[Congressional Record Volume 147, Number 178 (Thursday, December 20, 2001)]
[Senate]
[Pages S13973-S13980]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DODD:
  S. 1886. A bill to amend the Internal Revenue Code of 1986 to allow a 
business credit for supported elderly housing; to the Committee on 
Finance.
  Mr. DODD. Mr. President, I rise today to introduce two bills that 
will help address a growing problem in America, our ability to provide 
safe and affordable housing that meets the needs of older Americans. 
Currently there are 35 million Americans over 65 years old. That number 
will double within the next thirty years. By 2030, 20 percent of the 
U.S. population will be over 65 years old.
  Both of the bills that I am introducing will promote the development 
of assisted living programs to provide a wide range of services, 
including medical assistance, housekeeping services, hygiene and 
grooming, and meals preparation. Providing these services will in turn 
give older Americans greater opportunities to decide for themselves 
where they live and how they exercise their independence.
  The first bill I am introducing is the ``Elderly Plus Supportive 
Health Support Demonstration Act,'' which will provide Federal grants 
to allow public housing authorities around the country to develop new 
strategies for providing better housing for senior citizens. Nearly one 
third of all public housing units are occupied by senior citizens. This 
figure has been steadily growing in recent years and will undoubtedly 
continue to grow in the future. It is critically important that we 
remain committed to providing low-income seniors with safe and 
affordable housing.
  Unfortunately, as we examine the public housing stock across the 
country, we find a bleak situation. Over 66 percent of existing public 
housing units are more than 30 years old and most are not designed to 
meet the needs of older Americans. For example, too few of our housing 
units are equipped with equipment and features that facilitate mobility 
for those in wheelchairs. Even such simple things as having a kitchen 
counter top that can be reached from a wheelchair may make the 
difference between a senior being able to stay in her home or having to 
leave, often to be sent to an institution where seniors have less 
independence and control over their lives. The ``Elder Housing Plus 
Health Support Demonstration Act'' will give public housing authorities 
the tools they need to improve our public housing stock so our seniors 
will not be prematurely forced out of their homes.
  The second bill that I am introducing is the ``Assisted Living Tax 
Credit Act,'' which will provide a tax incentive to help construct 
assisted living housing for low- and moderate-income Americans. The 
current stock of assisted living facilities is inadequate to meet 
demand in certain places around the country and the stock of 
moderately-priced units is even tighter. The demand for assisted living 
units will only increase as our population ages and this highly desired 
housing choice should be available to all Americans. The ``Assisted 
Living Tax Credit Act'' will help make assisted living arrangements 
available to those who have previously been priced out of the market.
  The scarceness of affordable assisted living units has social costs 
that we

[[Page S13974]]

must consider as we set national housing policies for the future. 
Often, the cost of taking care of an aging family member can be 
devastating to American families. Too often, working men and women are 
torn between the need to maintain their jobs and the desire to provide 
the best possible care to their aging family members.
  Advances in medicine are allowing us to live longer, healthier lives. 
Longevity is a great blessing, but it also poses significant challenges 
for individuals, families, and society as whole. One of the largest 
challenges we will face in the decades ahead is the challenge of 
defining new kinds of housing that respond to the needs of our growing 
elderly population.
  It is my hope that the bills I am introducing today will generate 
earnest discussion on these important matters and will ultimately lead 
to action to ensure that every American senior can live in security and 
dignity.
  I ask unanimous consent that the text of the ``Elderly Housing Plus 
Health Support Demonstration Act'' be printed in the Record. I also ask 
unanimous consent that the ``Assisted Living Tax Credit Act'' be 
printed in the Record.

                                S. 1885

  There being no objection, the bills were ordered to be printed in the 
Record, as follows:
       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 ``Elderly Housing Plus Health 
     Support Demonstration Act''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) there are not fewer than 34,100,000 Americans who are 
     65 years of age and older, and persons who are 85 years of 
     age or older comprise almost one-quarter of that population;
       (2) the Bureau of the Census of the Department of Commerce 
     estimates that, by 2030, the elderly population will double 
     to 70,000,000 persons;
       (3) according to the Department of Housing and Urban 
     Development report ``Housing Our Elders--A Report Card on the 
     Housing Conditions and Needs of Older Americans'', the 
     largest and fastest growing segments of the older population 
     include many people who have historically been vulnerable 
     economically and in the housing market--women, minorities, 
     and people over the age of 85;
       (4) many elderly persons are at significant risk with 
     respect to the availability, stability, and accessibility of 
     affordable housing;
       (5) one third of public housing residents are approximately 
     62 years of age or older, making public housing the largest 
     Federal housing program for senior citizens;
       (6) the elderly population residing in public housing is 
     older, poorer, frailer, and more racially diverse than the 
     elderly population residing in other assisted housing;
       (7) two-thirds of the public housing developments for the 
     elderly, including those that also serve the disabled, were 
     constructed before 1970 and are in dire need of major 
     rehabilitation and reconfiguration, such as rehabilitation to 
     provide new roofs, energy-efficient heating, cooling, utility 
     systems, accessible units, and up-to-date safety features;
       (8) many of the dwelling units in public housing 
     developments for elderly and disabled persons are undersized, 
     are inaccessible to residents with physical limitations, do 
     not comply with the requirements under the Americans with 
     Disabilities Act of 1990, or lack railings, grab bars, 
     emergency call buttons, and wheelchair accessible ramps;
       (9) a study conducted for the Department of Housing and 
     Urban Development found that the cost of the basic 
     modernization needs for public housing for elderly and 
     disabled persons exceeds $5,700,000,000;
       (10) a growing number of elderly and disabled persons face 
     unnecessary institutionalization because of the absence of 
     appropriate supportive services and assisted living 
     facilities in their residences;
       (11) for many elderly and disabled persons, independent 
     living in a non-institutionalization setting is a preferable 
     housing alternative to costly institutionalization, and would 
     allow public monies to be more effectively used to provide 
     necessary services for such persons;
       (12) congregate housing and supportive services coordinated 
     by service coordinators is a proven and cost-effective means 
     of enabling elderly and disabled persons to remain in place 
     with dignity and independence; and
       (13) the effective provision of congregate services and 
     assisted living in public housing developments requires the 
     redesign of units and buildings to accommodate independent 
     living.
       (b) Purposes.--The purposes of this Act are--
       (1) to establish a demonstration program to make 
     competitive grants to provide state-of-the-art health-
     supportive housing with assisted living opportunities for 
     elderly and disabled persons;
       (2) to provide funding to enhance, make safe and 
     accessible, and extend the useful life of public housing 
     developments for the elderly and disabled and to increase 
     their accessibility to supportive services;
       (3) to provide elderly and disabled public housing 
     residents a readily available choice in living arrangements 
     by utilizing the services of service coordinators and 
     providing a continuum of care that allows such residents to 
     age in place;
       (4) to incorporate congregate housing service programs more 
     fully into public housing operations; and
       (5) to accomplish such purposes and provide such funding 
     under existing provisions of law that currently authorize all 
     activities to be conducted under the program.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Elderly and disabled families.--The term ``elderly and 
     disabled families'' means families in which 1 or more persons 
     is an elderly person or a person with disabilities.
       (2) Elderly person.--The term ``elderly person'' means a 
     person who is 62 years of age or older.
       (3) Person with disabilities.--The term ``person with 
     disabilities'' has the same meaning as in section 3(b)(3)(E) 
     of the United States Housing Act of 1937 (42 U.S.C. 
     1437a(b)(3)(E)).
       (4) Public housing agency.--The term ``public housing 
     agency'' has the same meaning as in section 3(b)(6)(A) of the 
     United States Housing Act of 1937 (42 U.S.C. 1437a(b)(6)(A)).
       (5) Secretary.--The term ``Secretary'' means the Secretary 
     of Housing and Urban Development.

