[Congressional Record Volume 144, Number 41 (Thursday, April 2, 1998)]
[Extensions of Remarks]
[Pages E582-E583]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  SENIOR CITIZEN HOUSING--ANOTHER CONTRACT RENEWAL DILEMMA: ``SENIOR 
         CITIZENS HOUSING FINANCIAL RESTRUCTURING ACT OF 1998''

                                 ______
                                 

                            HON. RICK LAZIO

                              of new york

                    in the house of representatives

                        Wednesday, April 1, 1998

  Mr. LAZIO of New York. Mr. Speaker, today I am introducing the Senior 
Citizens Housing Financial Restructuring Act of 1998. As my colleagues 
will recall, over the last three years the Congress has been dealing 
with the section 8 project-based renewal issue pertaining to the FHA 
multifamily inventory. Last year, the so-called mark to market 
legislation was enacted to deal with this inventory. However, that 
legislation did not address the Section 202 housing for the elderly 
inventory.
  The section 202 loan portfolio consists of over 4,500 direct 
government loans to private nonprofit sponsors for developing rental 
housing for lower income elderly. Projects developed under this program 
benefit from 40-year direct loans and 20-year section 8 rental 
assistance contracts. These projects contain approximately 215,000 \1\ 
units, for which funds were reserved from 1976 through 1988. Between 
2001 and 2015, virtually all of the section 8 rental contracts for 
these projects will expire. Projects funded subsequent to 1988 were 
either funded under the new Capital Advance Program or converted from 
direct loans to capital advances. \2\
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     \1\  Since the program was created in section 202 of the 
     Housing Act of 1959, the program has assisted not-for-profit 
     sponsors, dedicated to serving the special needs of the 
     elderly, in building 337,000 residential rental units--a 
     major portion of the nation's supply of quality, affordable 
     housing for the elderly.
     \2\  Since 1990, the revised section 202 program provides (1) 
     a capital advance to finance construction and (2) periodic 
     operating subsidies to fill the gap between the cost of 
     elderly housing and rent revenues that low-income residents 
     can afford. The capital advance is, in effect, an interest-
     free loan on which no payments are due as long as the housing 
     meets program requirements. Operating support goes to elderly 
     housing through a ``project rental assistance contract'' 
     (PRAC), renewable in five year increments.
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  Mr. Speaker, preservation of this inventory is of paramount concern 
to me as well as all my colleagues since there is considerable demand 
for the units and few alternatives for many lower income elderly. Like 
the FHA multifamily portfolio, a primary issue facing this housing 
program is the need for renewals of section 8 contracts. Current HUD 
policy allows annual renewals only. In 2001, approximately 300 projects 
will come due for renewal. The number will climb each year until it 
reaches 4,500 projects in 2013. The estimated annual cost of renewals 
is approximately $250 million in 2001 and $2.9 billion in 2021.
  As elderly housing becomes more market-oriented and residents age, 
the older section 202 projects must meet the cost of (1) service 
coordination, (2) structural retrofitting, and (3) other improvements 
required to serve more service-dependent residents in the future. 
However, in the current budgetary environment, Congress will have 
difficulty meeting these costs under section 8.
  My legislation allows that elderly housing operating under earlier 
versions of section 202 should be allowed to convert to the new, 
improved form of elderly housing assistance.

[[Page E583]]

The unpaid principal balance of an older section 202 loan would be 
converted to a capital advance, essentially forgiving outstanding debt. 
The project would then receive cost-effective operating assistance 
under a project rental assistance contract that is better designed to 
provide quality elderly housing in local markets.
  In its simplest form, conversion is likely to have no financial 
impact on the projects, but the federal subsidy would be scored in the 
budget process in a different manner. By forgiving the direct loan, the 
need for section 8 subsidy is reduced by the amount of principal and 
interest. Thus, the forgiveness of outstanding section 202 loans would 
initially have a one-time mandatory budget cost. However, the up-front 
costs of conversion would, over time, be more than offset by ongoing 
discretionary savings and lasting benefits to HUD's budget, elderly 
housing sponsors, and elderly residents.
  Mr. Speaker, I believe that Congress has a unique opportunity to 
address these issues because, unlike much of the rest of the section 8 
inventory, the contract renewal problem does not become significant 
until after the year 2000. I urge all my colleagues to join me in 
sponsoring this legislation.

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