[House Report 110-463]
[From the U.S. Government Publishing Office]
110th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 110-463
======================================================================
SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY ACT OF 2007
_______
December 4, 2007.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Frank of Massachusetts, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 2930]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2930) to amend section 202 of the Housing Act of
1959 to improve the program under such section for supportive
housing for the elderly, 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.............................................. 7
Background and Need for Legislation.............................. 7
Hearings......................................................... 10
Committee Consideration.......................................... 11
Committee Votes.................................................. 11
Committee Oversight Findings..................................... 11
Performance Goals and Objectives................................. 11
New Budget Authority, Entitlement Authority, and Tax Expenditures 12
Committee Cost Estimate.......................................... 12
Congressional Budget Office Estimate............................. 12
Federal Mandates Statement....................................... 17
Advisory Committee Statement..................................... 17
Constitutional Authority Statement............................... 17
Applicability to Legislative Branch.............................. 17
Earmark Identification........................................... 17
Section-by-Section Analysis of the Legislation................... 17
Changes in Existing Law Made by the Bill, as Reported............ 20
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Section 202
Supportive Housing for the Elderly Act of 2007''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title and table of contents.
TITLE I--NEW CONSTRUCTION REFORMS
Sec. 101. Project rental assistance.
Sec. 102. Selection criteria.
Sec. 103. Development cost limitations.
Sec. 104. Owner deposits.
Sec. 105. Definition of private nonprofit organization.
Sec. 106. Preferences for homeless elderly.
TITLE II--REFINANCING
Sec. 201. Approval of prepayment of debt.
Sec. 202. Sources of refinancing.
Sec. 203. Use of unexpended amounts.
Sec. 204. Use of project residual receipts.
Sec. 205. Additional provisions.
TITLE III--ASSISTED LIVING FACILITIES
Sec. 301. Definition of assisted living facility.
Sec. 302. Monthly assistance payment under rental assistance.
TITLE IV--FACILITATING AFFORDABLE HOUSING PRESERVATION TRANSACTIONS
Sec. 401. Use of sale or refinancing proceeds.
TITLE I--NEW CONSTRUCTION REFORMS
SEC. 101. PROJECT RENTAL ASSISTANCE.
Paragraph (2) of section 202(c) of the Housing Act of 1959 (12 U.S.C.
1701q(c)(2)) is amended--
(1) by inserting after ``assistance.--'' the following: ``(A)
Initial project rental assistance contract.--'';
(2) in the last sentence, by striking ``may'' and inserting
``shall''; and
(3) by adding at the end the following new subparagraph:
``(B) Renewal of and increases in contract amounts.--
``(i) Expiration of contract term.--Upon the
expiration of each contract term, the Secretary shall
adjust the annual contract amount to provide for
reasonable project costs, and any increases, including
adequate reserves, supportive services, and service
coordinators, except that any contract amounts not used
by a project during a contract term shall not be
available for such adjustments upon renewal.
``(ii) Emergency situations.--In the event of
emergency situations that are outside the control of
the owner, the Secretary shall increase the annual
contract amount, subject to reasonable review and
limitations as the Secretary shall provide.''.
SEC. 102. SELECTION CRITERIA.
Subsection (f) of section 202 of the Housing Act of 1959 (12 U.S.C.
1701q(f)) is amended--
(1) by striking ``Selection Criteria.--'' and inserting
``Initial Selection Criteria and Processing.--(1) Selection
criteria.--'';
(2) by redesignating paragraphs (1), (2), (3), (4), (5), (6),
and (7) as subparagraphs (A), (B), (C), (D), (E), (G), and (H),
respectively;
(3) by inserting after subparagraph (E) (as so redesignated
by paragraph (2) of this subsection) the following new
subparagraph:
``(F) the extent to which the applicant has ensured that a
service coordinator will be employed or otherwise retained for
the housing, who has the managerial capacity and responsibility
for carrying out the actions described in subparagraphs (A) and
(B) of subsection (g)(2);''; and
(4) by adding at the end the following new paragraph:
``(2) Delegated Processing.--
``(A) In issuing a capital advance under this subsection for
any project for which financing for the purposes described in
the last two sentences of subsection (b) is provided by a
combination of a capital advance under subsection (c)(1) and
sources other than this section, within 30 days of award of the
capital advance, the Secretary shall delegate review and
processing of such projects to a State or local housing agency
that--
``(i) is in geographic proximity to the property;
``(ii) has demonstrated experience in and capacity
for underwriting multifamily housing loans that provide
housing and supportive services;
``(iii) may or may not be providing low-income
housing tax credits in combination with the capital
advance under this section, and
``(iv) agrees to issue a firm commitment within 12
months of delegation.
