[House Report 108-164]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-164
======================================================================
AMERICAN DREAM DOWNPAYMENT ACT
_______
June 19, 2003.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1276]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 1276) to provide downpayment assistance under the
HOME Investment Partnerships Act, and for other purposes,
having considered the same, report favorably thereon with an
amendment and recommend that the bill as amended do pass.
CONTENTS
Page
Amendment........................................................ 2
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 3
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 7
Committee Oversight Findings..................................... 9
Performance Goals and Objectives................................. 9
New Budget Authority, Entitlement Authority, and Tax Expenditures 9
Committee Cost Estimate.......................................... 9
Congressional Budget Office Cost Estimate........................ 9
Federal Mandates Statement....................................... 11
Advisory Committee Statement..................................... 11
Constitutional Authority Statement............................... 11
Applicability to Legislative Branch.............................. 11
Section-by-Section Analysis...................................... 11
Changes in Existing Law Made by the Bill, as Reported............ 12
Dissenting Views................................................. 16
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``American Dream Downpayment Act''.
SEC. 2. DOWNPAYMENT ASSISTANCE INITIATIVE UNDER HOME PROGRAM.
(a) Downpayment Assistance Initiative.--Subtitle E of title II of the
Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821) is
amended to read as follows:
``Subtitle E--Other Assistance
``SEC. 271. DOWNPAYMENT ASSISTANCE INITIATIVE.
``(a) Grant Authority.--The Secretary may make grants to
participating jurisdictions to assist low-income families to achieve
homeownership, in accordance with this section.
``(b) Eligible Activities.--
``(1) In general.--Amounts made available under this section
may be used only for downpayment assistance toward the purchase
of single family housing by eligible families. For purposes of
this title, the term `downpayment assistance' means assistance
to help a family acquire a principal residence.
``(2) Eligible families.--For purposes of this section, the
term `eligible family' means a family who--
``(A) is a low-income family and a first-time
homebuyer; or
``(B) notwithstanding the income limitation under
section 215(b)(2)--
``(i) includes a uniformed employee (which
shall include policemen, firemen, and
sanitation and other maintenance workers) or a
teacher who is an employee, of the
participating jurisdiction (or an agency or
school district serving such jurisdiction) that
is providing the downpayment assistance under
this section for the family; and
``(ii) has an income, at the time referred to
in subparagraph (A), (B), or (C) of section
215(b)(2), as appropriate, and as determined by
the Secretary with adjustments for smaller and
larger families, that does not exceed 115
percent of the median income of the area,
except that, with respect only to such areas
that the Secretary determines have high housing
costs, taking into consideration median house
prices and median family incomes for the area,
such income limitation shall be 150 percent of
the median income of the area, as determined by
the Secretary with adjustments for smaller and
larger families.
``(c) Housing Strategy.--To be eligible to receive a grant under this
section for a fiscal year, a participating jurisdiction shall include
in its comprehensive housing affordability strategy under section 105
for such year--
``(1) a description of the use of the grant amounts;
``(2) a plan for conducting targeted outreach to residents
and tenants of public housing, trailer parks, and manufactured
housing, and to other families assisted by public housing
agencies, for the purpose of ensuring that grant amounts
provided under this section to a participating jurisdiction are
used for downpayment assistance for such residents, tenants,
and families; and
``(3) a description of the actions to be taken to ensure the
suitability of families provided downpayment assistance under
this section to undertake and maintain homeownership.
``(d) Formula Allocation.--For each fiscal year, the Secretary shall
allocate any amounts made available for assistance under this section
for the fiscal year in accordance with a formula, which shall be
established by the Secretary, that considers a participating
jurisdiction's need for and prior commitment to assistance to
homebuyers. The formula may include minimum and maximum allocation
amounts. In considering a participating jurisdiction's prior year's
commitment to assistance to homebuyers, the formula shall consider
amounts committed to such purpose under the HOME investment
partnerships program, the community development block grant program,
mortgage revenue bonds, and prior year's funding from State and local
governments, provided that the data underlying such funding is uniform,
verifiable, and accurate by the State and local government, and shall
consider other factors that the Secretary determines to be appropriate.
``(e) Reallocation.--If any amounts allocated to a participating
jurisdiction under this section become available for reallocation, the
amounts shall be reallocated to other participating jurisdictions in
accordance with the formula established pursuant to subsection (d),
except that if a local participating jurisdiction failed to receive
amounts allocated under this section and is located in a State that is
a participating jurisdiction, the funds shall be reallocated to the
State.
``(f) Applicability of Other Provisions.--
``(1) In general.--Except as otherwise provided in this
section, grants under this section shall not be subject to the
provisions of this title.