     SEC. 4. AUTHORITY FOR ELDERLY HOUSING PLUS HEALTH SUPPORT 
                   PROGRAM.

       The Secretary shall establish an elderly housing plus 
     health support demonstration program (referred to in this Act 
     as the ``demonstration program'') in accordance with this Act 
     to provide coordinated funding to public housing projects for 
     elderly and disabled families selected for participation 
     under section 5, to be used for--
       (1) rehabilitation or reconfiguration of such projects;
       (2) the provision of space in such projects for supportive 
     services and community and health facilities;
       (3) the provision of service coordinators for such 
     projects; and
       (4) the provision of congregate services programs in or 
     near such projects.

     SEC. 5. PARTICIPATION IN PROGRAM.

       (a) Application and Plan.--To be eligible to be selected 
     for participation in the demonstration program, a public 
     housing agency shall submit to the Secretary--
       (1) an application, in such form and manner as the 
     Secretary shall require; and
       (2) a plan for the agency that--
       (A) identifies the public housing projects for which 
     amounts provided under this Act will be used, limited to 
     projects that are designated or otherwise used for 
     occupancy--
       (i) only by elderly families; or
       (ii) by both elderly families and disabled families; and
       (B) provides for local agencies or organizations to 
     establish or expand the provision of health-related services 
     or other services that will enhance living conditions for 
     residents of public housing projects of the agency, primarily 
     in the project or projects to be assisted under the plan.
       (b) Selection and Criteria.--
       (1) Selection.--The Secretary shall select public housing 
     agencies for participation in the demonstration program based 
     upon a competition among public housing agencies that submit 
     applications for participation.
       (2) Criteria.--The competition referred to in paragraph (1) 
     shall be based upon--
       (A) the extent of the need for rehabilitation or 
     reconfiguration of the public housing projects of an agency 
     that are identified in the plan of the agency pursuant to 
     subsection (a)(2)(A);
       (B) the past performance of an agency in serving the needs 
     of elderly public housing residents or non-elderly, disabled 
     public housing residents given the opportunities in the 
     locality;
       (C) the past success of an agency in obtaining non-public 
     housing resources to assist such residents given the 
     opportunities in the locality; and
       (D) the effectiveness of the plan of an agency in creating 
     or expanding services described in subsection (a)(2)(B).

     SEC. 6. CONFIGURATION AND CAPITAL IMPROVEMENTS.

       (a) Grants.--
       (1) In general.--The Secretary shall make grants to public 
     housing agencies selected for participation under section 5, 
     to be used only--
       (A) for capital improvements to rehabilitate or reconfigure 
     public housing projects identified in the plan submitted 
     under section 5(a)(2)(A); and
       (B) to provide space for supportive services and for 
     community and health-related facilities primarily for the 
     residents of projects identified in the plan submitted under 
     section 5(a)(2)(A).
       (2) Source of funds.--Grants shall be made under this 
     section from funds made available for the demonstration 
     program in accordance with subsection (c).
       (3) Inapplicability of other provisions.--Section 9(c)(1) 
     of the United States Housing Act of 1937 (42 U.S.C. 
     1437g(c)(1)) does not apply to grants made under this 
     section.
       (b) Allocation.--Grants funded in accordance with this 
     section shall--

[[Page S13975]]

       (1) be allocated among public housing agencies selected for 
     participation under section 5 on the basis of the criteria 
     established under section 5(b)(2); and
       (2) be made in such amounts and subject to such terms as 
     the Secretary shall determine.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated for the demonstration program, to make 
     grants in accordance with this section--
       (1) $100,000,000 for fiscal year 2002; and
       (2) such sums as may be necessary for fiscal year 2003 and 
     each subsequent fiscal year.

     SEC. 7. SERVICE COORDINATORS.

       (a) Grants.--
       (1) In general.--The Secretary shall make grants to public 
     housing agencies selected for participation under section 5, 
     to be used only--
       (A) for public housing projects for elderly and disabled 
     families for whom capital assistance is provided under 
     section 6; and
       (B) to provide service coordinators and related activities 
     identified in the plan of the agency pursuant to section 
     5(a)(2), so that the residents of such public housing 
     projects will have improved and more economical access to 
     services that support the health and well-being of the 
     residents.
       (2) Source of funds.--Grants shall be made under this 
     section from funds made available for the demonstration 
     program in accordance with subsection (c).
       (3) Inapplicability of other provisions.--Section 9(c)(1) 
     of the United States Housing Act of 1937 (42 U.S.C. 
     1437g(c)(1)) does not apply to grants made under this 
     section.
       (b) Allocation.--The Secretary shall provide a grant 
     pursuant to this section, in an amount not to exceed 
     $100,000, to each public housing agency that is selected for 
     participation under section 5.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated for the demonstration program, to make 
     grants in accordance with this section--
       (1) $2,000,000 for fiscal year 2002; and
       (2) such sums as may be necessary for fiscal year 2003 and 
     each subsequent fiscal year.

     SEC. 8. CONGREGATE HOUSING SERVICES PROGRAMS.

       (a) Grants.--
       (1) In general.--The Secretary shall make grants to public 
     housing agencies selected for participation under section 5, 
     to be used only--
       (A) in connection with public housing projects for elderly 
     and disabled families for which capital assistance is 
     provided under section 6; and
       (B) to carry out a congregate housing service program 
     identified in the plan of the agency pursuant to section 
     5(a)(2) that provides services as described in section 
     202(g)(1) of the Housing Act of 1959 (12 U.S.C. 1701q(g)(1)).
       (2) Source of funds.--Grants shall be made under this 
     section from funds made available for the demonstration 
     program in accordance with subsection (c).
       (3) Inapplicability of other provisions.--Other than as 
     specifically provided in this section--
       (A) section 9(c)(1) of the United States Housing Act of 
     1937 (42 U.S.C. 1437g(c)(1)) does not apply to grants made 
     under this section; and
       (B) section 202 of the Housing Act of 1959 (12 U.S.C. 
     1701q) does not apply to grants made under this section.
       (b) Allocation.--The Secretary shall provide a grant 
     pursuant to this section, in an amount not to exceed 
     $150,000, to each public housing agency that is selected for 
     participation under section 5.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated for the demonstration program, to make 
     grants in accordance with this section--
       (1) $3,000,000 for fiscal year 2003; and
       (2) such sums as may be necessary for fiscal year 2005 and 
     each subsequent fiscal year.

     SEC. 9. SAFEGUARDING OTHER APPROPRIATIONS.

       Amounts authorized to be appropriated under this Act to 
     carry out this Act are in addition to any amounts authorized 
     to be appropriated under any other provision of law, or 
     otherwise made available in appropriations Acts, for 
     rehabilitation of public housing projects, for service 
     coordinators for public housing projects, or for congregate 
     housing services programs.
                                  ____


                                S. 1886

       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 ``Assisted Living Tax Credit 
     Act''.