``(B) The Secretary shall retain the authority to process
capital advances in cases in which no State or local housing
agency has applied to provide delegated processing pursuant to
this paragraph or no such agency has entered into an agreement
with the Secretary to serve as a delegated processing agency.
``(C) An agency to which review and processing is delegated
pursuant to subparagraph (A) may assess a reasonable fee which
shall be included in the capital advance amounts and may
recommend project rental assistance amounts in excess of those
initially awarded by the Secretary. The Secretary shall develop
a schedule for reasonable fees under this subparagraph to be
paid to delegated processing agencies, which shall take into
consideration any other fees to be paid to the agency for other
funding provided to the project by the agency, including bonds,
tax credits, and other gap funding.
``(D) Under such delegated system, the Secretary shall retain
the authority to approve rents and development costs and to
execute a capital advance within 60 days of receipt of the
commitment from the State or local agency. The Secretary shall
provide to such agency and the project sponsor, in writing, the
reasons for any reduction in capital advance amounts or project
rental assistance and such reductions shall be subject to
appeal.''.
SEC. 103. DEVELOPMENT COST LIMITATIONS.
Section 202(h)(1) of the Housing Act of 1959 (12 U.S.C. 1701q(h)(1))
is amended, in the matter preceding subparagraph (A), by inserting
``reasonable'' before ``development cost limitations''.
SEC. 104. OWNER DEPOSITS.
Section 202(j)(3)(A) of the Housing Act of 1959 (12 U.S.C.
1701q(j)(3)(A)) is amended by inserting after the period at the end the
following: ``Such amount shall be used only to cover operating deficits
during the first three years of operations and shall not be used to
cover construction shortfalls or inadequate initial project rental
assistance amounts.''.
SEC. 105. DEFINITION OF PRIVATE NONPROFIT ORGANIZATION.
Subparagraph (B) of section 202(k)(4) of the Housing Act of 1959 (12
U.S.C. 1701q(k)(4)(B)) is amended by inserting before the semicolon the
following: ``; except that, in the case of any national organization
that is the owner of multiple housing projects assisted under this
section, the organization may comply with clause (i) of this
subparagraph by having a local advisory board to the governing board of
the organization the membership of which is selected in the manner
required under clause (i)''.
SEC. 106. PREFERENCES FOR HOMELESS ELDERLY.
Subsection (j) of section 202 (12 U.S.C. 1701q(j)) is amended by
adding at the end the following new paragraph:
``(9) Preferences for homeless elderly.--The Secretary shall
permit an owner of housing assisted under this section to
establish for, and apply to, the housing a preference in tenant
selection for the homeless elderly, either within the
application or after selection pursuant to subsection (f), but
only if--
``(A) such preference is consistent with paragraph
(2) of this subsection; and
``(B) the owner demonstrates that the supportive
services identified pursuant to subsection (e)(4), or
additional supportive services to be made available
upon implementation of the preference, will meet the
needs of the homeless elderly, maintain safety and
security for all tenants, and be provided on a
consistent, long-term, and economical basis.''.
TITLE II--REFINANCING
SEC. 201. APPROVAL OF PREPAYMENT OF DEBT.