``(2) Applicable provisions.--In addition to the requirements
of this section, grants under this section shall be subject to
the provisions of title I, sections 215(b) (except as provided
in subsection (b)(2)(B) of this section), 218, 219, 221, 223,
224, and 226(a) of subtitle A of this title, and subtitle F of
this title.
``(3) References.--In applying the requirements of subtitle A
referred to in paragraph (2)--
``(A) any references to funds under subtitle A shall
be considered to refer to amounts made available for
assistance under this section; and
``(B) any references to funds allocated or
reallocated under section 217 or 217(d) shall be
considered to refer to amounts allocated or reallocated
under subsection (d) or (e) of this section,
respectively.
``(g) Administrative Costs.--Notwithstanding section 212(c), a
participating jurisdiction may use funds under subtitle A for
administrative and planning costs of the jurisdiction in carrying out
this section, and the limitation in section 212(c) shall be based on
the total amount of funds available under subtitle A and this section.
``(h) Authorization of Appropriations.--There is authorized to be
appropriated to carry out this section $200,000,000 for each of fiscal
years 2004 and 2005.''.
(b) Relocation Assistance and Downpayment Assistance.--Subtitle F of
title II of the Cranston-Gonzalez National Affordable Housing Act is
amended by inserting after section 290 (42 U.S.C. 12840) the following
new section:
``SEC. 291. RELOCATION ASSISTANCE AND DOWNPAYMENT ASSISTANCE.
``The Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970 shall not apply to downpayment assistance under
this title.''.
Purpose and Summary
H.R. 1276, the American Dream Downpayment Act, amends the
Cranston-Gonzalez National Affordable Housing Act to authorize
the Secretary of HUD to make grants to participating
jurisdictions for downpayment assistance to low-income, first-
time home buyers using the HOME program as a distribution
mechanism.
Background and Need for Legislation
In June, 2002, President Bush announced the national goal
of increasing the number of minority homeowners by at least 5.5
million by the end of this decade and in part to eliminate the
homeownership opportunity gap. To further that goal, the
Administration proposed the American Dream Downpayment
Initiative (Initiative)--a new initiative designed to set
first-time, low-income homebuyers on the path to homeownership
by helping with downpayment and closing costs. These costs are
traditionally the most significant obstacles that would-be
homebuyers face. The Initiative will provide communities
throughout America with $200 million in grants in each year for
FY 2004 and FY 2005. This $200 million is included in the
President's FY 2004 budget proposal and is estimated to assist
40,000 low-income families each year to share in the American
dream of owning their first home. The Initiative requires a
special appropriation so that funding for the downpayment
program does not affect existing HOME program funding. Each
low-income family will be given an average of $5,000 to be used
toward downpayment and closing costs. Moreover, this new group
of homeowners is expected to boost the American economy with an
infusion of roughly $256 billion.
The initiative is considered a wealth-building program and
will be administered under the Department of Housing and Urban
Development's (HUD) Home Investment Partnerships Program
(HOME). HOME is an existing grant program that helps
communities nationwide expand the supply of standard,
affordable housing for low- and very low-income families.
Therefore, rather than creating a new program infrastructure,
the existing HOME program provides the Initiative the same
local administrators, distribution networks and personnel to
begin making an immediate impact for low-income families.
Moreover, the Initiative will preserve the flexibility of the
HOME program, so that States can design a package of
downpayment assistance that best meets the needs of local
citizens. More than 500 States and local jurisdictions will be
eligible to receive the $200 million in grant funding, which
will immediately assist these low income families in their
first homebuying experience.
The need for this program was highlighted in a recent HUD
study entitled Barriers to Minority Homeownership, available on
HUD's website at www.hud.gov. The study showed that the
Nation's overall homeownership rate is 68 percent. More than
two-thirds of all Americans own their own home; however, the
homeownership rate for African-American, Hispanics and other
non-Hispanic minorities is approximately 49 percent. Between
1994 and 2001, the gap between these two homeownership rates
had only narrowed by 1\1/2\ percentage points.
The HUD report concluded that if the persistent gap in
minority homeownership is to be substantially narrowed, the
structural barriers to home ownership, particularly lack of
capital for downpayment and closing costs, must be eliminated.
This legislation eliminates that barrier for families
struggling to save for a downpayment, but otherwise qualify for
homeownership. Many low income Americans, particularly in
minority communities, can meet a monthly mortgage payment, but
they cannot afford the downpayment and closing costs associated
with a standard residential loan.