     SEC. 2. SUPPORTED ELDERLY HOUSING CREDIT.

       (a) In General.--Subpart D of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     business related credits) is amended by adding at the end the 
     following:

     SEC. 42A. SUPPORTED ELDERLY HOUSING CREDIT.

       ``(a) Amount of Credit.--For purposes of section 38, the 
     amount of the supported elderly housing credit determined 
     under this section for any taxable year in the credit period 
     shall be an amount equal to the sum of--
       ``(A) 9 percent of the qualified basis of each qualified 
     supported elderly building, plus
       ``(B) 4 percent of such qualified basis with respect to any 
     qualified supported elderly building providing qualified 
     supported elderly services.
       ``(b) Qualified Basis; Qualified Supported Elderly 
     Building; Credit Period.--For purposes of this section--
       ``(1) Qualified basis.--
       ``(A) Determination.--The qualified basis of any qualified 
     supported elderly building for any taxable year is an amount 
     equal to--
       ``(i) the applicable fraction (determined as of the close 
     of such taxable year) of
       ``(ii) the eligible basis of such building (determined 
     under rules similar to the rules under section 42(d)).
       ``(B) Applicable fraction.--For purposes of subparagraph 
     (A), the term `applicable fraction' means the smaller of the 
     unit fraction or the floor space fraction.
       ``(C) Unit fraction.--For purposes of subparagraph (B), the 
     term `unit fraction' means the fraction--
       ``(i) the numerator of which is the number of supported 
     elderly units in the building, and
       ``(ii) the denominator of which is the number of 
     residential rental units (whether or not occupied) in such 
     building.
       ``(D) Floor space fraction.--For purposes of subparagraph 
     (B), the term `floor space fraction' means the fraction--
       ``(i) the numerator of which is the total floor space of 
     the supported elderly units in such building, and
       ``(ii) the denominator of which is the total floor space of 
     the residential rental units (whether or not occupied) in 
     such building.
       ``(E) Qualified basis to include portion of building used 
     to provide qualified supported elderly services.--In the case 
     of a qualified supported elderly building described in 
     subsection (a)(2), the qualified basis of such building 
     for any taxable year shall be increased by the less of--
       ``(i) so much of the eligible basis of such building as is 
     used through the year to provide qualified support elderly 
     services, or
       ``(ii) 20 percent of the qualified basis of such building 
     (determined without regard to this subparagraph).
       ``(2) Qualified supported elderly building.--The term 
     `qualified supported elderly building' means any building 
     which is part of a qualified supported elderly housing 
     project at all times during the period--
       ``(A) beginning on the 1st day in the compliance period on 
     which such building is part of such a project, and
       ``(B) ending on the last day of the compliance period with 
     respect to such building.

     Such term does not include any building with respect to which 
     moderate rehabilitation assistance is provided, at any time 
     during the compliance period, under section 8(e)(2) of the 
     United States Housing Act of 1937 (other than assistance 
     under the Stewart B. McKinney Homeless Assistance Act (as in 
     effect on the date of the enactment of this sentence)).
       ``(3) Credit period.--The term `credit period' means, with 
     respect to any building, the period of 10 taxable years 
     beginning with--
       ``(A) the taxable year in which the building is placed in 
     service, or
       ``(B) at the election of the taxpayer, the succeeding 
     taxable year,

     but only if the building is a qualified supported elderly 
     building as of the close of the 1st year of such period. The 
     election under subparagraph (B), once made, shall be 
     irrevocable.
       ``(4) Applicable rules.--
       ``(A) For treatment of certain rehabilitation expenditures 
     as separate new buildings, subsection (e) of section 42 shall 
     apply.
       ``(B) For rules regarding the application of the credit 
     period, paragraph (2) through (5) of section 42(f) shall 
     apply.
       ``(c) Qualified Supported Elderly Housing Project.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified supported elderly 
     housing project' means any project for residential rental 
     property if the project meets the requirements of 
     subparagraph (A) or (B) whichever is elected by the taxpayer:
       ``(A) 20-50 test.--The project meets the requirements of 
     this subparagraph if 20 percent or more of the residential 
     units in such project are both rent-restricted and occupied 
     by individuals whose income is 50 percent or less of area 
     median gross income.
       ``(B) 40-90 test.--The project meets the requirements of 
     this subparagraph if 40 percent or more of the residential 
     units in such project are both rent-restricted and occupied 
     by individuals whose income is 90 percent or less of area 
     median gross income.

     Any election under this paragraph, once made, shall be 
     irrevocable. For purposes of this paragraph, any property 
     shall not be treated as failing to be residential rental 
     property merely because part of the building in which such 
     property is located is used for purposes other than 
     residential rental purposes.
       ``(2) Rent-restricted units.--
       ``(A) In general.--For purposes of paragraph (1), a 
     residential unit is rent-restricted if the gross rent with 
     respect to such unit does not exceed 65 percent of the 
     imputed income limitation applicable to such unit. For 
     purposes of the preceding sentence, the amount of the 
     income limitation under paragraph (1) applicable for any 
     period shall not be less than such limitation for the 
     earliest period the building (which contains the unit) was 
     included in the determination of whether the project is a 
     qualified supported elderly housing project.
       ``(B) Gross rent.--For purposes of subparagraph (A), gross 
     rent--
       ``(i) includes any fee for a qualified supported elderly 
     service which is paid to the

[[Page S13976]]

     owner of the unit (on the basis of the supported elderly 
     status of the tenant of the unit) by any governmental program 
     of assistance (or by an organization described in section 
     501(c)(3) and exempt from tax under section 501(a)) if such 
     program (or organization) provides assistance for rent and 
     the amount of assistance provided for rent is not separable 
     from the amount of assistance provided for supportive 
     services.
       ``(ii) does not include any payment under section 8 of the 
     United States Housing Act of 1937 or any comparable rental 
     assistance program (with respect to such unit or occupants 
     thereof),
       ``(iii) includes any utility allowance determined by the 
     Secretary after taking into account such determinations under 
     section 8 of the United States Housing Act of 1937, and
       ``(iv) does not include any rental payment to the owner of 
     the unit to the extent such owner pays an equivalent amount 
     to the Farmers' Home Administration under section 515 of the 
     Housing Act of 1949.
       ``(C) Imputed income limitation applicable to unit.--For 
     purposes of this paragraph, the imputed income limitation 
     applicable to a unit is the income limitation which would 
     apply under paragraph (1) to individuals occupying the unit 
     if the number of individuals occupying the unit were as 
     follows:
       ``(i) In the case of a unit which does not have a separate 
     bedroom, 1 individual.
       ``(ii) In the case of a unit which has 1 or more separate 
     bedrooms, 1.5 individuals for each separate bedroom.
       In the case of a project with respect to which a credit is 
     allowable by reason of this section and for which financing 
     is provided by a bond described in section 142(a)(7), the 
     imputed income limitation shall apply in lieu of the 
     otherwise applicable income limitation for purposes of 
     applying section 142(d)(4)(B)(ii).
       ``(D) Treatment of units occupied by individuals whose 
     incomes rise above limit.--
       ``(i) In general.--Except as provided in clause (ii), 
     notwithstanding an increase in the income of occupants of a 
     supported elderly unit above the income limitation applicable 
     under paragraph (1), such unit shall continue to be treated 
     as a supported elderly unit if the income of such occupants 
     initially met such income limitation and such unit continues 
     to be rent restricted.
       ``(ii) Next available unit must be rented to supported 
     elderly tenant if income rises above 140 percent of income 
     limit.--If the income of the occupants of the unit increases 
     above 140 percent of the income limitation applicable under 
     paragraph (1), clause (i) shall cease to apply to such 
     unit if any residential rental unit in the building (of a 
     size comparable to, or smaller than, such unit) is 
     occupied by a new resident whose income exceeds such 
     income limitation. In the case of a project described in 
     section 142(d)(4)(B), the preceding sentence shall be 
     applied by substituting `170 percent' for `140 percent' 
     and by substituting `any supported elderly unit in the 
     building is occupied by a new resident whose income 
     exceeds 40 percent of area median gross income' for `any 
     residential unit in the building (of a size comparable to, 
     or smaller than, such unit) is occupied by a new resident 
     whose income exceeds such income limitation'.
       ``(E) Units where federal rental assistance is reduced as 
     tenant's income increases.--If the gross rent with respect to 
     a residential unit exceeds the limitation under subparagraph 
     (A) by reason of the fact that the income of the occupants 
     thereof exceeds the income limitation applicable under 
     paragraph (1), such unit shall, nevertheless, be treated as a 
     rent-restricted unit for purposes of paragraph (1) if--
       ``(i) a Federal rental assistance payment described in 
     subparagraph (B)(i) is made with respect to such unit or its 
     occupants, and
       ``(ii) the sum of such payment and the gross rent with 
     respect to such unit does not exceed the sum of the amount of 
     such payment which would be made and the gross rent which 
     would be payable with respect to such unit if--
       ``(I) the income of the occupants thereof did not exceed 
     the income limitation applicable under paragraph (1), and
       ``(II) such units were rent-restricted within the meaning 
     of subparagraph (A).

