[Congressional Record Volume 143, Number 40 (Tuesday, April 8, 1997)]
[House]
[Pages H1299-H1302]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RURAL MULTIFAMILY RENTAL HOUSING LOAN GUARANTEE EXTENSION ACT OF 1997
Mr. LAZIO of New York. Mr. Speaker, I move to suspend the rules and
pass the bill (H.R. 28) to amend the Housing Act of 1949 to extend the
loan guarantee program for multifamily rental housing in rural areas.
The Clerk read as follows:
H.R. 28
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Rural Multifamily Rental
Housing Loan Guarantee Extentions Act of 1997''.
SEC. 2. LOAN GUARANTEES FOR MULTIFAMILY RENTAL HOUSING IN
RURAL AREAS.
Section 538 of the Housing Act of 1949 (42 U.S.C. 1490p-2)
is amended--
(1) in subsection (q), by striking paragraph (2) and
inserting the following new paragraph:
``(2) Annual limitation on amount of loan guarantee.--In
each fiscal year, the Secretary may enter into commitments to
guarantee loans under this section only to the extent that
the costs of the guarantees entered into in such fiscal year
do not exceed such amount as may be provided in appropriation
Acts for such fiscal year.'';
(2) by striking subsection (t) and inserting the following
new subsection:
``(t) Authorization of Appropriations.--There are
authorized to be appropriated for each fiscal year for costs
(as such term is defined in section 502 of the Congressional
Budget Act of 1974) of loan guarantees made under this
section such sums as may be necessary for such fiscal
year.''; and
(3) by striking subsection (u).
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from New
York [Mr. Lazio] and the gentleman from Massachusetts [Mr. Kennedy]
each will control 20 minutes.
The Chair recognizes the gentleman from New York [Mr. Lazio].
Mr. LAZIO of New York. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, today I rise in support of H.R. 28, the Rural
Multifamily Rental Housing Loan Guarantee Extension Act of 1997, a
mouthful, but a very important program which was introduced by the
gentleman from Nebraska, Mr. Doug Bereuter. I want to say at the
outset, without the leadership of Doug Bereuter we would likely not be
here today. This was largely his concept, a concept that he has fought
hard for, and it also is a reflection of the fact that poverty does not
end at the boundaries of our urban areas or even our suburban areas;
that in fact poverty and substandard housing is also very much a rural
issue.
I also want to thank the chairman of the full committee, the
gentleman from Iowa [Mr. Leach], who happens to be with us also here
today, and the ranking member of the subcommittee, the gentleman from
Massachusetts [Mr. Kennedy], for their extraordinary help and
assistance to bring this bill to where we are right now.
Mr. Speaker, H.R. 28 will permanently authorize a rural housing
multifamily program that leverages private sector dollars with Federal
loan guarantees in order to provide low-income housing in rural areas
in an efficient manner. The Rural Loan Guaranty Program originated in
the 103d Congress where the House passed fiscal year 1995 authorization
language and appropriated $1 million in budget authority. Although the
authorization bill was not enacted, the Agriculture Appropriations Act
for fiscal year 1995 left the program with appropriations or budget
authority without a program authorization.
During the last Congress, Mr. Speaker, Congress passed and the
President signed the Housing Opportunity Program Act of 1996 which
provided the fiscal year 1996 authorization of appropriations. For this
year we are in a similar quandary, and in fiscal year 1997
appropriations should result in $1.2 million in budget authority,
leveraging approximately $20 million in loan guarantees, with no
authorization for this year unless this bill moves.
During the first year of this program, there was significant industry
and public enthusiasm and support for the concept of guaranteed rental
housing loans. For example, during the 30-day fiscal year 1996 open
application season, there were 49 applications from 24 different States
requesting a total of approximately $62.5 million in guarantees to help
fund about $85 million in multifamily housing development. The need is
out there, Mr. Speaker.
The Rural Housing Service approved 9 requests for about $14 million
in guarantees on almost $20 million of new construction, resulting in
370 new apartment units.