In addition to helping more families purchase their own
homes, this proposal is also expected to strengthen communities
by enlarging the number of stakeholders, thereby stabilizing
and revitalizing our neighborhoods. The Millennial Housing
Commission, in its May 30, 2002, report to Congress, noted that
lagging minority homeownership rates are a serious concern
because minority households are expected to account for two-
thirds of household growth over the coming decade.
Improving the ability of Americans to make the transition
to homeownership will be an especially important test of the
Nation's capacity to create economic opportunity for minorities
and immigrants and to build strong, stable communities. In most
cases, the purchase of a home will be the largest and most
significant investment an individual will make. Therefore, the
home equity, created by that home purchase, is the most
significant and perhaps only asset held by most American
families and represents a significant share of household net
worth.
The creation of homeownership opportunities is also a
catalyst for creating wealth-building capacity enabling
families to prosper, through personal as well as professional
and educational opportunities. Home equity can provide capital
for small business startups or funds for higher education
pursuits, both of which enhance community and individual
economic viabilities. Studies also show that the average net
worth of low-income renters is about $900, yet it rises to over
$70,000 when they become home owners.
A substantial body of research suggests that homeowners are
more attached and active in their communities. With a little
extra help in the form of downpayment assistance, Congress can
help these families achieve the American dream of homeownership
and strengthen the Nation's economy and communities at the same
time.
During the Committee's review of the need for this
legislation, studies were presented showing that homeownership
leads to a higher quality home environment enabling children to
function better at school. For example, a 2001 study entitled
``The Impact of Homeownership on Child Outcomes,'' by Donald
Haurin, Toby Parcel, and Jean Haurin of Ohio State University
demonstrated that residential stability leads homeowners to
establish stronger community and social ties. A homeowner
child's mathematics achievement level is seven percent higher
than a renter child's. Further, children of homeowners complete
almost a half a year more of education and have a high-school
graduation rate that is 13 percentage points higher than their
counterparts.
From a community's perspective, owning a home provides a
sense of security and contributes to safer, stronger
neighborhoods. A financial and personal stake in a residence
ensures that citizens assist and provide for a better
neighborhood where all families, children, elderly and others
can thrive and enjoy a better quality of life.
Paradoxically, in order to build wealth through
homeownership, borrowers must first accumulate some amount of
wealth for a down payment. This contribution of borrower funds
is a significant factor in virtually every lending decision.
Until the mid-1990s, down payments on low-cost conventional
mortgages averaged around 20 percent of the loan balance. Many
families had to postpone homeownership for years while they
worked to accumulate such a sizeable downpayment. Under the
current mortgage finance environment, modern technology has
assisted financial underwriters with the ability to assess
credit risk, thereby decreasing the necessity for the types of
substantial downpayments required ten or twenty years ago.
However, most lenders continue to require some form of
downpayment or homeowner equity at purchase to increase the
likelihood that the borrower will not default. These
downpayments will provide that assurance and close that
homeownership opportunity gap.
The Subcommittee on Housing and Community Opportunity
adopted two amendments during its consideration of the bill.
The first amendment clarified the funding formula to ensure
that participating jurisdictions (local and State jurisdiction
receiving grants from HOME or this legislation) are given
credit and provided funds based on need and for downpayment
assistance provided through existing CDBG and HOME programs,
mortgage revenue bonds, and other State and local funds and
programs. The second amendment adopted by the Subcommittee
targets program outreach to public housing residents, Section 8
residents, and mobile home communities. Public housing
recipients are traditionally a sector of the population
excluded from the home buying experience. This outreach will
help to ensure that eligible public housing recipients have an
opportunity to share in the American dream of homeownership and
to break the cycle of dependence on public housing assistance.
During the full Committee's consideration of the bill, a
member raised a concern regarding section 271 of the bill
pertaining to the formula allocations and the inclusion of a
maximum amount, or ``cap'' on the funding for this program. The
concern was that such a cap could adversely affect large urban
areas. Recognizing this issue, the Committee intends to correct
this problem when the bill is considered by the House by
striking the language ``and maximum'' at the end of section 271
thereby making it consistent with the existing HOME program.
The full Committee also adopted two amendments during
consideration. The first would require States and localities to
ensure that families receiving the housing assistance are
financially prepared to maintain ownership of their homes after
the purchase. Under the provisions of the amendment, States and
localities are required to incorporate a plan outlining how
they intend to implement this initiative through the existing
and required annual comprehensive housing affordability
strategy plan as well as to provide the public an opportunity
to review and comment on the local government's plans to
address affordable housing issues.