Subsection (a) of section 811 of the American Homeownership and
Economic Opportunity Act of 2000 (12 U.S.C. 1701q note) is amended--
(1) in the matter preceding paragraph (1), by inserting ``,
for which the Secretary's consent to prepayment is required''
after ``Act)'';
(2) in paragraph (1)--
(A) by inserting ``project-based'' before ``rental
assistance payments contract'';
(B) by inserting ``project-based'' before ``rental
housing assistance programs''; and
(C) by inserting ``, or any successor project-based
rental assistance program,'' after ``1701s))''; and
(3) in paragraph (2)--
(A) by inserting ``(A)'' before ``a lower''; and
(B) by inserting before the period at the end the
following: ``, or (B) a transaction in which the
project owner will address the physical needs of the
project, but only if, as a result of the refinancing
(i) the rent charges for unassisted families residing
in the project do not increase or such families are
provided rental assistance under a senior preservation
rental assistance contract for the project pursuant to
subsection (e), and (ii) the overall cost for providing
rental assistance under section 8 for the project (if
any) does not increase''.
SEC. 202. SOURCES OF REFINANCING.
The last sentence of section 811(b) of the American Homeownership and
Economic Opportunity Act of 2000 (12 U.S.C. 1701q note) is amended--
(1) by inserting after ``National Housing Act,'' the
following: ``or approving the standards used by authorized
lenders to underwrite a loan refinanced with risk sharing as
provided by section 542 of the Housing and Community
Development Act of 1992 (12 U.S.C. 1701 note),''; and
(2) by striking ``may'' and inserting ``shall''.
SEC. 203. USE OF UNEXPENDED AMOUNTS.
Subsection (c) of section 811 of the American Homeownership and
Economic Opportunity Act of 2000 (12 U.S.C. 1701q note) is amended--
(1) in the matter preceding paragraph (1), by inserting after
``tenants,'' the following: ``or is used in the provision of
affordable rental housing and related social services for
elderly persons by the private nonprofit organization project
owner, private nonprofit organization project sponsor, or
private nonprofit organization project developer,'';
(2) in paragraph (1), by striking ``not more than 15 percent
of'';
(3) in paragraph (2), by inserting before the semicolon the
following; ``, including reducing the number of units and
reconfiguring units that are functionally obsolete,
unmarketable, or not economically viable'';
(4) in paragraph (3), by striking ``or'' at the end;
(5) in paragraph (4) by striking the period at the end and
inserting a semicolon; and
(6) by adding at the end the following new paragraphs:
``(5) the payment to the project owner, sponsor, or third
party developer of a developer's fee in an amount not to
exceed--
``(A) in the case of a project refinanced through a
State low income housing tax credit program, the fee
permitted by the low income housing tax credit program
as calculated by the State program as a percentage of
acceptable development cost as defined by that State
program; or
``(B) in the case of a project refinanced through any
other source of refinancing, 15 percent of the
acceptable development cost; or
``(6) the payment of equity, if any, to--
``(A) in the case of a sale, to the seller or the
sponsor of the seller, in an amount equal to the lesser
of the purchase price or the appraised value of the
property, as each is reduced by the cost of prepaying
any outstanding indebtedness on the property and
transaction costs of the sale; or
``(B) in the case of a refinancing without the
transfer of the property, to the project owner or the
project sponsor, in an amount equal to the difference
between the appraised value of the property less the
outstanding indebtedness and total acceptable
development cost.
For purposes of paragraphs (5)(B) and (6)(B), the term ``acceptable
development cost'' shall include, as applicable, the cost of
acquisition, rehabilitation, loan prepayment, initial reserve deposits,
and transaction costs.''.
SEC. 204. USE OF PROJECT RESIDUAL RECEIPTS.
Paragraph (1) of section 811(d) of the American Homeownership and
Economic Opportunity Act of 2000 (12 U.S.C. 1701q note) is amended--
(1) by striking ``not more than 15 percent of''; and
(2) by inserting before the period at the end the following:
``or other purposes approved by the Secretary''.
SEC. 205. ADDITIONAL PROVISIONS.