Furthermore, as compared to the rural multifamily direct loan program
where the Government subsidy costs are extraordinarily higher, we are
getting good value. This indirect program is only a fraction of the
cost. The variety of developments indicates that the program has
widespread applicability and that it is flexible enough to meet the
differing financing needs of eligible private and private-sector
lenders and low-income housing providers.
This program is an example of the type of partnership that should
exist between the Federal Government and the private sector, and is
necessary to provide and expand low-income housing.
Finally, again, I want to congratulate and commend my colleague, the
gentleman from Nebraska [Mr. Bereuter] for his tireless work on this
issue to ensure an effective tool and an integral part of our assisted
housing mission for rural Americans.
I urge my colleagues to enthusiastically support passage of H.R. 28.
Mr. Speaker, I reserve the balance of my time.
Mr. KENNEDY of Massachusetts. Mr. Speaker, I yield myself such time
as I may consume.
Mr. Speaker, first of all, I want to thank my good friend and the
chairman of the Subcommittee on Housing and Community Opportunity of
the Committee on Banking and Financial Services, as well as the
chairman of the full committee, and I think the gentleman from Nebraska
[Mr. Bereuter] has been working on this issue since I first got on the
committee over 10 years ago, trying to reform some of the concerns
about rural housing and how the Government provides the subsidies in
this country.
While I rise today in support of H.R. 28, the Rural Multifamily
Rental Housing Loan Guarantee Extension Act of 1997, and I want to
extend my thanks to my colleagues for their efforts to deal with this
issue, I do want to explain to the Members of the House just how
critical the issue of providing housing programs for rural America are.
We have a situation today in this country where we have tended to
focus on the issue of urban poverty, but anyone who has taken the time
to visit
[[Page H1300]]
some of the more rural parts of America knows there are parts of this
country that have terrible, terrible poverty that is in many cases
swept under the rug, is not seen, because we do not have the slums and
the ghettoes of urban America that are so painfully easy to view by
anyone who drives through particular neighborhoods.
In rural America, much of the poverty is much more hidden. We do not
see it, yet it exists. It is terrible, it is terrifying for the poor,
and it is an issue that I think this act, I believe, begins to pull
back the covers on to some degree.
Mr. Speaker, I would like to point out that the basic fundamental
program which serves the poorest of the poor, the section 515 program,
has had enormous cutbacks associated with it over the course of the
last couple of years in the Congress.
While there are the needs for some improvements in the 515 program,
we should make no mistake by suggesting for a second that while the 538
program, which is the guaranteed loan program that we are acting on
today, the need for the program, the 515 program, which provides the
credit subsidy, is I think something that is of critical importance to
the poorest of the poor. We have to make certain that we do not turn
our backs continuously on the very, very poor people of this country.
While we want to provide an innovative demonstration program with the
authorization that it requires in order that our appropriators can now
provide the funds for this program, which is technically what all this
bill is doing today, we should recognize that this is a program that
will end up funding people that are slightly above the poorest of the
poor.
While this is a commendable program in and of itself, we ought to be,
I think, forthright with the American people that at the same time, we
are really cutting significantly the amount of money that goes into the
basic fundamental 515 program.
{time} 1445
I would just like to read one brief statistic. According to the State
of Rural Housing in 1966, a publication of the Housing Assistance
Council, of the 9.1 million rural centers, 1.2 million families had
severe housing cost burdens, paying more than 50 percent of their
income for rent; 1.6 million renters had moderate cost burdens, paying
between 30 and 50 percent of their income for rent. I do not think
anybody in this Congress pays anything close to 50 percent of their
income for rent. The amount of burden that that places on all the other
costs in one's life is very, very significant.
With those severe cost burdens, they were concentrated amongst the
poorest rural residents. The credit enhancement of the guarantee will
at least make rental housing more affordable to low- and moderate-
income families, if not the very low-income families. I am encouraged
that the Rural Housing Service is making every effort to make this
program work for rural America. I urge my colleagues to support H.R.
28. Again, I want to thank the gentleman from Nebraska [Mr. Bereuter],
the gentleman from Iowa [Mr. Leach], and the gentleman from New York
[Mr. Lazio] for their efforts.