     The preceding sentence shall apply to any unit only if the 
     result described in clause (ii) is required by Federal 
     statute as of the date of the enactment of this subparagraph 
     and as of the date the Federal rental assistance payment is 
     made.
       ``(3) Qualified supported elderly service.--The term 
     `qualified supported elderly service' means any service 
     provided under a planned program of services designed to 
     enable residents of a residential rental property to remain 
     independent and avoid placement in a hospital, nursing home, 
     or intermediate care facility for the mentally or physically 
     handicapped. In the case of a single-room occupancy unit or a 
     building described in subsection (h)(2)(B)(iii), such term 
     includes any service provided to assist tenants in locating 
     and retaining permanent housing.
       ``(4) Date for meeting requirments.--
       ``(A) In general.--Except as otherwise provided in this 
     paragraph, a building shall be treated as a qualified 
     supported elderly building only if the project (of which such 
     building is a part) meets the requirements of paragraph (1) 
     not later than the close of the 1st year of the credit period 
     for such building.
       ``(B) Buildings which rely on later buildings for 
     qualification.--
       ``(i) In general.--In determining whether a building (in 
     this subparagraph referred to as the `prior building') is a 
     qualified supported elderly building, the taxpayer may take 
     into account 1 or more additional buildings placed in service 
     during the 12-month period described in subparagraph (A) with 
     respect to the prior building only if the taxpayer elects to 
     apply clause (ii) with respect to each additional building 
     taken into account.
       ``(ii) Treatment of elected buildings.--In the case of a 
     building which the taxpayer elects to take into account under 
     clause (i), the period under subparagraph (A) for such 
     building shall end at the close of the 12-month period 
     applicable to the prior building.
       ``(iii) Date prior building is treated as placed in 
     service.--For purposes of determining the credit period and 
     the compliance period for the prior building, the prior 
     building shall be treated for purposes of this section as 
     placed in service on the most recent date any additional 
     building elected by the taxpayer (with respect to such prior 
     building) was placed in service.
       ``(C) Special Rule.--A building--
       ``(i) other than the 1st building placed in service as part 
     of a project, and
       (ii) other than a building which is placed in service 
     during the 12-month period described in subparagraph (A) with 
     the respect to a prior building which becomes a qualified 
     supported elderly building,

     shall in no event be treated as a qualified supported elderly 
     building unless the project is a qualified supported elderly 
     housing project (without regard to such building) on the date 
     such building is placed in service.
       ``(D) Projects with more than 1 building must be 
     identified.--For purposes of this section a project shall be 
     treated as consisting of only 1 building unless, before the 
     close of the 1st calendar year in the project period (as 
     defined in subsection (d)(1)(F)(ii)), each building which is 
     (or will be) part of such project is identified in such form 
     and manner as the Secretary may provide.
       ``(5) Certain rules made applicable.--Paragraphs (2) (other 
     than subparagraph (A) thereof), (3), (4), (5), (6), and (7) 
     of section 142(d), and section 6652(j), shall apply for 
     purposes of determining whether any project is a qualified 
     supported elderly housing project and whether any unit is a 
     supported elderly unit; except that, in applying such 
     provisions for such purposes, the term `gross rent' shall 
     have the meaning given such term by paragraph (2)(B) of this 
     subsection.
       ``(6) Election to treat building after compliance period as 
     not part of a project.--For purposes of this section, the 
     taxpayer may elect to treat any building as not part of a 
     qualified supported elderly housing project for any period 
     beginning after the compliance period for such building.
       ``(7) Special rule where de minimis equity contribution.--
     Proeprty shall not be treated as failing to be residential 
     rental property for purposes of this section merely because 
     the occupant of a residential unit in the project pays (on a 
     voluntary basis) to the lessor a de minimis amount to be held 
     toward the purchase by such occupant of a residential unit in 
     such project if--
       ``(A) all amounts so paid are refunded to the occupant on 
     the cessation of his occupancy of a unit in the project, and
       ``(B) the purchase of the unit is not permitted until after 
     the close of the compliance period with respect to the 
     building in which the unit is located.

     Any amount paid to the lessor as described in the preceding 
     sentence shall be included in gross rent under paragraph (2) 
     for purposes of determining whether the unit is rent-
     restricted.
       ``(8) Scattered site projects.--Buildings which would (but 
     for their lack of proximity) be treated as a project for 
     purposes of this section shall be so treated if all of the 
     dwelling units in each of the buildings are rent-restricted 
     (within the meaning of paragraph (2)) residential rental 
     units.
       ``(9) Waiver of certain de minimis errors and 
     recertifications.--On application by the taxpayer, the 
     Secretary may waive--
       ``(A) any recapture under subsection (i) in the case of any 
     de minimis error in complying with paragraph (1), or
       ``(B) any annual recertification of tenant income for 
     purposes of this subsection, if the entire building is 
     occupied by supported elderly tenants.
       ``(d) Limitation on Aggregate Credit Allowable With Respect 
     to Projects Located in a State.--
       ``(1) Credit may not exceed credit amount allocated to 
     building.--The amount of the credit determined under this 
     section for any taxable year with respect to any building 
     shall not exceed the supported elderly housing credit dollar 
     amount allocated to such building under rules similar to the 
     rules of paragraph (1) of section 42(h).
       ``(2) Allocated credit amount to apply to all taxable years 
     ending during or after credit allocation year.--Any supported 
     elderly housing credit dollar amount allocated to any 
     building for any calendar year--
       ``(A) shall apply to such building for all taxable years in 
     the compliance period ending during or after such calendar 
     year, and
       ``(B) shall reduce the aggregate supported elderly housing 
     credit dollar amount of the allocating agency only for such 
     calendar year.
       ``(3) Supported elderly housing credit dollar amount for 
     agencies.--
       ``(A) In general.--The aggregate supported elderly housing 
     credit dollar amount which a