Section 811 of the American Homeownership and Economic Opportunity
Act of 2000 (12 U.S.C. 1701q note) is amended by adding at the end the
following new subsections:
``(e) Senior Preservation Rental Assistance Contracts.--
Notwithstanding any other provision of law, in connection with a
prepayment plan for a project approved under subsection (a) by the
Secretary or as otherwise approved by the Secretary, to prevent
displacement of elderly residents of the project in the case of
refinancing or recapitalization and to further preservation and
affordability of such project, at the election of the private nonprofit
organization owner of the project, the Secretary shall provide project-
based rental assistance for the project under a senior preservation
rental assistance contract, as follows:
``(1) Assistance under the contract shall be made available
to the private nonprofit organization owner--
``(A) for a term of at least 20 years, subject to
annual appropriations, and
``(B) under the same rules governing project-based
rental assistance made available under section 8 of the
Housing Act of 1937.
``(2) Any projects for which a senior preservation rental
assistance contract is provided shall be subject to a use
agreement to ensure continued project affordability having a
term of the longer of (A) the term of the senior preservation
rental assistance contract, or (B) such term as is required by
the new financing.
``(f) Mortgage Sale Demonstration.--
``(1) In general.--The Secretary may sell mortgages
associated with loans made under section 202 of the Housing Act
of 1959 (as in effect before the enactment of the Cranston-
Gonzalez National Affordable Housing Act) in accordance with
the relevant terms for sales of subsidized loans on multifamily
housing projects under section 203 of the Housing and Community
Development Amendments of 1978 (12 U.S.C. 1701z-11). For the
purpose of demonstrating the efficiency, effectiveness,
quality, and timeliness of asset management and regulatory
oversight of certain portfolios of such mortgages by State
housing finance agencies, the Secretary shall carry out a
demonstration program, in not more than three States, to sell
portfolios of such mortgages to State housing finance agencies
for a price not to exceed the unpaid principal balances of such
mortgages and otherwise in accordance with the requirements of
such section 203.
``(2) Limitations.--In carrying out the demonstration
program, the Secretary shall--
``(A) prohibit State housing finance agencies from
giving preference to, or conditioning the approval of,
awards of subordinate debt funds, allocations of tax
credits, or tax exempt bonds based on the use of
financing for the first mortgage that is provided by
such State housing finance agency; and
``(B) require such agencies to allow refinancing or
prepayment of loans made under section 202 of the
Housing Act of 1959 with a loan selected by the owners,
except that any use restrictions on the property for
which the loan was made shall remain in effect for the
duration provided under the original terms of such
loan.
``(g) Subordination or Assumption of Existing Debt.--In lieu of
prepayment under this section of the indebtedness with respect to a
project, the Secretary may approve--
``(1) in connection with new financing for the project, the
subordination of the loan for the project under section 202 of
the Housing Act of 1959 (as in effect before the enactment of
the Cranston-Gonzalez National Affordable Housing Act) and the
continued subordination of any other existing subordinate debt
previously approved by the Secretary to facilitate preservation
of the project as affordable housing, or
``(2) the assumption (which may include the subordination
described in paragraph (1)) of the loan for the project under
such section 202 in connection with the transfer of the project
with such a loan to a private nonprofit organization.
``(h) Flexible Subsidy Debt.--The Secretary shall waive the
requirement that debt for a project pursuant to the flexible subsidy
program under section 201 of the Housing and Community Development
Amendments of 1978 (12 U.S.C. 1715z-1a) be prepaid in connection with a
prepayment, refinancing, or transfer under this section of a project if
such waiver is necessary for the financial feasibility of the
transaction and is consistent with the long-term preservation of the
project as affordable housing.
``(i) Prepayment When Secretary's Consent Not Required.--In
connection with the prepayment under this section of a loan for which
the Secretary's consent to prepayment is not required, at the project
owner's election--
``(1) all tenants of the project shall be eligible for
enhanced vouchers in accordance with section 8(t) of the United
States Housing Act of 1937 (42 U.S.C. 1437f(t)); or
``(2) if the project will continue to be owned by a private
nonprofit organization owner, such private nonprofit
organization owner may enter into a senior preservation rental
assistance contract with the Secretary in accordance with
subsection (e).
``(j) Definition of Private Nonprofit Organization.--For purposes of
this section, the term `private nonprofit organization' has the meaning
given such term in section 202(k) of the Housing Act of 1959 (12 U.S.C.