Mr. Speaker, I reserve the balance of my time.
Mr. LAZIO of New York. Mr. Speaker, I yield 5 minutes to the
gentleman from Nebraska [Mr. Bereuter].
(Mr. BEREUTER asked and was given permission to revise and extend his
remarks.)
Mr. BEREUTER. Mr. Speaker, I want to first begin by thanking the
chairman of the Subcommittee on Housing and Community Development, the
distinguished gentleman from New York [Mr. Lazio], for his support and
assistance, and that of the gentleman from Iowa [Mr. Leach], chairman
of the full committee, for his assistance in bringing this legislation
to the floor. Mr. Lazio has certainly given us the history of this
legislation as it has evolved. I also appreciate his kind remarks.
I also appreciate the kind remarks of the gentleman from
Massachusetts, and I would say that his description of the poverty
problems and the housing problem in rural America, including our Indian
reservations, is directly on the mark.
This gentleman has never contended either that this housing program,
which has come to be known as the 538 program, is a replacement for
reform of the 515 program. We need to proceed with reforms of that
legislation which is also aimed at multiunit housing.
Mr. Speaker, I want to recognize a distinguished former Member of the
Congress who is on the floor today, Mr. de la Garza, former chairman
and then ranking member of the Committee on Agriculture. It is our
responsibility on the Committee on Banking and Financial Services to
work with the Committee on Agriculture on USDA housing programs. We
have worked with this gentleman in the past on housing legislation for
rural America and for small cities across the country. The gentleman
from Texas is seated by our current distinguished Agriculture Committee
chairman, the gentleman from Oregon [Mr. Smith]. I am sure they are
working on housing right now.
But Mr. Speaker, I do rise in support of this legislation and ask my
colleagues for support of it. This legislation does permanently
reauthorize the loan guarantee program for multifamily rental housing
in nonmetropolitan areas made under section 538 of the Housing Act of
1949. Originally enacted as a demonstration program under the section
515 rural housing program during the 103d Congress, this loan guarantee
program has been well received in nonmetropolitan America.
Unfortunately, the authorization for the program expired at the end
of the last fiscal year, and this authorization is urgently needed to
ensure the smooth operation of this important new program. Anyone
familiar with America's smaller cities and communities knows that the
supply of affordable rental housing is much needed but in short supply.
This lack of affordable housing is one of the reasons why many small
cities in nonmetropolitan areas are having a difficult time keeping
their young people, and thus their future, from migrating to
metropolitan areas.
Historically, it often has been difficult to entice adequate private
investment into these areas. Direct Federal lending programs which have
proven costly to taxpayers often have been the only source of financing
in these areas. Because of the problems which plagued and still plague
the section 515 direct loan program and knowing that Federal funds are
likely to become increasingly scarce, this Member saw the need for a
new approach that would cost taxpayers less but still provide equal or
greater housing opportunities in our Nation's smaller cities.
I had good support from our chairman, the gentleman from Iowa [Mr.
Leach], and the gentleman from New York [Mr. Lazio] and our colleagues
on the Democratic side of the aisle. The alternative which emerged is
the section 538 loan guarantee program. It does provide affordable
housing at least in part in nonmetropolitan areas for individuals with
incomes ranging from low to low-moderate to moderate levels; in other
words, those Americans whose incomes do not exceed 115 percent of the
area median income.
Eligible lenders, which include multifamily lenders approved by HUD
and Fannie Mae and Freddie Mac, provide financing for projects of at
least five housing units, five in a unit, developed by nonprofits,
State governments or for-profit private entities. Nonprofits and State
agencies are required to make a modest initial investment of 3 percent
of the development costs while private for-profit entities must
contribute an appropriate 10 percent of the development cost.
In return for a fee of up to 1 percent of the loan amount, the U.S.
Department of Agriculture guarantees repayment of the loan. Thus
projects which in the past required a dollar-for-dollar investment by
the Federal Government are now financed for pennies on the dollar by
the private sector.
Finally I wanted to quote from a letter received on March 18 of this
year from Jan Shadburn, Acting Administrator of the Rural Housing
Service of USDA.
