NATIONAL PRESERVATION
WORKING GROUP
Mr. Halliday. Thank you very much, Chairwoman Waters,
Ranking Member Capito, and members of the subcommittee. My name
is Toby Halliday, and I am the vice president for public policy
of the National Housing Trust. Thank you for inviting me to
testify today in support of this important draft legislation.
Over the past decade, the National Housing Trust has helped
save and improve more than 20,000 apartments in over 40 States.
The vast majority of these apartments have HUD-subsidized
mortgages or project-based rental assistance contracts.
Today, I am also testifying on behalf of the National
Preservation Working Group, a coalition of 25 national
nonprofit organizations supporting affordable rental housing.
The members of the Preservation Working Group strongly support
a balanced housing policy that includes the option of quality
affordable rental housing and endorses this proposed
legislation to protect low-income urban, suburban, rural, and
elderly households whose homes are at risk of loss or
conversion.
Due to the recession that now grips our economy, and the
mortgage crisis that precipitated it, the need for this
legislation is greater than ever. Continuing home foreclosures
will shift many families from homeownership to rental in a
market where there is already a shortage of affordable rental
housing for the poorest households. Many of the affected
families will experience sharp declines in household assets and
credit scores, but the increased demand for rental housing at
the lowest end of the market is actually leading to higher
rents and tighter credit screening in some markets despite
falling incomes and rising unemployment.
At the same time, many cash-strapped States and local
governments are reducing assistance to needy families. All of
this leads to a heightened risk of homelessness. Addressing
this challenge begins with preserving existing affordable
rental housing.
Federally-subsidized housing serves nearly every community
in the Nation. The Trust's analysis has identified nearly
170,000 units of federally-assisted apartments with contracts
that expire over the next decade located in the districts of
members of this committee, as shown in Attachment A of my
testimony.
At the heart of this legislation are new tools to protect
residents and preserve affordability when apartments are
refinanced or re-capitalized or when the underlying HUD-
subsidized mortgages mature. Unlike other assisted properties,
there are currently no provisions to preserve the affordability
of these units or to protect residents when thousands of these
mortgages expire over the next several years.
The current draft includes important provisions that would,
at the owner's discretion, provide rental assistance for
affected apartments, both for the HUD-assisted and the rural
development Section 515 properties. Improving preservation
tools makes the rehabilitation of these properties easier to
finance, leading to the creation of needed construction jobs.
There will be debate over the proposal to allow new
purchasers to preserve the affordability of federally-assisted
properties when current owners no longer wish to operate them
as affordable rental housing. So long as existing owners are
provided market values for their properties, we believe that
new ownership dedicated to long-term affordability will help
ensure affordable rental housing at a time when so many
families are homeless or at risk of homelessness.
There will also be debate over the provision to allow
residents to escrow their rents when properties are in
disrepair. All tenants must still pay their full rent but funds
will go into an escrow account or be used for HUD-approved
repairs when the Secretary determines serious violations of
housing quality standards or housing program requirements. The
only parties who have something to fear from this provision are
owners with serious property violations, which impacts not only
residents but the entire community surrounding these
properties.
We note that many Members of Congress recently expressed
their strong view that recipients of housing assistance should
be American citizens. This is already the law of the land and
residents are currently required to certify their compliance
with this requirement. But such new requirements will have a
huge impact on many U.S. citizens who do not have birth
certificates or passports in their possession, who are
disproportionately senior citizens, African Americans, rural
residents, or lacking a high school diploma. In California, for
example, obtaining a birth certificate can take 10 to 12 weeks
and cost $5 to $23 in different jurisdictions. A passport can
take several additional weeks and cost up to $100.
Finally, I would like to express our support for the titles
for Section 202 elderly housing and for Section 515 rural
housing administered by the Department of Agriculture. These
proposed changes will provide important new tools to protect
vital affordable rental housing for seniors and in rural
States, especially in high-cost areas.
Again, thank you for the opportunity to comment on this
draft affordable rental housing legislation. The National
Housing Trust and the Preservation Working Group are looking
forward to the formal introduction and enactment of this
legislation.
[The prepared statement of Mr. Halliday can be found on
page 29 of the appendix.]
Chairwoman Waters. Thank you very much.
Mr. Mehreteab.