The second amendment adopted by the Committee would allow
localities to use the new grant funds to help municipal
employees making between 80 percent and 115 percent of local
median income, and up to 150 percent in high cost areas, in
order to help them live in the communities they serve. During
the deliberations, many concerns were raised about the local
residency requirements for police, fireman, teachers or other
municipal workers imposed by local jurisdictions. In most
cases, the public service salaries are not sufficient to afford
housing in some of the most expensive housing markets in the
country. As a result, the amendment would contribute to the
viability and diversity of working families in these
communities.
The Committee deliberated on a third amendment to expand
the eligible activities under the initiative to include
foreclosure prevention counseling and foreclosure prevention
assistance. While the Committee recognizes the benefits of
counseling to the long-term homeownership status of low-income
families, allowing American Dream Downpayment grants to be used
for foreclosure counseling and prevention would dilute the
specific purpose of the bill, which is to provide downpayment
assistance for first-time low-income homebuyers.
The Committee believes that the private sector currently
provides a variety of loss-mitigation programs to prevent
foreclosure. In fact, in most cases, it is disadvantageous for
mortgage lenders to allow a mortgage to go to foreclosure.
Conventional lenders not only practice loss mitigation but
advise their mortgagors about the availability of counseling.
The Committee believes, however, that counseling is
essential to successful homeownership. Counseling helps renters
and homebuyers become better-educated consumers and can result
in reduced defaults and foreclosures. That is why President
Bush has made housing counseling a priority in HUD's budget
this year. In fact, the proposed FY 04 HUD budget increases
housing counseling by $10 million, providing a total of $45
million overall for that initiative. A multitude of counseling
programs already exist at HUD to assist and provide individuals
with counseling. The Committee believes a review of the current
counseling practices and standards in the existing programs
will help to determine what types of additional assistance is
necessary. In addition, the Committee intends to work on a
comprehensive homeownership counseling bill that will include
foreclosure prevention and foreclosure counseling.
Overall, the goal of the American Dream Downpayment Act is
to increase the overall homeownership rate, and to close the
current homeownership opportunity gap for minorities. There are
many hard working, low-income families who would greatly
benefit from the wealth-building opportunity that homeownership
can afford. When citizens own their own home, they become
stakeholders in their communities. By increasing the number of
stakeholders through homeownership, empowered individuals and
families will be less reliant on long-term government
assistance.
The American Dream Downpayment will help jumpstart the
Administration's goal to bridge the minority homeownership
opportunity gap and to increase the number of Americans owning
their own home by 5.5 million.
Hearings
The Subcommittee on Housing and Community Opportunity held
a hearing on April 8, 2003 entitled ``Promoting the American
Dream of Homeownership through Downpayment Assistance.'' The
following witnesses testified: the Honorable Mel Martinez,
Secretary of Housing and Urban Development; Robert M. Couch,
President and CEO, New South Federal Savings Bank, Birmingham,
Alabama, on behalf of the Mortgage Bankers Association of
America; Ms. Lori R. Gay, Executive Director, Los Angeles
Neighborhood Housing Services, Los Angeles, California; Ms.
Barbara Thompson, Executive Director, National Council of State
Housing Agencies; Mr. Paul Hilgers, Director, Neighborhood
Housing and Community Development Department, City of Austin,
Texas; Mr. Craig S. Nickerson, Vice President, Community
Development and Lending, Freddie Mac, Washington DC; and Mr.
Darrell V. Griffin, Sr., Division Chief, Housing Services
Division, City of Jacksonville, Florida.
Committee Consideration
The Subcommittee on Housing and Community Opportunity met
in open session on May 7, 2003, and approved H.R. 1276 for full
Committee consideration, as amended, by a voice vote.
The Committee on Financial Services met in open session on
May 21, 2003, and ordered H.R. 1276 reported to the House with
a favorable recommendation, with an amendment.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. A
motion by Mr. Oxley to report the bill to the House with a
favorable recommendation was agreed to by a voice vote.
The following amendment was considered by a record vote:
An amendment by Ms. Lee, no. 5, providing foreclosure
prevention counseling, was not agreed to by a record
vote of 25 yeas and 35 nays (Record vote no. FC-7).
RECORD VOTE NO. FC-7
----------------------------------------------------------------------------------------------------------------
Representative Aye Nay Present Representative Aye Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Oxley...................... ........ X ......... Mr. Frank (MA).. X ........ .........
Mr. Leach...................... ........ X ......... Mr. Kanjorski... X ........ .........
Mr. Bereuter................... ........ X ......... Ms. Waters...... X ........ .........
Mr. Baker...................... ........ X ......... Mr. Sanders*.... X ........ .........
Mr. Bachus..................... ........ X ......... Mrs. Maloney.... ........ ........ .........