1701q(k)).''.
TITLE III--ASSISTED LIVING FACILITIES
SEC. 301. DEFINITION OF ASSISTED LIVING FACILITY.
Section 202b(g) of the Housing Act of 1959 (12 U.S.C. 1701q-2(g)) is
amended by striking paragraph (1) and inserting the following new
paragraph:
``(1) the term `assisted living facility' means a facility
that--
``(A) is owned by a private nonprofit organization;
and
``(B)(i) is licensed and regulated by the State (or
if there is no State law providing for such licensing
and regulation by the State, by the municipality or
other political subdivision in which the facility is
located); or
``(ii)(I) makes available, directly or through
recognized and experienced third party service
providers, to residents at the resident's request or
choice supportive services to assist the residents in
carrying out the activities of daily living, such as
bathing, dressing, eating, getting in and our of bed or
chairs, walking, going outdoors, toileting, laundry,
home management, preparing meals, shopping for personal
items, obtaining and taking medication, managing money,
using the telephone, or performing light of heavy
housework, and which may make available to residents
home health care service, such as nursing and therapy,
and certain health related services; and
``(II) provides separate dwelling units for
residents, each of which may contain a full kitchen and
bathroom and which includes common rooms and other
facilities appropriate for the provision of supportive
services to the residents of the facility; and''.
SEC. 302. MONTHLY ASSISTANCE PAYMENT UNDER RENTAL ASSISTANCE.
Clause (iii) of section 8(o)(18)(B) of the United States Housing Act
of 1937 (42 U.S.C. 1437f(o)(18)(B)(iii)) is amended by inserting before
the period at the end the following: ``, except that a family may be
required at the time the family initially receives such assistance to
pay rent in an amount exceeding 40 percent of the monthly adjusted
income of the family by such an amount or percentage as the Secretary
deems appropriate''.
TITLE IV--FACILITATING AFFORDABLE HOUSING PRESERVATION TRANSACTIONS
SEC. 401. USE OF SALE OR REFINANCING PROCEEDS.
Notwithstanding any other provision of law, in connection with the
sale or refinancing of a multifamily housing project, or the transfer
of an assistance contract on such a property, that requires the
approval of the Secretary of Housing and Urban Development, the
Secretary shall not impose any condition that restricts the amount or
use of sale or refinancing proceeds, or requires the filing of a
financial report, unless such condition is expressly authorized by an
existing contract entered into between the Secretary (or the
Secretary's designee) and the project owner before the imposition of a
condition prohibited by this section or is a general condition for new
financing with a mortgage insured by the Secretary. Any such condition
previously imposed by the Secretary after January 1, 2005, shall, at
the option of the project owner, be considered void and not
enforceable, and any agreement containing such a condition shall be
rescinded and may be reissued without the void condition.
Purpose and Summary
H.R. 2930, the ``Section 202 Supportive Housing for the
Elderly Act,'' facilitates the construction, rehabilitation and
preservation of affordable, supportive housing for very-low
income elderly persons. The goal of the bill is to streamline
the development of new 202 housing units, while enabling owners
of older Section 202 projects to rehabilitate and preserve
their properties as affordable for very low-income elderly
persons, while preserving the highest quality of housing and
services available.
Background and Need for Legislation
The ``Section 202 Supportive Housing for the Elderly Act of
2007'' amends the Housing Act of 1959 (P.L. 86-372). At its
inception, the Section 202 program provided low-interest, 50-
year construction loans to non-profit developers for the
development of affordable housing projects for moderate income
seniors. Currently, there are 292 projects with over 40,000
units with active loans under this phase of the program.
The Housing and Community Opportunity Development Act of
1974 made several key changes to the program. The duration of
loans was reduced from 50 to 40 years; section 8 project-based
assistance was added to enable more low-income elderly
households to participate in the program; the interest on loans
was raised to the U.S. Treasury's cost of borrowing; new
developments were required to support state and local support
service plans; and 20-25 percent of program funds were to be
used for non-metropolitan areas.