[[Page S13977]]

     supported elderly housing credit agency may allocate for any 
     calendar year is the portion of the State supported elderly 
     housing credit ceiling allocated under this paragraph for 
     such calendar year to such agency.
       ``(B) State ceiling initially allocated to state supported 
     elderly housing credit agencies.--Except as provided in 
     subparagraphs (D) and (E), the State supported elderly 
     housing credit ceiling for each calendar year shall be 
     allocated to the supported elderly housing credit agency of 
     such State. If there is more than 1 supported elderly housing 
     credit agency of a State, all such agencies shall be treated 
     as a single agency.
       ``(C) State supported elderly housing credit ceiling.--The 
     State supported elderly housing credit ceiling applicable to 
     any State and any calendar year shall be an amount equal to 
     the sum of--
       ``(i) the unused State supported elderly housing credit 
     ceiling (if any) of such State for the preceding calendar 
     year,
       ``(ii) $1.25 multiplied by the State population,
       ``(iii) the amount of State supported elderly housing 
     credit ceiling returned in the calendar year, plus
       ``(iv) the amount (if any) allocated under subparagraph (D) 
     to such State by the Secretary.

     For purposes of clause (i), the unused State supported 
     elderly housing credit ceiling for any calendar year is the 
     excess (if any) of the sum of the amounts described in 
     clauses (i) through (iv) over the aggregate supported elderly 
     housing credit dollar amount allocated for such year. For 
     purposes of clause (iii), the amount of State supported 
     elderly housing credit ceiling returned in the calendar year 
     equals the supported elderly housing credit dollar amount 
     previously allocated within the State to any project which 
     fails to meet the 10 percent test under section 
     42(h)(1)(E)(ii) on a date after the close of the calendar 
     year in which the allocation was made or which does not 
     become a qualified supported elderly housing project within 
     the period required by this section or the terms of the 
     allocation or to any project with respect to which an 
     allocation is canceled by mutual consent of the supported 
     elderly housing credit agency and the allocation recipient.
       ``(D) Unused supported elderly housing credit carryovers 
     allocated among certain states.--
       ``(i) In general.--The unused supported elderly housing 
     credit carryover of a State for any calendar year shall be 
     assigned to the secretary for allocation among qualified 
     states for the succeeding calendar year.
       ``(ii) Unused supported elderly housing credit carryover.--
     For purposes of this subparagraph, the unused supported 
     elderly housing credit carryover of a State for any calendar 
     year is the excess (if any) of--
       ``(I) the unused State supported elderly housing credit 
     ceiling for the year preceding such year, over
       ``(II) the aggregate supported elderly housing credit 
     dollar amount allocated for such year.
       ``(iii) Formula for allocation of unused supported elderly 
     housing credit carryovers among qualified states.--The amount 
     allocated under this subparagraph to a qualified State for 
     any calendar year shall be the amount determined by the 
     Secretary to bear the same ratio to the aggregate unused 
     supported elderly housing credit carryovers of all States for 
     the preceding calendar year as such State's population for 
     the calendar year bears to the population of all qualified 
     States for the calendar year. For purposes of the preceding 
     sentence, population shall be determined in accordance with 
     section 146(j).
       ``(iv) Qualified state.--For purposes of this subparagraph, 
     the term `qualified State' means, with respect to a calendar 
     year, any State--
       ``(I) which allocated its entire State supported elderly 
     housing credit ceiling for the preceding calendar year; and
       ``(II) for which a request is made (not later than May 1 of 
     the calendar year) to receive an allocation under clause 
     (iii).
       ``(E) Special rule for states with constitutional home rule 
     cities.--For purposes of this subsection--
       ``(i) In general.--The aggregate supported elderly housing 
     credit dollar amount for any constitutional home rule city 
     for any calendar year shall be an amount which bears the same 
     ratio to the State supported elderly housing credit ceiling 
     for such calendar year as--
       ``(I) the population of such city, bear to
       ``(II) the population of the entire State.
       ``(ii) Coordination with other allocations.--In the case of 
     any State which contains 1 or more constitutional home rule 
     cities, for purposes of applying this paragraph with respect 
     to supported elderly housing credit agencies in such State 
     other than constitutional home rule cities, the State 
     supported elderly housing credit ceiling for any calendar 
     year shall be reduced by the aggregate supported elderly 
     housing credit dollar amounts determined for such year for 
     all constitutional home rule cities in such State.
       ``(iii) Constitutional home rule city.--For purposes of 
     this paragraph, the term `constitutional home rule city' has 
     the meaning given such term by section 146(d)(3)(C).
       ``(F) State may provide for different allocation.--Rules 
     similar to the rules of section 146(e) (other than paragraph 
     (2)(B) thereof) shall apply for purposes of this paragraph.
       ``(G) Population.--For purposes of this paragraph, 
     population shall be determined in accordance with section 
     146(j).
       ``(4) Credit for buildings financed by tax-exempt bonds 
     subject to volume cap not taken into account.--
       ``(A) In general.--Paragraph (1) shall not apply to the 
     portion of any credit allowable under subsection (a) which is 
     attributable to eligible basis financed by any obligation the 
     interest on which is exempt from tax under section 103 if--
       ``(i) such obligation is taken into account under section 
     146, and
       ``(ii) principal payments on such financing are applied 
     within a reasonable period to redeem obligations the proceeds 
     of which were used to provide such financing.
       ``(B) Special rule where 50 percent or more of building is 
     financed with tax-exempt bonds subject to volume cap.--For 
     purposes of subparagraph (A), if 50 percent or more of the 
     aggregate basis of any building and the land on which the 
     building is located is financed by any obligation described 
     in subparagraph (A), paragraph (1) shall not apply to any 
     portion of the credit allowable under subsection (a) with 
     respect to such building.
       ``(5) Portion of state ceiling set-aside for certain 
     projects involving qualified nonprofit organizations.--
       ``(A) In general.--Not more than 90 percent of the State 
     supported elderly housing credit ceiling for any State for 
     any calendar year shall be allocated to projects other 
     than qualified supported elderly housing projects 
     described in subparagraph (B).
       ``(B) Projects involving qualified nonprofit 
     organizations.--For purposes of subparagraph (A), a qualified 
     supported elderly housing project is described in this 
     subparagraph if a qualified nonprofit organization is to 
     materially participate (within the meaning of section 469(h)) 
     in the development and operation of the project throughout 
     the compliance period.
       ``(C) Qualified nonprofit organization.--For purposes of 
     this paragraph, the term `qualified nonprofit organization' 
     means any organization if--
       ``(i) such organization is described in paragraph (3) or 
     (4) of section 501(c) and is exempt from tax under section 
     501(a),
       ``(ii) such organization is determined by the State 
     supported elderly housing credit agency not to be affiliated 
     with or controlled by a for-profit organization; and
       ``(iii) 1 of the exempt purposes of such organization 
     includes the fostering of supported elderly housing.
       ``(D) Treatment of certain subsidiaries.--
       ``(i) In general.--For purposes of this paragraph, a 
     qualified nonprofit organization shall be treated as 
     satisfying the ownership and material participation test of 
     subparagraph (B) if any qualified corporation in which such 
     organization holds stock satisfies such test.
       ``(ii) Qualified corporation.--For purposes of clause (i), 
     the term `qualified corporation' means any corporation if 100 
     percent of the stock of such corporation is held by 1 or more 
     qualified nonprofit organizations at all times during the 
     period such corporation is in existence.
       ``(E) State may not override setaside.--Nothing in 
     subparagraph (F) of paragraph (3) shall be construed to 
     permit a State not to comply with subparagraph (A) of this 
     paragraph.
       ``(6) Buildings eligible for credit only if minimum long-
     term commitment to supported elderly housing.--
       ``(A) In general.--Under rules similar to the rules under 
     section 42(h)(6), no credit shall be allowed by reason of 
     this section with respect to any building for the taxable 
     year unless an extended supported elderly housing commitment 
     is in effect as of the end of such taxable year.
       ``(B) Extended supported elderly housing commitment.--For 
     purposes of this paragraph, the term `extended supported 
     elderly housing commitment' has the meaning given the term 
     `extended low-income housing commitment' under section 
     42(h)(6).
       ``(7) Application of certain rules.--For purposes of this 
     section, rules similar to the rules of section 42(h)(7) shall 
     apply.
       ``(8) Other definitions.--For purposes of this subsection--
       ``(A) Supported elderly housing credit agency.--The term 
     `supported elderly housing credit agency' means any agency 
     authorized to carry out this subsection.
       ``(B) Possessions treated as states.--The term `State' 
     includes a possession of the United States.
       ``(e) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Compliance period.--The term `compliance period' 
     means, with respect to any building, the period of 15 taxable 
     years beginning with the 1st taxable year of the credit 
     period with respect thereto.
       ``(2) Supported elderly unit.--
       ``(A) In general.--The term `supported elderly unit' means 
     any unit in a building if--
       ``(i) such unit is rent-restricted (as defined in 
     subsection (c)(2)), and
       ``(ii) the individuals occupying such unit meet the income 
     limitation applicable under subsection (c)(1) to the project 
     of which such building is a part.
       ``(B) Exception.--
       ``(i) In general.--A unit shall not be treated as a 
     supported elderly unit unless the unit

