[Congressional Record Volume 152, Number 87 (Thursday, June 29, 2006)]
[Senate]
[Pages S6802-S6803]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SCHUMER (for himself, Mr. Smith, Mr. Bond, Mr. Reed, Mrs. 
        Murray, and Mr. Sarbanes):
  S. 3616. A bill to amend the Internal Revenue Code of 1986 to provide 
an incentive to preserve affordable housing in multifamily housing 
units which are sold or exchanged; to the Committee on Finance.
  Mr. SCHUMER. Mr. President, today I rise to introduce mine and 
Senator Gordon Smith's bill, The Affordable Housing Preservation Act of 
2006. Our bill provides a solution to preserve federally assisted 
affordable multifamily housing.
  I want to thank all of our colleagues-- Senators Bond, Reed, Murray, 
and Sarbanes--for realizing the importance of this issue and agreeing 
to cosponsor our legislation.
  I have often said that few Federal programs have helped mothers and 
fathers keep their families together more than our low income and 
public housing programs. And while I always fight to make sure New York 
and the country at large gets all the money it can from Washington, 
frankly I am not the kind of elected official who believes that all 
government programs are equally good. But low income housing programs 
are some of the best things our government has ever done to help 
families, mothers, the elderly, and the disabled.
  Unfortunately--the current housing climate has reached a crisis point 
and the good that we are doing just is not enough anymore. Consider 
that in 2001, 95 million people--a whopping one third of the nation--
had housing problems: ranging from high cost burden, to overcrowding, 
to poor quality, or worse to homelessness.
  In the same year, 41 million people, 14.6 percent of the U.S. 
population, were without health insurance and 12 percent of all people 
in the U.S.--33.6 million--lacked food security. These are all 
interrelated. If rent is too high--you go without health insurance. 
Maybe you trim down spending on groceries.
  Sixty-five million Americans with housing problems are low income, 
and 87 percent of them face high housing cost burdens. In New York, the 
numbers are even worse. New York State ranks 47th out of the 50 States 
in renter affordability.
  Across the board, housing problems are plaguing low income people who 
live in both renter and owner households, and by people in all age 
groups, including children and seniors.
  The bottom line is that twice as many people who lack health 
insurance and three times more people who struggle on a regular basis 
to put food on their table have housing problems.
  But for whatever reason, the housing issue does not attract the same 
level of public concern and political attention as other programs. And 
that's why housing programs have been cut back by more than just about 
any other program over the last decade.
  Whenever I speak to New Yorkers--there is a common refrain: from gas 
prices to milk costs to rent hikes, the cost of living in New York 
keeps going up and up.
  It is a demonstrated pattern and we have worked diligently to try to 
defend every penny. We have had some successes but it is a yearly 
battle and I unfortunately have no doubt that we will continue to fight 
to defend every penny of funding for housing programs.
  But scraping our pockets for money is not enough. I served on the 
Housing Subcommittee for my entire 25 years in Congress and I'm tired 
of just playing defense and preventing things from happening.
  If we want to actually get something done to improve the housing 
market and prospects for millions of low income families we've got to 
not just be satisfied with a good defense.
  What we need right now is a good offense. As the newest member on the 
Senate Finance Committee in addition to my current post on the Banking, 
Housing and Urban Affairs Committee, I intend to use this position to 
help fight for housing and particularly new funding for housing for New 
York and America.
  Today I am introducing legislation with my fellow Finance Committee 
member, Senator Gordon Smith--proposing that we bring this fight to a 
playing field many more are comfortable on. We should focus on housing 
tax incentives rather than just relying solely on new spending to 
expand the number of affordable housing units.
  Since its inception the Tax Reform Act of 1986, the low-income 
housing tax credit, for example, has helped build and convert 1.6 
million apartments with rents affordable to low income families, by 
providing investors in affordable housing developments with a dollar-
for-dollar reduction in their Federal tax liability.
  We anticipate that the Affordable Housing Preservation Act of 2006 
will afford renters and developers similar benefits. Our legislation 
will work to ensure that we can preserve the current supply of 
affordable housing by providing tax relief to owners.
  At the moment the inadequate present stock of affordable housing 
might shrink even further--much of it was built in the 60s and 70s and 
is aging and needs to be rehabilitated.
  Under normal circumstances--developers who own this housing and have 
no interest in rehabilitating it themselves would sell it to another 
developer who would refinance and rehabilitate it for affordable 
housing.
  But because a so called ``exit tax'' is placed on any developer who 
plans to sell their subsidized property--more and more are deciding not 
to sell and to just sit on the property until they die.