Mr. Castle..................... ........ X ......... Mr. Gutierrez... ........ ........ .........
Mr. King....................... ........ ........ ......... Ms. Velazquez... X ........ .........
Mr. Royce...................... ........ X ......... Mr. Watt........ X ........ .........
Mr. Lucas (OK)................. ........ X ......... Mr. Ackerman.... ........ ........ .........
Mr. Ney........................ ........ X ......... Ms. Hooley (OR). X ........ .........
Mrs. Kelly..................... ........ X ......... Ms. Carson (IN). X ........ .........
Mr. Paul....................... ........ ........ ......... Mr. Sherman..... X ........ .........
Mr. Gillmor.................... ........ X ......... Mr. Meeks (NY).. X ........ .........
Mr. Ryun (KS).................. ........ X ......... Ms. Lee......... X ........ .........
Mr. LaTourette................. ........ ........ ......... Mr. Inslee...... X ........ .........
Mr. Manzullo................... ........ X ......... Mr. Moore........ X ........ .........
Mr. Jones (NC)................. ........ X ......... Mr. Gonzalez.... X ........ .........
Mr. Ose........................ ........ X ......... Mr. Capuano..... X ........ .........
Mrs. Biggert................... ........ X ......... Mr. Ford......... ........ ........ .........
Mr. Green (WI)................. ........ X ......... Mr. Hinojosa.... X ........ .........
Mr. Toomey..................... ........ X ......... Mr. Lucas (KY).. ........ X .........
Mr. Shays...................... ........ X ......... Mr. Crowley..... ........ ........ .........
Mr. Shadegg.................... ........ X ......... Mr. Clay........ ........ ........ .........
Mr. Fossella................... ........ X ......... Mr. Israel...... ........ ........ .........
Mr. Gary G. Miller (CA)........ ........ X ......... Mr. Ross........ X ........ .........
Ms. Hart....................... ........ X ......... Mrs. McCarthy X ........ .........
(NY).
Mrs. Capito.................... ........ X ......... Mr. Baca........ X ........ .........
Mr. Tiberi..................... ........ X ......... Mr. Matheson.... X ........ .........
Mr. Kennedy (MN)............... ........ X ......... Mr. Lynch....... X ........ .........
Mr. Feeney..................... ........ X ......... Mr. Miller (NC). X ........ .........
Mr. Hensarling................. ........ X ......... Mr. Emanuel..... X ........ .........
Mr. Garrett (NJ)............... ........ X ......... Mr. Scott (GA).. X ........ .........
Mr. Murphy..................... ........ X ......... Mr. Davis (AL).. X ........ .........
Ms. Ginny Brown-Waite (FL)..... ........ X ......... ................. ........ ........ .........
Mr. Barrett (SC)............... ........ X ......... ................. ........ ........ .........
Ms. Harris..................... ........ X ......... ................. ........ ........ .........
Mr. Renzi...................... ........ X ......... ................. ........ ........ .........
----------------------------------------------------------------------------------------------------------------
*Mr. Sanders is an independent, but caucuses with the Democratic Caucus.
The following amendments were also considered:
An amendment by Mr. Crowley, No. 1, eliminating
maximum allocation amounts from the formula, was
withdrawn.
An amendment by Ms. Velazquez, No. 2, ensuring the
suitability of recipients of downpayment assistance,
was agreed to by a voice vote.
An amendment by Mr. Capuano, No. 3, making municipal
employees eligible for downpayment assistance through
the Home Program, was ruled non germane by the Chair.
An amendment by Mr. Capuano, No. 4, making municipal
employees eligible for downpayment assistance through
the American Dream Downpayment Program, was agreed to
by a voice vote.
An amendment by Mr. Meeks of New York, No. 6,
defining ``single family'' as 1 to 4 family residences,
was withdrawn.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee made findings that are
reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
Utilizing the authority granted by this legislation, the
Secretary of Housing and Urban Development will provide
resources to States and localities to increase the
opportunities for homeownership among low-income, first-time
homebuyers, particularly minorities, in accordance with their
comprehensive housing affordability strategies.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of budget authority, entitlement authority, or
tax expenditures or revenues contained in the cost estimate
prepared by the Director of the Congressional Budget Office
pursuant to section 402 of the Congressional Budget Act of
1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, May 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1276, the American
Dream Downpayment Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Chad Chirico.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 1276--American Dream Downpayment Act
Summary: H.R. 1276 would authorize the appropriation of
$200 million for each of fiscal years 2004 and 2005 to be used
for down-payment assistance toward the purchase of single-
family housing by low-income, first-time homebuyers. Uniformed
employees of participating local jurisdictions, such as police
and firefighters, whose income does not exceed 115 percent of
the median income of the area would also be eligible for down-
payment assistance.