[[Page S13978]]

     is suitable for occupancy and used other than on a transient 
     basis.
       ``(ii) Suitability for occupancy.--For purposes of clause 
     (i), the suitability of a unit for occupancy shall be 
     determined under regulations prescribed by the Secretary 
     taking into account local health, safety, and building codes.
       ``(iii) Transitional housing for homeless.--For purposes of 
     clause (i), a unit shall be considered to be used other than 
     on a transient basis if the unit contains sleeping 
     accommodations and kitchen and bathroom facilities and is 
     located in a building--
       ``(I) which is used exclusively to facilitate the 
     transition of homeless individuals (within the meaning of 
     section 103 of the Stewart B. McKinney Homeless Assistance 
     Act (42 U.S.C. 11302), as in effect on the date of the 
     enactment of this clause) to independent living within 24 
     months, and
       ``(II) in which a governmental entity or qualified 
     nonprofit organization (as defined in subsection (d)(5)(C)) 
     provides such individuals with temporary housing and 
     supportive services designed to assist such individuals in 
     locating and retaining permanent housing.
       ``(iv) Single-room occupancy units.--For purposes of clause 
     (i), a single-room occupancy unit shall not be treated as 
     used on a transient basis merely because it is rented on a 
     month-by-month basis.
       ``(C) Special rule for buildings having 4 or fewer units.--
     In the case of any building which has 4 or fewer residential 
     rental units, no unit in such building shall be treated as a 
     supported elderly unit if the units in such building are 
     owned by--
       ``(i) any individual who occupies a residential unit in 
     such building, or
       ``(ii) any person who is related (within the meaning of 
     section 42(d)(2)(D)(iii)) to such individual.
       ``(D) Owner-occupied building having 4 or fewer units 
     eligible for credit where development plan.--
       ``(i) In general.--Subparagraph (C) shall not apply to the 
     acquisition or rehabilitation of a building pursuant to a 
     development plan of action sponsored by a State or local 
     government or a qualified nonprofit organization (as defined 
     in subsection (d)(5)(C)).
       ``(ii) Limitation on credit.--In the case of a building to 
     which clause (i) applies, the applicable fraction shall not 
     exceed 80 percent of the unit fraction.
       ``(iii) Certain unrented units treated as owner-occupied.--
     In the case of a building to which clause (i) applies, any 
     unit which is not rented for 90 days or more shall be treated 
     as occupied by the owner of the building as of the 1st day it 
     is not rented.
       ``(3) Application to estates and trusts.--In the case of an 
     estate or trust, the amount of the credit determined under 
     subsection (a) and any increase in tax under subsection (i) 
     shall be apportioned between the estate or trust and the 
     beneficiaries on the basis of the income of the estate or 
     trust allocable to each.
       ``(4) Impact of tenants right of 1st refusal to acquire 
     property.--
       ``(A) In general.--No Federal income tax benefit shall fail 
     to be allowable to the taxpayer with respect to any qualified 
     supported elderly building merely by reason of a right of 1st 
     refusal held by the tenants (in cooperative form or 
     otherwise) or resident management corporation of such 
     building or by a qualified nonprofit organization (as defined 
     in subsection (d)(5)(C)) or government agency to purchase the 
     property after the close of the compliance period for a price 
     which is not less than the minimum purchase price determined 
     under subparagraph (B).
       ``(B) Minimum purchase price.--For purposes of subparagraph 
     (A), the minimum purchase price under this subparagraph is an 
     amount equal to the sum of--
       ``(i) the principal amount of outstanding indebtedness 
     secured by the building (other than indebtedness incurred 
     within the 5-year period ending on the date of the sale to 
     the tenants), and
       ``(ii) all Federal, State, and local taxes attributable to 
     such sale.

     Except in the case of Federal income taxes, there shall not 
     be taken into account under clause (ii) any additional tax 
     attributable to the application of clause (ii).
       ``(f) Recapture of Credit.--
       ``(1) In general.--If--
       ``(A) as of the close of any taxable year in the compliance 
     period, the amount of the qualified basis of any building 
     with respect to the taxpayer is less than.
       ``(B) the amount of such basis as of the close of the 
     preceding taxable year,

