[Congressional Record (Bound Edition), Volume 161 (2015), Part 8]
[House]
[Pages 11439-11441]
[From the U.S. 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:

[[Page 11440]]

       ``(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 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.

[[Page 11441]]

  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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