STATEMENT OF GHEBRE SELASSIE MEHRETEAB, CHIEF EXECUTIVE
OFFICER, THE NATIONAL HOUSING PARTNERSHIP FOUNDATION
Mr. Mehreteab. Chairwoman Waters, Ranking Member Capito,
Congressman Cleaver, Congressman Green, and Congressman
Ellison, I thank for you for the opportunity to testify this
afternoon on one of the most crucial issues: the preservation
and creation of affordable housing, especially in urban areas.
My name is Ghebre Selassie Mehreteab, but I am mostly known
as Gabe. I am the chief executive officer of the NHP
Foundation, a nonprofit housing organization headquartered in
New York City.
At the outset, I want to state that the NHP Foundation is
in full support of the bill. Thank you, committee members.
In 1989, the National Housing Partnership was chartered by
Congress as a private corporation to create and preserve
affordable housing. The National Housing Partnership created
the NHP Foundation as a national nonprofit organization to
address America's affordable housing crisis. Our strategy was
to combine the discipline of the private real estate sector
with a charitable mission.
Since 1994, the NHP Foundation has preserved or converted
from market rate to affordable 46 properties, totaling
approximately 10,000 units in 14 States. Recently, the NHP
Foundation, which was created by the corporation that was
chartered by Congress, has developed a 5-year strategy plan for
the creation or preservation of an additional 5,000 to 10,000
affordable housing units, again mostly to be located in urban
areas.
As you are fully aware, the need for affordable housing in
our society is a pressing one. Yet, as the committee members
noted, we are losing much of our affordable housing daily.
Against this trend, we must preserve the affordable housing
that has already been built at great expense to the taxpayer.
However, for preservation efforts to be successful, the
nonprofit organization must raise financing from the public
sector, obtain investment of private capital from banks and
other financial institutions, and secure grants and loans from
the philanthropy community.
One, this bill will provide new tools, reform existing
programs and create incentives for financing affordable
housing. For example, specifically, the bill will assist large-
scale nonprofit organizations in preserving the existing stock
of affordable housing. Two, it will attract private capital
from banks and other institutions. And, three, leverage the
initiative of philanthropic organizations.
As you know, the NHP Foundation and other nonprofit owners
rely on private lenders and investors to create and preserve
affordable housing. For example, over the last few years, the
NHP Foundation has partnered with Bank of America's Community
Development Group in obtaining debt and tax credit equity
financing. However, the glue that binds the public sector with
the private capital is philanthropic grants. Many nonprofits
have received funding from the Ford Foundation, the McArthur
Foundation, Prudential Social Investments, and other
philanthropic sources for our preservation work.
In conclusion, the NHP Foundation looks forward to
continuing to work with the committee and its staff on those
preservation issues.
Thank you again for inviting me to testify today.
[The prepared statement of Mr. Mehreteab can be found on
page 58 of the appendix.]
Chairwoman Waters. Thank you very much.
Our next witness will be Mr. Allan Isbitz.
STATEMENT OF ALLAN ISBITZ, PRESIDENT, NATIONAL LEASED HOUSING
ASSOCIATION (NLHA)
Mr. Isbitz. Chairwoman Waters, Ranking Member Capito, and
members of the subcommittee, thank you for your invitation to
speak today and for the opportunity to address some of the
issues of importance to our affordable housing constituency.
My name is Allan Isbitz. I am chief financial officer and
vice president of real estate development for Jewish Community
Housing for the Elderly, a nonprofit that owns and operates
over 1,000 apartments for low-income seniors in the Boston
area.
I am here today as president of the National Leased Housing
Association. NLHA is pleased to present our concerns related to
the preservation of federally-assisted affordable housing. NLHA
represents a broad cross-section of people and organizations
that provide or administer Section 8 and tax credit housing for
over 3 million families and elderly.
We appreciate and applaud the efforts of the committee to
produce this important bill.
I would like to spend a few minutes sharing with you to
illustrate my experience with a preservation transaction where
HUD guidance was confusing and inconsistent and unnecessarily
impeded our ability to achieve important preservation
objectives. This is about a refinancing transaction we
undertook 3 years ago that involved preservation and
improvement of a 33-year-old project with a Section 236
mortgage that provides 254 apartments for low-income seniors.
