[Congressional Record Volume 161, Number 109 (Tuesday, July 14, 2015)]
[House]
[Pages H5134-H5135]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PRESERVATION ENHANCEMENT AND SAVINGS OPPORTUNITY ACT OF 2015
Mr. LUETKEMEYER. Mr. Speaker, I move to suspend the rules and pass
the bill (H.R. 2482) to amend the Low-Income Housing Preservation and
Resident Homeownership Act of 1990.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 2482
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 ``Preservation Enhancement and
Savings Opportunity Act of 2015''.
SEC. 2. DISTRIBUTIONS AND RESIDUAL RECEIPTS.
Section 222 of the Low-Income Housing Preservation and
Resident Homeownership Act of 1990 (12 U.S.C. 4112) is
amended by adding at the end the following new subsection:
``(e) Distribution and Residual Receipts.--
``(1) Authority.--After the date of the enactment of the
Preservation Enhancement and Savings Opportunity Act of 2015,
the owner of a property subject to a plan of action or use
agreement pursuant to this section shall be entitled to
distribute--
``(A) annually, all surplus cash generated by the property,
but only if the owner is in material compliance with such use
agreement including compliance with prevailing physical
condition standards established by the Secretary; and
``(B) notwithstanding any conflicting provision in such use
agreement, any funds accumulated in a residual receipts
account, but only if the owner is in material compliance with
such use agreement and has completed, or set aside sufficient
funds for completion of, any capital repairs identified by
the most recent third party capital needs assessment.
``(2) Operation of property.--An owner that distributes any
amounts pursuant to paragraph (1) shall--
``(A) continue to operate the property in accordance with
the affordability provisions of the use agreement for the
property for the remaining useful life of the property;
``(B) as required by the plan of action for the property,
continue to renew or extend any project-based rental
assistance contract for a term of not less than 20 years; and
``(C) if the owner has an existing multi-year project-based
rental assistance contract for less than 20 years, have the
option to extend the contract to a 20-year term.''.
SEC. 3. FUTURE REFINANCINGS.
Section 214 of the Low-Income Housing Preservation and
Resident Homeownership Act of 1990 (12 U.S.C. 4104) is
amended by adding at the end the following new subsection:
``(c) Future Financing.--Neither this section, nor any plan
of action or use agreement implementing this section, shall
restrict an owner from obtaining a new loan or refinancing an
existing loan secured by the project, or from distributing
the proceeds of such a loan; except that, in conjunction with
such refinancing--
``(1) the owner shall provide for adequate rehabilitation
pursuant to a capital needs assessment to ensure long-term
sustainability of the property satisfactory to the lender or
bond issuance agency;
``(2) any resulting budget-based rent increase shall
include debt service on the new financing, commercially
reasonable debt service coverage, and replacement reserves as
required by the lender; and
``(3) for tenants of dwelling units not covered by a
project- or tenant-based rental subsidy, any rent increases
resulting from the refinancing transaction may not exceed 10
percent per year, except that--
``(A) any tenant occupying a dwelling unit as of time of
the refinancing may not be required to pay for rent and
utilities, for the duration of such tenancy, an amount that
exceeds the greater of--
``(i) 30 percent of the tenant's income; or
``(ii) the amount paid by the tenant for rent and utilities
immediately before such refinancing; and
``(B) this paragraph shall not apply to any tenant who does
not provide the owner with proof of income.
Paragraph (3) may not be construed to limit any rent
increases resulting from increased operating costs for a
project.''.
SEC. 4. IMPLEMENTATION.
The Secretary of Housing and Urban Development shall issue
any guidance that the Secretary considers necessary to carry
out the provisions added by the amendments made by sections 2
and 3 not later than the expiration of the 120-day period
beginning on the date of the enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Missouri (Mr. Luetkemeyer) and the gentlewoman from California (Ms.
Maxine Waters) each will control 20 minutes.
The Chair recognizes the gentleman from Missouri.
General Leave
Mr. LUETKEMEYER. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days in which to revise and extend their
remarks and include extraneous material on this bill.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Missouri?
