[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.

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