We had three objectives in this transaction: first, to make
the necessary capital improvements to the building; second, to
build a new community center so we can meet the need for
essential support services for our senior residents that would
allow them to continue to live there in spite of increasing
frailty as they grow older; and third, to use some of the sales
proceeds to help finance a new 150-unit Section 202 mixed-
income development for seniors on land in Framingham,
Massachusetts, that we owned and had zoned for that purpose.
To achieve these objectives, we successfully sought and
received tax-exempt bond financing that generated over $10
million in tax credit equity and supplemented the proceeds of a
new HUD-insured loan used to cover building improvements. We
believed the $10 million of private investor equity could be
used under existing HUD guidelines to support the construction
of the Resident Services Community Center and the financing of
the new construction project.
As an added bonus, the availability of private investor
equity allowed us to set rents below market and save HUD almost
$5 million in Section 8 subsidies over the term of the HUD-
insured mortgage. We believed this to be a real win/win
situation for us and for HUD, and the HUD field office showed
strong support for the project.
However, HUD central had to approve the prepayment of the
mortgage, and they refused to do so claiming that the
proceeds--the sale proceeds we were realizing were too high.
HUD then required us to sign an agreement as a condition of
proceeding with the refinancing that restricted almost $3
million of these proceeds to fund future rent increases instead
of using the Section 8 subsidy contract that existed for this
purpose.
HUD's position was incomprehensible because private tax
credit equity, not HUD rental subsidy, supported the sale
proceeds we wanted to use for the Resident Services Community
Center and for a new affordable housing development.
There is no basis in law or in regulation for HUD's
actions. Its actions were inconsistent and amounted to treating
nonprofit owners differently than for-profit owners in similar
prepayment circumstances when HUD's written guidance on this
subject states just the opposite. In the face of adverse market
conditions today, we have requested HUD to reconsider its
position on the use of sale proceeds for our new construction
project. The project is currently shovel ready and will produce
$25 million worth of construction activity, plus 259
construction jobs for the Massachusetts economy, but has been
delayed for about a year now.
This situation demonstrates that producing tax-credit
financed housing involves market risk for nonprofit and for-
profit developers alike. So it is particularly important that
both nonprofits and for-profits be given access to the same
financial tools, such as sale proceeds, that they need to
negotiate with their partners in the marketplace.
HUD's action in the recent years regarding sale proceeds
remain an issue for nonprofits so it is important that Congress
clarify this matter. The current draft includes language that
attempts to address the problem, but it is not retroactive and
therefore does not provide a remedy for nonprofits that have
already been denied access to their rightful sale proceeds,
which are necessary to meet their current needs. We prefer the
language that was included in Section 401 of H.R. 2930 that
passed the House last year and request that it be substituted
for Section 503 of the current draft.
I thank you again for this opportunity to let you know of
our need for improvements in Federal preservation programs. I
might add that we believe that Secretary Donovan and his new
team share many of these concerns, and we look forward to
working with the new HUD administration in this regard.
Thank you.
[The prepared statement of Mr. Isbitz can be found on page
40 of the appendix.]
Mr. Cleaver. [presiding] Mr. Leung, you are next. Did I
mispronounce your name?
STATEMENT OF RICKY LEUNG, TREASURER, NATIONAL ALLIANCE OF HUD
TENANTS
Mr. Leung. Thank you, Chairwoman Waters. Thank you, Mr.
Cleaver. My name is Ricky Leung. I am the treasurer for the
National Alliance of HUD Tenants, a national tenant union, the
one and only in the Nation, for privately-owned HUD-assisted
multi-family housing.
Since the Title 6 Preservation Program ended in 1996, our
Nation has lost at least 360,000 units of affordable low-income
housing. We commend you and Chairman Frank for including the
first right of purchase in the draft preservation bill to stop
this loss. We also thank my own representative, Nydia
Velazquez, for filing H.R. 44, now Title 4 in the bill, to
address the related loss of 120,000 units of HUD's housing
stock and for her leadership in addressing the new crisis of
private equity.
For 30 years, I have lived in Cherry Street Apartments in a
Section 8 unit with my parents, a secure home for our family.
We would not survive long in the overheated Manhattan market.
The 488 families at Cherry Street are a diverse mix of working
and middle class, a microcosm of the City and the Nation.