There was no objection.
Mr. LUETKEMEYER. Mr. Speaker, I rise in support of H.R. 2482, the
Preservation Enhancement and Savings Opportunity Act of 2015.
As my colleague from Minnesota, a longtime advocate of this
preservation bill, will explain shortly, this bill provides technical
changes to the Low-Income Housing Preservation and Resident
Homeownership Act of 1990, or LIHPRHA, to allow property owners access
to their profits while ensuring long-term preservation of affordable,
multifamily housing properties.
By correcting the inequities resulting from a fixed return on
investment, we are providing for continued preservation of an important
asset and facilitating future recapitalization to maximize the
remaining useful life of the LIHPRHA properties without any cost to the
Federal Government.
HUD recognized the need to address this issue in the administration's
fiscal year 2015 and fiscal year 2016 budget requests.
Administratively, HUD has removed the limitation on distributions in
similar circumstances where it had the authority to do so but has
determined it lacks such authority with the LIHPRHA portfolio.
This bill ensures the continued viability of the properties through
continued adherence to the use agreement. This includes compliance with
physical need requirements and requirement to provide for any
identified capital needs.
I would like to reemphasize that this provision does not result in a
cost to the Federal Government and ensures long-term preservation. I
thank the gentleman from Minnesota for his hard work on this issue.
Mr. Speaker, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
This bill is the product of years of thoughtful consideration and
negotiations. I am very pleased with the compromises that were reached
on this bill, especially some additional tenant protections that
include rent affordability restrictions for existing tenants.
There are currently about 640 properties that are subject to
restrictions in the Low-Income Housing Preservation and Resident
Homeownership Act of 1990, otherwise known as LIHPRHA. LIHPRHA imposed
some significant restrictions on property owners, which have proven to
be problematic by making it more difficult for property owners to
preserve these aging properties.
This bill would help address this issue by providing affected
property owners with greater flexibilities on the condition that they
comply with basic requirements that ensure that the properties are
adequately maintained
[[Page H5135]]
and that tenants do not see dramatic increases in rents.
By providing these flexibilities, property owners will have better
access to capital to carry out repairs and other improvements that will
help preserve these aging properties and ultimately benefit tenants.
Particularly in light of the current rental housing crisis, this is an
important bipartisan measure that seeks to preserve our affordable
housing stock. I urge my colleagues to support this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I yield such time as he may consume to
the distinguished gentleman from Minnesota (Mr. Paulsen), who has been
an advocate on this issue for a long, long time.
Mr. PAULSEN. Mr. Speaker, I rise in support of the legislation, the
Preservation Enhancement and Savings Opportunity Act. Let me start by
thanking the gentleman and the ranking member of the committee for
their long efforts to bring this legislation forward with support.
As was mentioned, in 1990 Congress enacted the Low-Income Housing
Preservation and Resident Homeownership Act, or LIHPRHA, to preserve
and extend the availability of low-income housing throughout the
country.
Many low-income housing properties at that time were nearing the end
of a 20-year period of the owner's obligation to maintain below-market
rents for qualified tenants, and Congress was worried about a flood of
thousands of properties coming out of the low-income housing pool.
Congress used LIHPRHA to create new incentives, in the form of low-
interest restructured mortgages, to entice property owners to maintain
their properties as low-income housing. In exchange for the incentives,
owners who agreed to extend low-income use of properties became
obligated to operate properties as low-income housing for 50 years or
the remaining useful life of the properties, whichever would be
greater.
Property owners also agreed to a fixed cap on their allowed annual
cash distributions from rents from the properties. The cap was designed
to provide the owners with an 8 percent equity return, based on
property values at the time. The income from the properties above the
cap is still the owner's money, but it is held at HUD in an account
that the owners have no right to access until the end of that 50-year
period.
These 8 percent distribution limits, while initially workable, over
time have resulted in very adverse and unexpected consequences, in
particular relating to the Federal income tax liabilities of the
owners. Initially, owners were able to offset a portion of their taxes
owed with depreciation and mortgage interest deductions. The 8 percent
cash distributions were sufficient to meet those tax obligations.