She says as follows: ``We are very excited about the program and we
believe that, once reauthorized by Congress, it will continue to grow
and will prove to be an effective tool and an integral part of our
assisted housing mission for rural Americans.''
[[Page H1301]]
Mr. Speaker, this Member again asks his colleagues to support this
important alternative, a supplement to direct Federal lending in order
to ensure smooth operation of a program which is working in
nonmetropolitan America.
Mr. Speaker, I thank the gentleman for yielding me the time.
Mr. KENNEDY of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentlewoman from North Carolina [Mrs. Clayton].
Mrs. CLAYTON. Mr. Speaker, as a member of the Committee on
Agriculture, I want to rise in support of this initiative for rural
housing and associate myself with the remarks and comments
congratulating all of the persons who have been involved in bringing
this to fruition.
I want to acknowledge, as has been acknowledged by the gentleman from
Massachusetts [Mr. Kennedy], that this is not a substitute for 515,
which is so critically needed for the poorest of the poor. Those of us
who live in rural areas know how persistent and how pervasive the
poverty is and how difficult it is to bring resources and to make a
difference. So this is to stretch the resources, to give more resources
to rural areas so that we cannot only continue 515 in an improved way
but to introduce now what we call 538, the rural rental housing
guarantee program, which will allow the private sector to be partners
with the Government in guaranteeing more homes. I want to say this is
an addition that we welcome, but we also want to encourage further
reform and the expansion of 515 because we know it is so difficult for
the poorest of the poor to have housing and to say come to North
Carolina, if you want to see the poorest of the poor.
However, I am pleased to note that part of the demonstration program
North Carolina will have is in Clayton, NC, not my district but
nevertheless it is worthy of noting. It just happened to be Clayton,
and it happened to be North Carolina. And 56 persons will have
apartments that they would not have unless this program was available.
Mr. LAZIO of New York. Mr. Speaker, I yield such time as he may
consume to the gentleman from Iowa [Mr. Leach], chairman of the
Committee on Banking and Financial Services, who is also a tireless
advocate on behalf of our Nation's poor and those who have substandard
housing.
Mr. LEACH. Mr. Speaker, I thank the gentleman for yielding me the
time. Let me say, I also rise in support of this modest but very
significant program and would commend the gentleman from Nebraska [Mr.
Bereuter] for introducing the original legislation, the gentleman from
New York [Mr. Lazio], who leads housing efforts on behalf of all
Americans at this time in the House of Representatives, and the
gentleman from Massachusetts [Mr. Kennedy] who has always spoken so
eloquently on housing issues.
I would only make two points, one that was underscored by Mr.
Bereuter; that is, this approach is a guarantee loan program.
Therefore, it involves small sums of money, leveraging quite a bit
larger sums of money. In addition, it is based upon a USDA model and,
in fact, is USDA administered and that model has found that there is
only a 3-percent default rate, which is a rather impressive number in
relationship to almost every Federal program. But what is impressive in
addition is 3 percent default does not mean 3 percent losses. It means
that the loan went sour but there are still recoverable parts. So the
total losses to the taxpayer end up being a small percentage of 3
percent.
This is, in short, one of the most extraordinary ways of leveraging
housing programs in rural America. It is targeted precisely to rural
America and obviously, as a representative of a rural State with a high
percentage of nonurban housing stock, I am appreciative of its import.
But I would also stress that this program is intended as a tie-in to
other housing programs and that in the near future significant housing
reform will be the subject of a full Committee on Banking and Financial
Services review. We look forward, those of us from rural areas, to
working closely with the distinguished chairman of the subcommittee on
the endeavors that he is leading at this time.
I simply want to stress again the innovation of this program, the
leadership of my colleagues.
Mr. KENNEDY of Massachusetts. Mr. Speaker, I yield myself such time
as I may consume.
I would just like to end by pointing out that this program, as I
understand, the 515 Program, I would just like to point out, used to be
funded at about $690 million a year. The current 515 Program is down to
$150 million a year. This program is about $1.2 million, just so
Members will keep in perspective what we have done in terms of our
rural housing programs.