In 2003, our project-based Section 8 contract was set to
expire in the super hot real estate market in Manhattan. Our
tenant association persuaded the owner to renew, but he did so
for only 5 years. After I testified a little over a year ago in
front of the full committee, our building was bought by a
predatory investor for $177 million, more than $360,000 per
unit. And our Section 8 contract was renewed for 5 more years.
Just 3 years from now, the new owner will again decide what
to do. Passage of first right of purchase would at least give
our tenant association and the City a fighting chance to save
our homes. By itself, a first right purchase would not add to
Federal costs. It would simply allow a city or nonprofit to
purchase an at-risk property using existing programs like
markup-to-market. There is ample precedent besides Title 6, for
20 years, Congress has provided a Federal right of purchase for
rural housing and several States have adopted similar laws.
The need for this measure is urgent in New York City. We
are losing affordable housing to speculators at an alarming
rate. Since the 1990's, more than 32,000 low-cost apartments
have already been lost, and the rate has spiked dramatically. A
national first right of purchase will help save 22,000 more
apartments like Cherry Street that are at immediate risk.
In the wake of 9/11, the loss of 54,000 affordable
apartments in New York City is a tragedy which we can neither
bear nor ignore.
Nationwide, tenants are also challenged by the end of
regulation in 260,000 apartments reaching an end of the 40-year
HUD-subsidized mortgages. The number of expiring mortgages
properties will skyrocket by more than 600 percent between now
and 2012 according to the GAO. Whatever the source of risk, the
first right of purchase is needed to ensure that owners use
voluntary incentives in the draft bill to save our homes.
Congress dismantled Title 6 in 1996 due to concerns about
excessive costs. Under Title 6, residents and HUD negotiated
major repairs, permanent affordability, and transfers to
nonprofit and tenant organizations. Today, the enhanced
vouchers are mark-up-to-market options available to owners are
just as costly as the Title 6, but with none of these benefits.
A first right of purchase will save money in the long run
by removing subsidized housing from the speculated market,
lessen owner windfalls, and guarantee benefits from the
investment from any Federal funds.
Three weeks ago, Secretary Donovan mentioned the State
court decision that struck down a right of purchase law adopted
by the City of New York. I was involved in the effort to pass
this law to help save my home. The court struck down the City
law solely due to State and Federal preemption concerns, not
constitutional questions addressed in our written testimony. In
fact, the courts acknowledged the serious rental housing
crisis, and they urge action by other levels of government.
We urge the committee to honor the plea of the New York
tenants, echoed by the State courts, to adopt a right of
purchase at the Federal level. Obviously, preemption is not an
issue if Congress acts.
The National Alliance of HUD Tenants also supports the
tenant empowerment provision in the bill. These no-cost
measures will allow tenants to join as HUD partners to improve
and save our homes.
To conclude my testimony today, just like concluding my
testimony last year, I would like to pay tribute to the three
main languages spoken in my community. I would like to say to
everyone in this room in English: Thank you very, very much.
And in Spanish, especially to my Congresswoman, Nydia
Velazquez, Muchas Gracias. And in my native language, Chinese:
Xie, xie doh je.
[The prepared statement of Mr. Leung can be found on page
45 of the appendix.]
Mr. Cleaver. Thank you.
Mr. Myer?
STATEMENT OF JOE MYER, BOARD MEMBER, NATIONAL RURAL HOUSING
COALITION
Mr. Myer. Good afternoon, Chairwoman Waters, and Ranking
Member Capito. My name is Joe Myer. I am the executive director
of NCALL. We are based in Dover, Delaware. We serve the mid-
Atlantic region. I received a very nice introduction by
Congressman Mike Castle, and I want to thank him for that
introduction. As a two term governor, and now Delaware's sole
Congressman, Mike Castle has been an important friend of
affordable housing.
I am also a current board member of the National Rural
Housing Coalition. NRHC is a national membership organization
that advocates for Federal policies which improve housing and
community facilities in rural America. NRHC has stood for the
principle that all rural residents have a right to a decent
place to live. We have testified before this committee
previously, and appreciate the opportunity to testify today on
rural housing issues and H.R. 2876, the Rural Housing
Preservation Act of 2009.
We commend the bipartisan effort of Congressmen Geoff Davis
and Lincoln Davis.