     then the taxpayer's tax under this chapter for the taxable 
     year shall be increased by the credit recapture amount 
     determined under rules similar to the rules of section 42(j).
       ``(g) Application of At-Risk rules.--For purposes of this 
     section, rules similar to the rules of section 42(k) shall 
     apply.
       ``(h) Responsibilities of Taxpayers and Supported Elderly 
     Housing Credit Agencies.--For purposes of this section, 
     subsections (l) and (m) of section 42 shall apply.
       ``(i) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section, including regulations--
       ``(1) dealing with--
       ``(A) projects which include more than 1 building or only a 
     portion of a building,
       ``(B) buildings which are placed in service in portions,
       ``(2) providing for the application of this section to 
     short taxable years,
       ``(3) preventing the avoidance of the rules of this 
     section, and
       ``(4) providing the opportunity for supported elderly 
     housing credit agencies to correct administrative errors and 
     omissions with respect to allocations and record keeping 
     within a reasonable period after their discovery, taking into 
     account the availability of regulations and other 
     administrative guidance from the Secretary.''.
       (b) Current Year Business Credit Calculation.--Section 
     38(b) of the Internal Revenue Code of 1986 (relating to 
     current year business credit) is amended by striking ``plus'' 
     at the end of paragraph (12), by striking the period at the 
     end of paragraph (13) and inserting ``, plus'', and by adding 
     at the end the following:
       ``(14) the supported elderly housing credit determined 
     under section 42A(a).''.
       (c) Limitation on Carryback.--Subsection (d) of section 39 
     of the Internal Revenue Code of 1986 (relating to carryback 
     and carryforward of unused credits) is amended by adding at 
     the end the following:
       ``(10) No carryback of supported elderly housing credit 
     before effective date.--No amount of unused business credit 
     available under section 42A may be carried back to a taxable 
     year beginning on or before the date of the enactment of this 
     paragraph.''.
       (d) Conforming Amendments.--
       (1) Section 55(c)(1) of the Internal Revenue Code of 1986 
     is amended by inserting ``or subsection (f) or (g) of section 
     42A'' after ``section 42''.
       (2) Subsections (i)(c)(3), (i)(c)(6)(B)(i), and (k)(1) of 
     section 469 of such Code are each amended by inserting ``or 
     42A'' after ``section 42''.
       (3) Section 772(a) of such Code is amended by striking 
     ``and'' at the end of paragraph (10), by redesignating 
     paragraph (11) as paragraph (12), and by inserting after 
     paragraph (10) the following:
       ``(11) the supported elderly housing credit determined 
     under section 42A, and''.
       (4) Section 774(b)(4) of such Code is amended by inserting 
     ``, 42A(f),'' after ``section 42(j)''.
       (e) Clerical Amendment.--The table of sections for subpart 
     D of part IV of subchapter A of chapter 1 of the Internal 
     Revenue Code of 1986 is amended by inserting after the item 
     relating to section 42 the following:

``Sec. 42A. Supported elderly housing credit.''.

       (f) Effective Date.--The amendments made by this section 
     shall apply to expenditures made in taxable years beginning 
     after the date of the enactment of this Act.
                                   ____
                                 
      By Ms. SNOWE:
  S. 1887. A bill to provide for renewal of project-based assisted 
housing contracts at reimbursement levels that are sufficient to 
sustain operations, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Ms. SNOWE. Mr. President, I rise today to introduce legislation 
intended to correct serious inequities created by existing statutes 
affecting owners, financing agencies, and low-income residents 
participating in one of HUD's Section 8 multifamily rental subsidy 
programs.
  I have worked closely with the Maine Congressional Delegation on this 
matter, as well as the Maine State Housing Authority and several 
housing projects in Maine, and the U.S. Department of Housing and Urban 
Development--HUD. At issue is HUD's interpretation of Section 524 of 
the Multifamily Assisted Housing Reform and Affordability Act of 1997 
as it relates to the renewal of Section 8 ``moderate rehabilitation'' 
contracts in Maine and elsewhere.
  The effect of HUD's interpretation of current law results in the 
application of HUD ``published Fair Market Rents.'' Such rents are 
often well below the actual comparable market rent. If this problem is 
not addressed, and addressed soon, I am very concerned that we could 
lose this affordable rental housing stock in Maine, resulting in the 
displacement of the residents of these properties.
  The Maine Delegation worked with HUD over the last year to try to 
identify an administrative solution to this problem, but have been 
advised by HUD that we must pursue a change in law to enable the 
projects to obtain reimbursements at a level sufficient to sustain 
operations. Accordingly, the legislation I am introducing today will 
correct the portion of the statute that could result in the loss of 
this critical housing stock.
  The program involved is the Section 8 Moderate Rehabilitation 
program, which is administered by local and state housing agencies 
throughout the nation. Existing law, contained in Section 524 of the 
Multifamily Assisted Housing Reform and Affordability Act of 1997, as 
amended--MAHRA--regarding renewal of expiring project-based Section 8 
contracts, treats contracts under the Moderate Rehabilitation

[[Page S13979]]