CBO estimates that appropriation of the authorized amounts
would cost $400 million over the 2004-2008 period. Enacting
H.R. 1276 would not affect direct spending or revenues.
H.R. 1276 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local, or tribal
governments.
Estimated cost to the Federal Government: CBO estimates
that implementing H.R. 1276 would cost $400 million over the
2004-2008 period, assuming appropriation of the amounts
authorized for each year. For this estimate, we assume the bill
will be enacted by the beginning of fiscal year 2004. The
estimated outlays are based on historical patterns for similar
activities in the HOME Investment Partnership Program. The
estimated budgetary impact of H.R. 1276 is shown in the
following table. The costs of this legislation fall within
budget function 600 (income security).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
-----------------------------------------------------
2003 2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
SPENDING SUBJECT TO APPROPRIATION
Spending Under Current Law:
Budget Authority/Authorization Level \1\.............. 1,987 2,021 2,061 2,104 2,148 2,196
Estimated Outlays..................................... 1,644 1,704 1,809 1,901 1,993 2,074
Proposed Changes:
Estimated Authorization Level......................... 0 200 200 0 0 0
Estimated Outlays..................................... 0 20 120 180 80 0
Spending Under H.R. 1276:
Estimated Authorization Level......................... 1,987 2,221 2,261 2,104 2,148 2,196
Estimated Outlays..................................... 1,644 1,724 1,929 2,081 2,073 2,074
----------------------------------------------------------------------------------------------------------------
\1\ The 2003 level is the amount appropriated for that year for the Home Investment Partnership Program. The
2004-2008 levels are baseline projections for the Home Investment Partnership Program, assuming annual
adjustments for anticipated inflation.
Intergovernmental and private-sector impact: H.R. 1276
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Estimate prepared by: Federal costs: Chad Chirico; impact
on State, local, and tribal governments: Tori Heid Hall; impact
on the private sector: Samuel Kina.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
defense and general welfare of the United States), and clause 3
(relating to the power to regulate foreign and interstate
commerce).
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section provides the short title of the bill, the
``American Dream Downpayment Act.''
Section 2. Downpayment assistance initiative under HOME program
This section amends subtitle E of title II of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 12821) to
grant the Secretary of Housing and Urban Development the
authority to make grants to participating jurisdictions
(defined as a local community or a State that receives funds
under the HOME program) to assist (1) low-income families and
(2) municipal uniformed employees and teachers to buy their
first home. The participating jurisdictions receiving funds
through this program must include a description of how these
funds will be used in its comprehensive housing affordability
strategy. This strategy includes a plan for (1) conducting
targeted outreach to, and (2) ensuring the suitability of,
families receiving public housing assistance.
This section also directs the Secretary to develop a
formula for the allocation of assistance funds taking into
consideration a participating jurisdiction's need for, and
verifiable prior provision of, assistance to homebuyers. The
formula may include a minimum and/or a maximum amount to be
provided to a participating jurisdiction.
The final provision of the bill gives the Secretary
authority to reallocate funds to other participating
jurisdictions if they cannot use all of the money in accordance
with the allocation formula. However, if the participating
jurisdiction is a local community in a State that is a
participating jurisdiction, the funds will be reallocated to
the State instead of according to the formula. This section
also authorizes the appropriation of $200 million for each of
fiscal years 2004 and 2005.
Finally, during its deliberations, the Committee discussed
the definition of a ``single-family'' home and agreed to
clarify the definition of ``single-family''. For the purpose of
this Initiative, the Committee intends that the term ``single
family housing'' mean a one- to four-unit dwelling or
condominium unit, and will include both real and personal
property manufactured homes. Downpayment assistance may include
the purchase of a manufactured housing lot on which a
qualifying single family home shall be located. The
participating jurisdiction may determine whether or not
ownership or membership in a cooperative or mutual housing
project constitutes homeownership under State law.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
CRANSTON-GONZALEZ NATIONAL AFFORDABLE HOUSING ACT
* * * * * * *
TITLE II--INVESTMENT IN AFFORDABLE HOUSING
* * * * * * *
[Subtitle E--Mortgage Credit Enhancement
[SEC. 271. REPORT ON CREDIT ENHANCEMENT.
[(a) In General.--The Comptroller General of the United
States shall carry out a study of ways in which financing for
affordable housing may be made available to assist in the most
efficient implementation of comprehensive housing affordability
strategies of participating jurisdictions. In conducting the
study, the Comptroller General shall draw upon the expertise of
such representatives of State and local government, State and
local housing finance agencies, agencies of the United States,
government-sponsored mortgage finance corporations, for-profit
and nonprofit housing developers, private financial
institutions, and sources of long-term mortgage
investment, as the Comptroller General determines to be
appropriate.