It is vital to preserve our current stock of affordable
rental housing because of lack of decent apartments in rural
America. A disproportionate share of the Nation's substandard
housing is located in rural areas. According to the 2000
census, of 106 million housing units available in the United
States, 18.7 million units, or about 18 percent, are located in
non-metro counties. Thirty-five percent of rural renters are
cost-burdened, paying more than 30 percent of their income for
housing costs. Almost one million rural rental households
suffer from multiple housing problems, 60 percent of whom pay
more than 70 percent of their income for housing. More than
900,000 renters live in moderately or severely inadequate
housing, and 1.9 million people are rent overburdened.
Section 515 of the Housing Act of 1949 is the principal
source of financing for rental housing in rural areas. Under
Section 515, nonprofit and for-profit entities can receive one
percent loans for acquisition, rehabilitation or construction
of rental housing and related facilities. Most Section 515
loans have gone to for-profit developers who combine the
subsidized loan with tax subsidies to finance housing. About 75
percent of these properties are further subsidized by the RHS
Section 521 rental assistance program, and the Department of
Housing and Urban Development Section 8 program, both of which
provide rent subsidies to ensure that residents pay no more
than 30 percent of their income towards rent and utilities.
Section 515 is generally well-managed. The portfolio is
financially sound. It has a loan delinquency rate of just 1.6
percent and only 8 properties in inventory at the current time.
Projects are small, sized to the communities that they serve,
an average of 28 units.
So over 400,000 low-income families and elderly households
live in rental housing financed under Section 515. For many
rural areas, Section 515 provides the only decent affordable
rental apartments in the community. Although rents are
extremely low, averaging a little more than $325 per unit per
month, the average resident annual income for the properties is
also low, about $9,200. Twenty percent of the tenants were
nonetheless rent overburdened and 7 percent paid more than half
of their income towards rent. This is due to noticeably lower
incomes in rural areas.
Over the last several years, the Federal Government has
virtually stopped financing for new affordable rental units in
rural America. In 1992, the loan level for Section 515 was $500
million. By 1998, that number was less than $200 million. And
for Fiscal Year 2009, the level of Section 515 was $69 million.
Over the last 40 years, Congress has debated the best, most
appropriate way to preserve the rights of owners and tenants
living in Section 515 developments. This issue is important
because virtually all households living in these apartments are
low income, many are elderly, and many have disabilities. These
are people with few other housing options.
The evolution of the 515 program and prepayment process
shows how the rural housing services lack of funding for
incentives and rent subsidy vouchers has hurt both owners and
tenants.
We see that the comprehensive property assessment and
portfolio analysis indicates that there is a long-term need to
ensure adequate operations and long-term rehabilitation of $2.6
billion over 20 years.
In response to the USDA report, Congress provided funds for
a demonstration aimed at preserving rural rental developments.
From 2006 to 2009, $100 million was provided in multi-family
restructurings. RHS provided restructurings financing to 105
projects. The financing mostly in the form of deferred loans
preserved 4,500 units. This is an important demonstration and
really points to what needs to happen in the future.
The current restructuring program relies heavily on funding
from other sources, but given the difficult economic climate,
raising capital from other sources will prove more difficult.
[The prepared statement of Mr. Myer can be found on page 69
of the appendix.]
Mr. Cleaver. Mr. Myer, I hate to cut you off, and I am
going to have to apologize to all of you. As you probably
heard, the bell just sounded, which means we have votes. We
have about 40 minutes of votes. It could be longer if there are
some parliamentary procedures that we have to deal with. But
what I would like to do is, if the three of you who have not
had made presentations would do so, and if you can, I know they
are already abbreviated, but give us the Reader's Digest
version. And then we will dismiss the panel because the most
important part is your testimony anyway. And we will send out a
memo to all the committee members that if there are questions,
we will send those questions to you.
So if we can, let's move with Ms. Alitz.
Ms. Alitz. ``Alitz.''
Mr. Cleaver. Ms. Alitz, I'm sorry.
STATEMENT OF KATIE ALITZ, VICE PRESIDENT, THE COUNCIL FOR
AFFORDABLE AND RURAL HOUSING
Ms. Alitz. Mr. Cleaver, members of the subcommittee, my
name is Katie Alitz, and I am the vice president of the Council
for Affordable and Rural Housing. On behalf of myself and CARH,
I would like to thank you for the opportunity today to address
issues related to rural affordable housing, and in particular
the rural housing legislation under discussion.
