[Congressional Record Volume 141, Number 29 (Tuesday, February 14, 1995)]
[Extensions of Remarks]
[Page E337]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

                             [[Page E337]]

                 THE LOW-INCOME HOUSING PRESERVATION ACT

                                 ______


                            HON. JIM McCRERY

                              of louisiana

                    in the house of representatives

                       Tuesday, February 14, 1995
  Mr. McCRERY. Mr. Speaker, I rise today to join with Mr. Jefferson in 
introducing legislation to address the preservation needs of low-income 
housing. I am doing so because I believe that the Low-Income Housing 
Preservation Act is the kind of innovative, market-oriented approach 
that we, in Congress, must follow in the future to solve many of our 
Nation's housing problems.
  The Low-Income Housing Preservation Act will encourage the investment 
of additional private capital in a large category of privately owned 
projects that provide housing at reduced rents to low-income tenants. 
It does so by eliminating some of the disincentives now in the Tax Code 
which have denied new investors virtually any incentive to invest in 
these affordable housing projects. As a result, the current owners are 
trapped in the projects without the ability to sell the projects to new 
investors with capital, or the ability to raise new capital for the 
projects themselves. In the meantime, the projects fall further and 
further behind in performing the rehab needed. The bill provides an 
effective and cost-efficient way to meet the increasingly serious needs 
of these projects for capital improvements by providing the benefits of 
a shortened depreciation schedule and limited relief from the passive 
loss rules for investors who agree to buy the projects, fix them up, 
and maintain them for low-income tenants.
  This is the direction we must be going, as we attempt to reinvent 
Government. In the housing area in particular we need to find new 
solutions that rely less on bureaucratic programs run directly by HUD, 
and more on programs that harness the energy of the free enterprise 
system, while restricting the Government's role to a minimum. 
Government can provide a helping hand, but it is the private sector 
that must take the lead. That is what the Low-Income Housing 
Preservation Act would do. The bill would encourage the investment of 
new private capital in the projects, but only so long as the projects 
continue to serve low-income tenants. HUD would have a role in ensuring 
that the projects are maintained properly for these tenants, but it 
would do so without HUD playing the kind of direct programmatic role it 
has played in the case of some programs in the past.
  At the same time that this bill will help solve a problem without 
more Government, it is fiscally responsible. Because of the way the 
bill is drafted, the estimate by the Joint Tax Committee indicates that 
the cost to the Federal Government over 5 years will be very low. But 
more importantly, it negates the need for alternative preservation 
programs at HUD that would cost much more, and require the involvement 
of large staffs just when we are trying to reduce the size of HUD and 
the Federal Government generally. Immediately upon passage, the 
legislation will enable HUD to sell at a higher price the mortgages on 
projects which they already hold because the owner has defaulted on the 
loan. This will reduce the loss to HUD from these defaults, and save 
the taxpayer money. Doing nothing, and allowing these projects to 
deteriorate beyond physical and financial help, would in the end cost 
the taxpayer much more because the Government would then have to fund 
the considerable expense of constructing new affordable housing 
projects that will be needed to replace the existing projects lost. I 
have no doubt that as a practical matter the legislation will save the 
taxpayer in the end far more than it will cost.
  Historically, the country has placed considerable reliance on 
privately owned housing to provide affordable housing to low-income 
tenants. I think this is a wise policy, but to make it work we cannot 
deny all financial incentives to private investors to purchase and 
maintain these projects. The Ways and Means Committee recognized this 
in 1986 when it adopted the low-income housing tax credit. Before it is 
too late Congress must recognize the same for the stock of existing but 
aging low-income housing that has not been able to take advantage of 
the tax credit.
  I urge my colleagues to join me in supporting this legislation.
  

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