[(b) Report.--Not later than one year after the enactment of
this Act, the Comptroller General shall submit to the Congress
and the Secretary a report containing any recommendations for
legislative or administrative actions needed to improve the
availability of mortgage finance for affordable housing. The
report shall include, but need not be limited to, an assessment
of--
[(1) the need for the Department of Housing and Urban
Development or other agencies of the United States to
provide partial credit enhancement to make financing
for affordable housing available efficiently and at the
lowest possible cost; and
[(2) alternative ways in which--
[(A) the Department could provide any needed
credit enhancement on a one-stop basis for
participating jurisdictions, in coordination
with other forms of assistance under this
subtitle;
[(B) the Department or other agencies of the
Federal Government could assist government-
sponsored mortgage finance corporations in the
financing of mortgages on affordable housing
through the development of mortgage-backed
securities that are more standardized and
readily traded in the capital markets;
[(C) the capacities of existing agencies of
the United States could be used to provide
mortgage finance more efficiently for
affordable housing through government-sponsored
mortgage finance corporations; and
[(D) the interests of the Federal Government
could be protected and any risks of loss could
be minimized through requirements for fees,
mortgage insurance, risk-sharing, secure
collateral, and guarantees by other parties,
and through standards relating to minimum
capital and prior experience with underwriting,
origination and servicing.]
Subtitle E--Other Assistance
SEC. 271. DOWNPAYMENT ASSISTANCE INITIATIVE.
(a) Grant Authority.--The Secretary may make grants to
participating jurisdictions to assist low-income families to
achieve homeownership, in accordance with this section.
(b) Eligible Activities.--
(1) In general.--Amounts made available under this
section may be used only for downpayment assistance
toward the purchase of single family housing by
eligible families. For purposes of this title, the term
``downpayment assistance'' means assistance to help a
family acquire a principal residence.
(2) Eligible families.--For purposes of this section,
the term ``eligible family'' means a family who--
(A) is a low-income family and a first-time
homebuyer; or
(B) notwithstanding the income limitation
under section 215(b)(2)--
(i) includes a uniformed employee
(which shall include policemen,
firemen, and sanitation and other
maintenance workers) or a teacher who
is an employee, of the participating
jurisdiction (or an agency or school
district serving such jurisdiction)
that is providing the downpayment
assistance under this section for the
family; and
(ii) has an income, at the time
referred to in subparagraph (A), (B),
or (C) of section 215(b)(2), as
appropriate, and as determined by the
Secretary with adjustments for smaller
and larger families, that does not
exceed 115 percent of the median income
of the area, except that, with respect
only to such areas that the Secretary
determines have high housing costs,
taking into consideration median house
prices and median family incomes for
the area, such income limitation shall
be 150 percent of the median income of
the area, as determined by the
Secretary with adjustments for smaller
and larger families.
(c) Housing Strategy.--To be eligible to receive a grant
under this section for a fiscal year, a participating
jurisdiction shall include in its comprehensive housing
affordability strategy under section 105 for such year--
(1) a description of the use of the grant amounts;
(2) a plan for conducting targeted outreach to
residents and tenants of public housing, trailer parks,
and manufactured housing, and to other families
assisted by public housing agencies, for the purpose of
ensuring that grant amounts provided under this section
to a participating jurisdiction are used for
downpayment assistance for such residents, tenants, and
families; and
(3) a description of the actions to be taken to
ensure the suitability of families provided downpayment
assistance under this section to undertake and maintain
homeownership.
(d) Formula Allocation.--For each fiscal year, the Secretary
shall allocate any amounts made available for assistance under
this section for the fiscal year in accordance with a formula,
which shall be established by the Secretary, that considers a
participating jurisdiction's need for and prior commitment to
assistance to homebuyers. The formula may include minimum and
maximum allocation amounts. In considering a participating
jurisdiction's prior year's commitment to assistance to
homebuyers, the formula shall consider amounts committed to
such purpose under the HOME investment partnerships program,
the community development block grant program, mortgage revenue
bonds, and prior year's funding from State and local
governments, provided that the data underlying such funding is
uniform, verifiable, and accurate by the State and local
government, and shall consider other factors that the Secretary
determines to be appropriate.
(e) Reallocation.--If any amounts allocated to a
participating jurisdiction under this section become available
for reallocation, the amounts shall be reallocated to other
participating jurisdictions in accordance with the formula
established pursuant to subsection (d), except that if a local
participating jurisdiction failed to receive amounts allocated
under this section and is located in a State that is a
participating jurisdiction, the funds shall be reallocated to
the State.