We also very much appreciate this committee's interest and
focus on rural housing issues. CARH is an association that
includes for-profit, nonprofit, and public agencies that build,
own, invest and manage in rural and affordable housing. CAR
members house hundreds of thousands of low-income elderly and
disabled residents across rural America.
CARH strongly supports preservation of affordable rural
housing, and we think it is critical that the preservation
efforts include Rural Development's budget being restored. Over
the previous 12 years, Rural Development's budget has been
decimated, especially the Section 515 multi-family loan
program. This has made preservation of rural housing very
difficult.
Owners have preserved Section 515 properties over the last
decade largely by finding other sources of funding, primary
low-income housing tax credits and also recently Section 538
guaranteed loans. However, this has never sufficiently closed
the gap. Because of their small size, rural properties have
always had difficulty competing for tax credits and finding
equity providers. Given the recent upheavals in the low-income
housing tax credit markets, these problems will be further
exacerbated.
In addition, the 538 interest credit subsidy was reduced in
the 2009 budget from $20 million to $8 million and eliminated
in the 2010 budget. This subsidy is critical to the
preservation of 515 housing and also for keeping housing
affordable for low-income residents. Without the subsidy, this
program will target more middle-income residents.
We also support Ms. Capito's legislation to restore this
interest credit subsidy, and we thank you for your support.
In addition to funding, providing Rural Development with
certain tools is critical to their preservation efforts. The
preservation legislation that we are seeing today was
introduced also in the 109th and 110th Congress. CARH has
supported this legislation but has concerns about three
provisions that we believe may impede preservation.
First, the legislation calls for a 30-year capital needs
assessment. We think that is too long; the industry standard is
an average of 15 years. Second, while we have no issue with
limiting resident rents to 30 percent of their income, we are
concerned about imposing this limit without including further
rental subsidies. We think that will take a lot of eligible
properties off the table. And finally, we are concerned about
the restrictions on owners who participated in the prepayment
settlement. There seems to be some barriers to their entry into
this program.
Thank you.
[The prepared statement of Ms. Alitz can be found on page
24 of the appendix.]
Mr. Cleaver. Mr. O'Donnell?
STATEMENT OF VINCENT F. O'DONNELL, PRESIDENT, CITIZENS' HOUSING
AND PLANNING ASSOCIATION
Mr. O'Donnell. Good afternoon. I will try to do the
standing on one foot version of my written testimony. I want to
thank Chairwoman Waters and Ranking Member Capito and
Representative Cleaver and all the members of the subcommittee
for the opportunity to testify. My name is Vincent O'Donnell. I
am testifying in favor of this urgent and important
legislation. I am speaking on behalf of the Citizens' Housing
and Planning Association in Massachusetts, which was created in
1967 as an umbrella organization that represents advocates for
affordable housing for low- and moderate-income people in the
Commonwealth. It really is a broad umbrella of producers and
consumers and folks interested in housing policy and has been
extremely successful.
In fact, CHAPA's involvement in preservation goes back to
1978 when we worked to implement new guidance that was created
for HUD to deal with distressed properties. I think the most
important thing I want to say today is that the whole concept
of the preservation of affordable housing really goes back to
the residents themselves. The preservation issues have always
been raised by the tenants who live there. Back in 1978,
residents in a gentrifying neighborhood of Boston living in
distressed housing went to then-Senator Edward Brooke and got
some Federal relief that enabled them ultimately to purchase
that property as a cooperative. And it is still today a
successful, 100 percent Section 8 cooperative. The issues have
always been brought forth by the folks who live there.
Secondly, it is a changing landscape. Back then, the issue
was HUD foreclosure of distressed housing. Later, the issue
became the prepayment of subsidized mortgages. After that, it
was the expiration of Section 8 contracts. We now have new
emerging issues in what is called the Year 40 problem where,
after the complete expiration of all obligations, there are no
current effective ways to make sure that the tenants are
protected and the housing is preserved.
So I think it is important to look at this extremely
complex and comprehensive bill as something which fundamentally
is addressing those basic goals. And if you look at it that
way, it is, I think, a terrific piece of work that has
responded to years of development of ideas by the preservation
community trying to make this housing safe and affordable for
the future for the tenants who live there and to contribute
positively to the neighborhoods where the housing is located.