In 1990, the Cranston-Gonzalez National Affordable Housing
Act (P.L. 101-625) modified the program significantly,
replacing loans with capital advance grants combined with a
project rental assistance contract (PRAC) and establishing the
program structure under which the program currently operates.
Additionally, in 2000, the American Homeownership and Economic
Opportunity Act (P.L. 106-569) provided detailed terms and
conditions under which owners are allowed to prepay Section 202
mortgages and refinance for the purpose of project
rehabilitation and modernization. The bill also permits the use
of private financing and Federal Low Income Housing Tax Credits
in combination with Section 202 capital funds by permitting
for-profit limited partnerships to own Section 202 properties,
under the condition that the sole general partner be a private
non-profit organization.
The Committee believes that the Section 202 program, the
only HUD affordable housing program exclusively serving
seniors, provides a vital link between affordable housing and
supportive services. Moreover, the demand for available,
affordable housing for seniors will only increase as members of
the ``baby boomer'' generation reach their 60s. According to A
Quiet Crisis in America, a report by the Commission on
Affordable Housing and Health Facility Needs for Seniors in the
21st Century, the number of senior households will have grown
by 53 percent by 2020. A recent AARP study of the nation's
available Section 202 housing stock estimated that for every
unit of Section 202 housing that became available in 2006,
there were 10 seniors waiting. The need to produce more housing
and preserve the existing housing stock is very real, and soon
may be dire.
Capital Advance New Construction. The American
Homeownership and Economic Opportunity Act of 2000 permitted
the combination of 202 capital advance funds with other
financing sources, including Low-Income Housing Tax Credits.
However, the Committee has received testimony from project
sponsors stating that, due to HUD's interpretation of existing
law, the underwriting process for mixed finance grants is
prolonged and often results in increases in development costs
and delays in bringing developments online. It is the intention
of the Committee that this bill will encourage sponsors to
combine financing sources by simplifying the grant underwriting
process. For projects which combine Section 202 program funds
with other sources of capital financing, the bill provides that
the processing of the capital advance must be delegated to an
experienced State or local housing finance agency, while
projects that are financed solely by 202 grant funds will
continue to be processed by HUD. Additionally, HUD will retain
the ultimate authority to approve the project costs, and must
provide written explanations of costs approved by the state or
local housing finance agency which HUD subsequently disallows.
The Committee believes that the provision of service
coordinators is critical in linking residents of Section 202
properties with supportive services. Therefore the bill amends
the selection criteria by which new projects are evaluated to
receive a grant by creating an additional preference for those
proposed projects that will provide for a full or part-time
service coordinator position.
Additionally, the bill permits owners to establish, either
in the application process or after grant selection, a
preference in the tenant selection of homeless elderly persons.
With regard to use of owner deposits, current HUD practice
is to require that owners use these funds to meet development
cost shortfalls. However the intended use of these funds is
only to cover operating budget shortfalls during the first
three years. The bill prevents HUD from forcing owners to use
owner deposits to cover development shortfalls.
The bill also provides protections for 202 owners to ensure
that HUD operating assistance keeps pace with actual property
costs. Current statute only permits, but does not require,
payment of such cost increases and, in practice, many 202
owners often are not granted needed cost increases. The bill
would require HUD to make adjustments to operating assistance
to cover reasonable cost increases, including, but not limited
to, increases associated with service coordinators and
emergency situations beyond the control of the owner.
Refinancing of Loan Program Projects. The American
Homeownership and Economic Opportunity Act of 2000 included
provisions to streamline the prepayment of Section 202 loans,
while providing safeguards for the affordability of units.
However, many of these provisions, specifically where they
serve to preserve existing housing stock, have not been fully
implemented by HUD. The bill provides more explicit language to
ensure that owners can take full advantage of provisions in the
2000 Act, which provided more flexibility to owners to use
refinancing proceeds. Many owners seek to enhance their
supportive services or build community rooms in older
developments. However, HUD has placed unwarranted limits on use
of refinancing proceeds, often leaving owners few other options
than waiting out the term of their mortgages, where no
requirement for owners to keep units affordable remains. H.R.
2930 provides, more explicitly, the authority to use
refinancing proceeds with more flexibility, allowing owners to
use proceeds for activities which aid the provision of
affordable housing and expand available supportive services of
developments.