  Let's say back in the 70s Developer Dan purchased a plot of land in 
Queens for $200,000 and built $800,000 worth of affordable housing on 
it--for a total investment of $1 million.
  At the time, Developer Dan was able to secure tax benefits as part of 
the accelerated tax depreciation program and was able to deduct 70 
cents on every dollar invested in affordable housing over a 15-year 
period.
  So now in 2004 his accelerated depreciation has expired and Dan is 
getting on in his years and wants to sell the property--simply to break 
even and get out of the business.

[[Page S6803]]

  But he can't do it very easily. If Dan sells the property for $1 
million he must then pay an exit tax. The exit tax for Dan will be 25 
percent applied to the building that was subsidized. So Dan must pay a 
$200,000 tax when he sells the building. That is not a very appealing 
situation for our friend Dan.
  So Dan entertains two other options--instead of keeping the units as 
affordable housing he sells his property into the traditional housing 
market where he can garner a greater price which includes the amount of 
the exit tax but removes the units from the affordable housing market.
  Or even more likely, Dan holds onto the property and neglects its 
upkeep at a detriment to his tenants and waits until he dies because 
then the tax consequence is erased. The property is likely sold in the 
traditional market and lost to the affordable housing community.
  The Local Initiatives Support Coalition estimates that there are 1 
million housing units held in this manner because owners are unwilling 
to sell and take on the new tax burden.
  That is 1 million housing units--many of which are rapidly 
deteriorating and not providing good homes for the people who are 
living in them and one million units that will eventually be removed 
from the affordable market if we don't do something to make it easier 
and more attractive for affordable housing owners to sell their 
properties to other affordable housing developers.
  So today, we are proposing a plan to waive exit taxes for owners who 
sell their properties to buyers who agree to keep the properties 
affordable for no less than 30 years. It is a simple fix--and one that 
could save us 1 million affordable housing units.
  While we await a full scoring of our proposal from the CBO, our back 
of the envelope estimate shows that waiving the exit taxes to preserve 
this supply of affordable housing represents a $422 million incentive 
program over a 10-year period.
  We hope this bill will move quickly, especially since we have clear 
support in both the House and the Senate. Congressman Jim Ramstad has 
introduced a similar bill on the House side. In addition, we have 
widespread support from the housing, real estate and investment 
community
  Before I close I want to make clear--this and similar types of 
housing tax proposals are not meant to replace funding for current 
housing programs. We will still fight for full funding of every housing 
program--from section 8 to CDBG. We just need to modify our strategy 
and operate more on the offense rather than the defense.
  Mr. SMITH. Mr. President, I rise to join Senator Schumer in offering 
legislation that will help maintain our Nation's affordable housing 
inventory. Our country's stock of affordable rental housing is 
shrinking. Every day, we lose affordable units to rent increases, 
deterioration, and conversions to market-rate housing or commercial 
use. For millions of Americans, this means that it is getting harder to 
put a roof over their family's heads and food on the table.
  In 2000--recognizing that we had a looming crisis--Congress 
established the bipartisan Millennial Housing Commission. The 
Commission was tasked with studying the importance of affordable 
housing to the infrastructure of the United States as well as the 
various methods to increase the effectiveness and efficiency of the 
private sector's role in providing affordable housing.
  The bill Senator Schumer and I are introducing is based on a 
recommendation by the Millennial Housing Commission. Our bill would 
waive the depreciation recapture tax liability if investors sell their 
property to owners who will preserve the property as affordable housing 
for 30 years. Through a simple change in the Tax Code, our bill will 
help preserve the federally assisted affordable housing stock of the 
United States at a minimal cost to the Federal Government. This 
proposal is supported by a broad coalition of affordable housing 
advocates, including the National Housing Conference, the National 
Housing Trust, the National Low-Income Housing Coalition, and the 
National Council of State Housing Agencies.
  According to Oregon Housing and Community Services, OHCS, there are 
approximately 4,000 households at risk of losing their homes in the 
OHCS portfolio alone. There are another 6,000 households at risk in 
section 8 projects not currently in the OHCS portfolio. All of these 
properties could benefit from the change Senator Schumer and I are 
proposing.
  The Neighborhood Partnership Fund of Portland estimates that an 
additional 215 Rural Housing Service properties with more than 6,000 
units in Oregon could also benefit.
  I thank the Senator from New York, Mr. Schumer, for working with me 
on this bill. I believe this is important legislation and will help 
stem affordable housing losses in the United States. I look forward to 
working with my colleagues to see the legislation passed and signed 
into law.
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