Although it deals with many, many things, I just want to
highlight several things which are very important. First, I
think it does address the new problems which have arisen at the
end of 40 years, the extension of authority for tools like
enhanced vouchers, and conversion of earlier forms of rental
assistance to Section 8 so that it can more flexibly support
the redevelopment of the property.
Second, the right of purchase is an extremely important
aspect of this legislation. It is also extremely complex. And
it exemplifies the partnership that affordable private housing
is based on in this country. We have private owners, private
financing serving low-income residents. This has to work for
everybody. And an important tool like this is a very complex
one. In my written testimony, I have some thoughts about how to
make that work the best for all stakeholders.
Third, there are certain State-funded properties that were
recognized in LIHPRHA, the earlier preservation legislation
dealing with prepayment as requiring Federal assistance, and
this bill addresses their needs.
Fourth, elderly housing is a very important element and the
preservation of that stock is addressed in a comprehensive way
in this bill, and I want to speak in favor of that as well.
And I think I better stop there; the rest of my comments
are in the written testimony.
[The prepared statement of Mr. O'Donnell can be found on
page 76 of the appendix.]
Mr. Cleaver. Thank you.
Ms. Metherell?
STATEMENT OF SARAH METHERELL, VICE PRESIDENT, INSTITUTE FOR
RESPONSIBLE HOUSING PRESERVATION
Ms. Metherell. Good afternoon. First of all, thank you very
much for inviting me here to testify today. My name is Sarah
Metherell, and I am with Steadfast Residential located in
Newport Beach, California. We have acquired, rehabilitated, and
preserved and now own about 15,000 units of federally-assisted
low-income housing. These units are mostly in California but
also in a total of 18 other States.
I am here today, however, representing in my capacity as
vice president of the Institute for Responsible Housing
Preservation, the IRHP. Since 1989, the IRHP has represented
owners and managers of federally-assisted multi-family
properties on preservation issues, including advocating for
legislative and regulatory changes for preservation policies
and providing educational seminars on preserving affordable
housing. I would add that the IRHP is primarily a group of for-
profit developers, however we do have a few nonprofit members
and some State agency members.
I am going to make this very quick. IRHP is generally in
favor of the bill. There are a few things I would like to point
out based on personal experience that I have had in acquiring
affordable multifamily properties over the last couple of
years. One is that the Section 236 decoupling program is a
wonderful program and has been very successful in preserving
HUD properties. I think if you look at the Section 236 program,
you see a higher rate of preservation over other HUD programs
because it is easier to preserve those properties. The primary
reason is the ability to undertake a budget-based rent
increase, which includes new debt service, something that is
not now available for other types of HUD properties. Also,
there is an increased annual distribution for all preservation
owners; it applies to both for-profits and nonprofits and it
costs nothing to HUD. However, these benefits are only
available on Section 236 decoupling transactions and not on
other types of HUD transactions, and I am not quite sure why
but the new bill does change that. And we approve of that.
Finally, very briefly, I have a lot more in writing here,
but we also support the rollover of certain HUD debt. And I
think oftentimes when properties are being transferred to new
owners, it should have certain HUD debt, including flex sub-
loans and mark to market soft debt cannot be paid off in full--
Mr. Cleaver. We have 2 minutes.
Ms. Metherell. All right.
Mr. Cleaver. No, no, we have 2 minutes.
Ms. Metherell. You have 2 minutes?
Mr. Cleaver. To get to the Capitol to vote. Voting will
close in less than 2 minutes now. I apologize, as I did
earlier.
[The prepared statement of Ms. Metherall can be found on
page 63 of the appendix.]
Mr. Cleaver. The Chair notes that some members may have
additional questions for this panel, which they may wish to
submit in writing. Without objection, the hearing record will
remain open for 30 days for members to submit written questions
to these witnesses and to place their responses in the record.
And before we adjourn, the written statements of the following
organizations will be made a part of the hearing: The National
Low-Income Housing Coalition; the American Association of Homes
and Services for the Aging; the National Affordable Housing
Manager's Association; the Housing Assistance Council; and a
statement from the National Apartment Association and others.
If there are no other questions, we are adjourned.
[Whereupon, at 3:26 p.m., the hearing was adjourned.]
A P P E N D I X
July 15, 2009
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