However, since that time, rents have increased, and deductible
mortgage interest and depreciation deductions have decreased for
LIHPRHA property owners. This effectively means that the annual Federal
taxable income of the owners has increased substantially, despite the
fact that their allowed cash distributions have remained capped at a
constant dollar amount fixed in the 1990s.
Mr. Speaker, in recent years, for example, owners' income tax
liabilities have often been more than double the amount of cash
permitted to be distributed to them under the law, and this is unfair
to LIHPRHA property owners. It will only worsen over time.
Fortunately, there is a simple solution to the problem. The
Preservation Enhancement and Savings Opportunity Act will allow LIHPRHA
property owners to access their funds held at HUD, after all operating
expenses and property maintenance costs have been paid. More
importantly, removing the limitation on distributions will not result
in any cost to the Federal Government, as the funds belong to the
owners and not to HUD.
The legislation also requires individuals refinancing LIHPRHA
properties to provide adequate rehabilitation and replacement reserves.
It includes protections for low-income housing tenants from excessive
rent increases.
Removing the limitation on distributions and the refinancing
provisions will facilitate additional recapitalization of these
properties by private sector developers and other preservation
entities, which will in turn extend the availability of low-income
housing across the country for those who most need it. This all happens
at no additional cost to American taxpayers.
Mr. Speaker, I insert into the Record a letter to Chairman Hensarling
and Ranking Member Waters from nine national housing organizations
endorsing this bill.
I close by asking my colleagues to join me in support of this
legislation.
June 11, 2015.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services.
Hon. Maxine Waters,
Ranking Minority Member, Committee on Financial Services.
Dear Chairman Hensarling and Ranking Member Waters: The
undersigned organizations urge you to support H.R. 2482, the
Preservation, Enhancement and Savings Opportunity Act of
2014. The bill provides technical changes to the Low Income
Housing Preservation and Resident Homeownership Act of 1990
(LIHPRHA) while ensuring long-term preservation of these
affordable multifamily housing properties.
When LIHPRHA was enacted, property owners were provided
incentives to maintain the affordability of the properties
for low and moderate income renters for the remaining useful
life of the properties in exchange for relinquishing the
right to prepay the mortgage after 20 years. As part of the
process, the owners' equity contributions in the property
were redefined but a contractual limitation on property
income distributions remained, even though all surplus funds
belong to the ownership entity. Such a limitation was
workable twenty years ago, but as the mortgages mature the
annual distribution becomes insufficient to address
increasing tax liabilities.
The bill would remove the limitation on distributions and
provide the ownership entity/sponsor access to its own funds
to address tax liabilities or other expenses while ensuring
continued preservation and adherence to the properties' use
agreements. Such action provides additional incentives for
future investors to recapitalize these multifamily
properties, therefore extending their useful life and the
continuation of a scarce housing resource for years to come.
For the last 15 years, HUD has administratively removed
limitations on distributions where it had the authority to do
so. HUD has concluded that it lacks this authority with the
LIHPRHA portfolio.
The bill's changes to LIHPRHA have no associated budgetary
or tax cost to the Federal Government and ensure the
preservation of an important housing resource. We urge you to
support H.R. 2482.
Sincerely,
Council for Affordable and Rural Housing (CARH);
Institute of Real Estate Management (IREM); Institute
for Responsible Housing Preservation (IRHP); Mortgage
Bankers Association (MBA); National Affordable Housing
Management Association (NAHMA); National Apartment
Association (NAA); National Association of Home
Builders (NAHB); National Leased Housing Association
(NLHA); National Multifamily Housing Council (NMHC).
{time} 1330
Ms. MAXINE WATERS of California. Mr. Speaker, I have no additional
speakers. I encourage support for this bill, and I yield back the
balance of my time.
Mr. LUETKEMEYER. Mr. Speaker, I urge support of H.R. 2482, and I
yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Missouri (Mr. Luetkemeyer) that the House suspend the
rules and pass the bill, H.R. 2482.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill was passed.
A motion to reconsider was laid on the table.
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