Program in a fundamentally different way from contracts under the New 
Construction, Substantial Rehabilitation, and Loan Management Set-Aside 
programs.
  Section 524(b)(3) of MAHRA provides a separate and distinct formula 
for calculating renewal rents for expiring contracts under the Moderate 
Rehabilitation program. The formula is more restrictive than the 
formula applicable to expiring contracts under other Section 8 
programs, based on an assumption that the debt service payments on the 
original moderate rehabilitation financing would not be a continuing 
obligation of the project owner after expiration of the original 
subsidy contract.
  The assumption was correct as to many projects under the Moderate 
Rehabilitation program, but it is not true as to some significant 
projects serving particularly vulnerable populations, including two 
very important community projects located in Maine, which I will 
describe later.
  Perhaps an even greater concern than the formula itself, however, is 
a ruling by HUD's Office of General Counsel that Section 524(b)(3) 
presents the exclusive method for renewal of expiring contracts under 
the Moderate Rehabilitation program. In order to appreciate the drastic 
and problematic results of this opinion, it is necessary to understand 
the relationship between the Section 8 renewal legislation and the 
Mark-to-Market program, also enacted by MAHRA.
  According to HUD, housing subsidy contracts are expiring on thousands 
of privately owned multifamily properties with federally insured 
mortgages. Many of these contracts set rents at amounts higher than 
those of the local market. As these subsidy contracts expire, the Mark-
to-Market program will reduce rents to market levels and will 
restructure existing debt to levels supportable by these rents.
  The basic principle of this integrated legislative structure is that 
for projects financed by FHA-insured mortgages, expiring Section 8 
contracts which are subsidizing rents higher than market rents in the 
area will be renewed at rents reduced to a level not higher than the 
market rents. Where this reduced rent will not support debt service on 
the FHA-insured mortgage, the mortgage will be restructured pursuant to 
Mark-to-Market. The basic tradeoff is that while the Federal Government 
may bear some cost in the FHA insurance fund, it will be a lesser cost 
than continuing to subsidize above-market rents.
  However, not all Section 8 projects are financed by FHA-insured 
mortgages. Many, instead, are financed by State housing agency bond-
financed mortgages without FHA insurance, and some are even 
conventionally financed. The legislation provides, therefore, for an 
important ``exception'' to the requirement that rents be reduced upon 
renewal to market rents. Under Sections 524(b)(1) and (2), Section 8 
contracts for ``exception'' projects--which are principally projects 
not eligible for Mark-to-Market because their mortgages are not FHA-
insured--may be renewed at rents not exceeding the lower of current 
rents, as adjusted by an operating cost adjustment factor, and a 
``budget-based rent'' approved by HUD, notwithstanding that such rents 
may exceed market rents in the area.
  The effect of the HUD ruling that Section 524(b)(3) provides the 
exclusive authority for renewing expiring contracts in the Moderate 
Rehabilitation program is that ``exception'' project treatment under 
Section 524(b)(1) and (2) is made unavailable for Moderate 
Rehabilitation projects. The irony of this is that while the majority 
of Section 8 New Construction and Substantial Rehabilitation projects, 
and of course all Loan Management Set-Aside projects, are financed by 
FHA-insured mortgages--and therefore non-insured projects are truly the 
``exception'' under those programs--the opposite is true in the 
Moderate Rehabilitation program.
  Information provided by HUD indicates that not more than 
approximately 13 percent of all units ever subsidized under the 
Moderate Rehabilitation program were in projects financed by FHA-
insured mortgages. Non-insured mortgages, therefore, were the rule, not 
the exception, in the Moderate Rehabilitation program.
  The impact of this circumstance is well illustrated by two projects 
in Maine, both of which represent vital community resources for highly 
vulnerable low-income populations.
  Loring House is a 104-unit development in Portland. The building 
originally was the Portland City Hospital, which was closed by the City 
in the early 1980s. It was converted to a residential facility for 
elderly and handicapped residents with significant public participation 
and support, including tax-exempt bond first mortgage financing by the 
Maine State Housing Authority, Moderate Rehabilitation Section 8 rental 
subsidies from the Portland and Westbrook public housing authorities, 
and second mortgage operating deficit financing by the Portland Housing 
Development Corporation.
  The Loring House Section 8 contract expired in stages commencing 
December 31, 2000. The Loring House mortgage financing is not FHA-
insured, but based on the HUD opinion I described, ``exception'' 
project treatment was denied. Under the Section 524(b)(3) formula, the 
Section 8 contract rents were reduced approximately 14 percent on 
renewal--this notwithstanding that the project was already incurring 
substantial operating deficits, supported by public operating deficit 
financing, even under the previous rents. The ultimate financial risk 
on this development is borne by the Maine State Housing Authority.
  Loring House is an important community resource aside from the 
substantial public stake in its financing. Since 1985, the resident 
population has undergone a significant transformation, attributable 
largely to deinstitutionalization of two state mental institutions and 
concentration of State-supported comprehensive mental health services 
in the Portland area.
  It is estimated that currently 70 percent of the tenant population 
are impacted by mental health, mental retardation and/or substance 
abuse issues. This change in population served has increased the total 
independence of the project on project-based assistance if it is to 
continue to serve this population. The only feasible avenue to 
financial survival of this facility, much less to its continued ability 
to serve its special population, is availability of ``exception'' 
project treatment.
  Maison Marcotte is a 128-unit congregate care facility located in 
Lewiston. The building was built originally in the 1920s as a nursing 
home on a health care campus owned by the Sisters of Charity Health 
System.
  Following construction of a new nursing home on the campus in the 
early 1980s, the Health System ground leased the former nursing home to 
a for-profit development group which renovated the facility into 
several discrete uses, including a kitchen and cafeteria facility for 
the health care campus, a wing of physician offices, and 128 one-
bedroom congregate care units. The renovation was assisted by a 110-
unit Moderate Rehabilitation award by the Lewiston Housing Authority; 
18 units are private-pay.
  A nonprofit subsidiary of Sisters of Charity Health System took over 
possession and operation of the facility following a Chapter 11 
reorganization of the for-profit developer in the late 1980s. The bank 
debt on the facility was refinanced in 1993 by a tax-exempt bond 
financed first mortgage loan made by the Maine State Housing Authority 
which matures in 2023. The mortgage financing is not FHA-insured. The 
Moderate Rehabilitation HAP Contract expires October 31, 2001.
  The current Moderate Rehabilitation contract rents for the one-
bedroom units are substantially lower than the private-pay rents for 
similar units in the facility. Nevertheless, contract renewal pursuant 
to the existing Section 524(b)(3) formula would result in a 20-percent 
rent reduction, which clearly would threaten survival of the project. 
The financial risk, again, is borne solely by the Maine State Housing 
Authority.
  The property might appear to have the option of opting out and 
converting to all private-pay units at the higher rental, but that is 
not the desire of the nonprofit operator nor would it be consistent 
with the low-income use restrictions arising from the tax-exempt bond 
issue. The only feasible outcome for this facility which would permit 
continuance of its commitment to very low-income elderly residents is 
renewal at ``exception rent'' pursuant to Section 524(b)(1).
  I find it inconceivable that Congress consciously intended to impose 
the financial impact of Section 8 rent reductions in cases such as 
these onto State housing finance agencies. I also have no reason to 
think that the circumstances of these two projects, in which state 
housing agencies have undertaken the financing risk of long-term 
mortgages backed by short-term rental subsidy contracts because of the 
important public purposes of the projects, are unique to the State of 
Maine.

[[Page S13980]]

  The legislation I am introducing today, therefore, would correct this 
inequity by simply striking subsection (b)(3) of Section 524. Under 
this legislation, the renewal of expiring contracts in the Moderate 
Rehabilitation program would be governed by the same renewal rent 
provisions as are applicable to expiring contracts in the New 
Construction and Substantial Rehabilitation programs, including the 
availability of ``exception'' project rents where the project financing 
is not FHA-insured.
  Finally, the legislation would also strike one other current 
provision of the Section 8 renewal legislation which singles out 
Moderate Rehabilitation projects for unfavorable treatment and, more 
importantly, excludes Moderate Rehabilitation projects from the 
important policy preference for encouraging Section 8 project owners to 
continue their participation in the program and thereby maintain the 
availability of the units for low-income occupancy.
  An essential tool for the preservation program, as strengthened by 
amendments to MAHRA enacted in 1999, is the ability to permit Section 8 
owners currently receiving below-market rents under expiring contracts 
to receive rent increases upon renewal up to the level of market rents 
in the area, in exchange for a commitment to remain in the program for 
not less than an additional 5 years. Expiring contracts under the 
Moderate Rehabilitation program were excluded from this authority. 
However, from the standpoint of lower-income families needing 
subsidized housing opportunities in their communities, I believe the 
preservation of units which happen to be subsidized under the Moderate 
Rehabilitation program is no less vital than preservation of units 
under other subdivisions of the Section 8 program.

  The Section 8 Moderate Rehabilitation program, while relatively small 
in comparison to the New Construction or Substantial Rehabilitation 
programs, is nevertheless widespread throughout the nation, in both 
large and small communities. It also has suffered a marked attrition of 
units, presumably due in large part to owner opt-outs in recent years. 
Information provided by HUD indicates that out of the total of 
approximately 120,000 units that we assisted under the Moderate 
Rehabilitation program, 52,000 units remained in the program in May 
2000.
  HUD information also indicated that 113 separate housing agencies in 
42 States across the nation plus Puerto Rico, including State as well 
as local agencies, had 100 or more units under contract in May 2000. 
Since many if not most Moderate Rehabilitation project owners receive 
rents under their original contracts that are lower than market rents, 
it cannot be doubted that the ability to receive market rents could 
encourage many owners to remain in the program and to continue to 
provide affordable housing opportunities for their communities.
  Accordingly, the legislation I am introducing today would also strike 
the current exclusion of contracts under the Moderate Rehabilitation 
program from the ability to receive renewal rents increased to market 
rent levels.
  The overall effect of my legislation is to place expiring contracts 
under the Moderate Rehabilitation program on an equal footing with 
other expiring Section 8 contracts having similar characteristics in 
terms of comparison of contract rents with market rents and in terms of 
financing source--HUD-insured or non-insured.
  I believe that preservation of these critical housing units is an 
imperative to my constituents and the communities I represent, as well 
as communities and projects elsewhere. As such, I urge my colleagues to 
join me in supporting this important legislation.
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