(f) Applicability of Other Provisions.--
(1) In general.--Except as otherwise provided in this
section, grants under this section shall not be subject
to the provisions of this title.
(2) Applicable provisions.--In addition to the
requirements of this section, grants under this section
shall be subject to the provisions of title I, sections
215(b) (except as provided in subsection (b)(2)(B) of
this section), 218, 219, 221, 223, 224, and 226(a) of
subtitle A of this title, and subtitle F of this title.
(3) References.--In applying the requirements of
subtitle A referred to in paragraph (2)--
(A) any references to funds under subtitle A
shall be considered to refer to amounts made
available for assistance under this section;
and
(B) any references to funds allocated or
reallocated under section 217 or 217(d) shall
be considered to refer to amounts allocated or
reallocated under subsection (d) or (e) of this
section, respectively.
(g) Administrative Costs.--Notwithstanding section 212(c), a
participating jurisdiction may use funds under subtitle A for
administrative and planning costs of the jurisdiction in
carrying out this section, and the limitation in section 212(c)
shall be based on the total amount of funds available under
subtitle A and this section.
(h) Authorization of Appropriations.--There is authorized to
be appropriated to carry out this section $200,000,000 for each
of fiscal years 2004 and 2005.
Subtitle F--General Provisions
* * * * * * *
SEC. 291. RELOCATION ASSISTANCE AND DOWNPAYMENT ASSISTANCE.
The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 shall not apply to downpayment
assistance under this title.
* * * * * * *
DISSENTING VIEWS
The American dream, as conceived by the Nation's founders,
has little in common with H.R. 1276, the so-called American
Dream Downpayment Act. In the original version of the American
dream, individuals earned the money to purchase a house through
their own efforts, oftentimes sacrificing other goods to save
for their first downpayment. According to the sponsors of H.R.
1276, that old American dream has been replaced by a new dream
of having the federal government force your fellow citizens to
hand you the money for a downpayment.
H.R. 1276 not only warps the true meaning of the American
dream, but also exceeds Congress' constitutional boundaries and
interferes with and distorts the operation of the free market.
Instead of expanding unconstitutional federal power, Congress
should focus its energies on dismantling the federal housing
bureaucracy so the America people can control housing resources
and use the free market to meet their demands for affordable
housing.
As the great economist Ludwig Von Mises pointed out,
questions of the proper allocation of resources for housing and
other goods should be determined by consumer preference in the
free market. Resources removed from the market and distributed
according to the preferences of government politicians and
bureaucrats are not devoted to their highest-valued use. Thus,
government interference in the economy results in a loss of
economic efficiency and, more importantly, a lower standard of
living for all citizens.
H.R. 1276 takes resources away from private citizens,
through confiscatory taxation, and uses them for the
politically favored cause of expanding home ownership.
Government subsidization of housing leads to an excessive
allocation of resources to the housing market. Thus, thanks to
government policy, resources that would have been devoted to
education, transportation, or some other good desired by
consumers, will instead be devoted to housing. Proponents of
this bill ignore the socially beneficial uses the monies
devoted to housing might have been put to had those resources
been left in the hands of private citizens.
Finally, while I know this argument is unlikely to have
much effect on my colleagues, I must point out that Congress
has no constitutional authority to take money from one American
and redistribute it to another. Legislation such as H.R. 1276,
which takes tax money from some Americans to give to others
whom Congress has determined are worthy, is thus blatantly
unconstitutional.
I hope no one confuses my opposition to this bill as
opposition to any congressional actions to ensure more
Americans have access to affordable housing. After all, one
reason many Americans lack affordable housing is because taxes
and regulations have made it impossible for builders to provide
housing at a price that could be afforded by many lower-income
Americans. Therefore, Congress should cut taxes and
regulations. A good start would be generous housing tax
credits. Congress should also consider tax credits and
regulatory relief for developers who provide housing for those
with low incomes. For example, I am cosponsoring H.R. 839, the
Renewing the Dream Tax Credit Act, which provides a tax credit
to developers who construct or rehabilitate low-income housing.
H.R. 1276 distorts the economy and violates constitutional
prohibitions on income redistribution. A better way of
guaranteeing an efficient housing market where everyone could
meet their own needs for housing would be for Congress to
repeal taxes and programs that burden the housing industry and
allow housing needs to be met by the free market. Therefore, I
urge my colleagues to reject this bill and instead develop
housing policies consistent with constitutional principles, the
laws of economics, and respect for individual rights.
Ron Paul.