Rural poverty is growing. We have significant numbers of very, very
poor people living in rural America that have great, great housing
needs. I just hope that the Congress keeps in mind the need for us to
continue to support housing programs in general. We are going to have
major housing problems for America's poor in the coming year as a
result of some peculiarities in the budgeting process. I think that we
need to continue to bring home at every possible opportunity, to
recognize the significant problems that very poor people in this
country have in terms of attaining reasonable shelter. I hope to work
with the chairman of the full committee and the chairman of the housing
committee in resolving those issues in the future.
Mr. Speaker, I yield back the balance of my time.
Mr. LAZIO of New York. Mr. Speaker, I yield myself such time as I may
consume.
Let me again urge my colleagues to support this important piece of
legislation. It is a complement, not a substitute, for our other tools
that are available to combat poverty and substandard housing in rural
America. I want to emphasize once again, because so often the
illustrations that we see on the news, the shows that we see on
television, the things that we talk about tend to focus on what happens
in urban America, and the need is great in urban America. And the fact
is that we have extraordinary needs in terms of housing and community
development in both suburban and urban America. But poverty does not
end at the city boundary. Nor does it end at the suburban boundary. It
is a fact of life all too often in our rural areas.
In this case, we are doing what I think is an extraordinarily
efficient thing, which is to leverage our dollars, making our dollars
work as hard as possible. In this case, $1.2 million will leverage $20
million in construction, bringing housing to scores of Americans that
would otherwise potentially be homeless or, at least, be in terribly
substandard housing. As I say, it is a complement and not a substitute.
Let me also point out, in relation to the 515 Program, which has been
under considerable criticism by, among other people, a former Member of
this body and now a Member of the other body, Mr. Durbin, for the fact
that there have been numerous allegations of fraud, that in the 515
Program, which also has brought hope to many Americans, the Federal
Government subsidy costs are approximately 49 cents for each dollar
appropriated. The loan guarantee program subsidy today that we are
talking about is only, the cost is only about 6.8 cents for every
dollar appropriated. So again 6.8 cents for this program relative to 49
cents for every dollar appropriated in the 515 Program.
It is, in fact, a reality that we need as many tools as possible to
combat poverty and substandard housing throughout America. I want also
to compliment the Rural Housing Service of USDA for working with us,
with the Members on the other side of the aisle, in particular the
gentleman from Massachusetts [Mr. Kennedy], for his support of our
efforts to bring relief to rural areas; the support of other
associations, like the National Association of Home Builders; again,
the appropriators, the gentleman from New Mexico [Mr. Skeen], the
gentleman from Louisiana [Mr. Livingston] for their support through the
appropriations process. But most importantly, I would suggest that the
credit largely goes to the chairman of the full committee, the
Committee on Banking and Financial Services, the gentleman from Iowa
[Mr. Leach], and, of course, the gentleman from Nebraska [Mr. Bereuter]
for their vision and for their commitment to this very important
program that is truly bringing hope for many, many Americans throughout
the Nation.
[[Page H1302]]
Mr. Speaker, I include for the Record the following section-by-
section analysis:
H.R. 28--Rural Multifamily Rental Housing Loan Guarantee Extension Act
of 1997
section by section analysis
Section 1. Short Title.--The title is cited as the ``Rural
Multifamily Rental Housing Loan Guarantee Extension Act of
1997.''
Sec. 2. Loan Guarantees For Multifamily Rental Housing in
Rural Areas.--This section amends Section 538 of the Housing
Act of 1949 to provide a permanent authorization of
appropriations and permanent authority to the [US Department
of Agriculture] Secretary to guarantee rural housing
multifamily loans.
{time} 1500
Mr. LAZIO of New York. Mr. Speaker, I yield back the balance of my
time.
The SPEAKER pro tempore (Mr. Miller of Florida). The question is on
the motion offered by the gentleman from New York [Mr. Lazio] that the
House suspend the rules and pass the bill, H.R. 28.
The question was taken.
Mr. LAZIO of New York. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________