H.R. 2930 authorizes a new Section 8 project-based rental
assistance program, or Senior Preservation Rental Assistance,
to provide rental assistance to projects that currently do not
receive any rental assistance. Projects built between 1959 and
1974 did not require an accompanying rental subsidy, as the low
3 percent interest rate enabled owners to charge very low
rents. However as these projects age and require significant
rehabilitation, owners will be forced to raise rents in order
to cover cost or rehabilitation. A Senior Preservation Rental
Assistance Contract will allow owners to finance the
rehabilitation of their properties without raising the rent for
elderly residents, which otherwise could risk their
displacement, homelessness or premature institutionalization.
Additionally, owners who choose to prepay a loan which does not
require the approval of the HUD Secretary may protect the
affordability of the project by either making all tenants
eligible for enhanced vouchers or, if the owner maintains
ownership of the property, the owner may enter into a Senior
Preservation Rental Assistance Contract.
In addition to the establishment of the Senior Preservation
Rental Assistance contract, the bill enables owners who were
previously ineligible to refinance their loan to address the
substantial physical needs of a property. Current statute
requires, as a condition of refinancing, that such new
financing must result in a lower interest rate. However
projects built between 1959 and 1974 have a 3 percent interest
loan and therefore are unable to refinance at a lower rate. By
removing the requirement that owners secure a lower interest
rate, the bill would make such properties eligible for
prepayment and enable them to address the rehabilitation needs
of a project.
Another barrier owners face when seeking to modernize and
extend the functionality and affordability of a project is the
reconfiguration of obsolete units. During the Subcommittee
hearing, several witnesses testified to the need to reconfigure
a large number of small, efficiency units, which are often
vacant and no longer desirable for elderly households seeking
to age in place. However, HUD practice has been to disallow
reconfiguration, or to require owners to create new units to
replace any unit that is combined or lost. H.R. 2930 allows
owners to combine obsolete units to create larger units, for
which a higher demand exists, therefore avoiding potential
vacancies.
The bill waives the requirement that owners repay flexible
subsidy debt and permits HUD to subordinate the original HUD
debt where such requirements would diminish the amount of
proceeds that could be used for rehabilitation.
The bill includes a mortgage sale demonstration program,
the purpose of which is to examine whether state housing
finance agencies might be able to more effectively administer
section 202 loans, in contrast to how they are currently
managed by HUD. The demonstration would authorize HUD to sell
the Section 202 mortgage portfolios of three states to the
State housing finance agencies. The purpose of the
demonstration is to enable HUD to evaluate, in conjunction with
State or local housing finance agencies, the benefits, costs,
and effects of implementing the program on a broader scale.
Facilitating Affordable Housing Preservation Transactions.
During the course of the Subcommittee on Housing and Community
Opportunity hearing on H.R. 2930, a number of witnesses
testified on the need to extend the allowable uses of proceeds
from sale or refinancing of loans for the Section 202 and
related HUD programs that provide housing for elderly
households, including the Section 236 and Section 221(d)(3)
programs, which are also in need of rehabilitation and
modernization. In an effort to limit the activities eligible
for sale or refinancing proceeds, HUD practice has been to
require sponsors to enter into contracts limiting the use of
funds beyond the limitations already required by law. For
owners seeking to rehabilitate existing properties or invest in
developing new affordable housing units, these proceeds are a
vital source of funds. The Committee believes that the bill, by
prohibiting HUD from imposing further limitations and releasing
owners who are restricted by existing contracts, will provide
owners the flexibility to continue to provide affordable
housing and supportive services through proceeds.
Assisted Living Conversion Program. The Committee believes
that the Section 202 program provides a foundation for the
effective delivery of services by federally funded program
partners. The American Homeownership and Economic Opportunity
Act authorized grants to convert Section 202 units and
buildings to assisted living, and grants have been appropriated
each subsequent year for this purpose. However, the Committee
believes that many meritorious projects are excluded from this
Assisted Living Conversion Program because of overly
restrictive limitations on eligible service providers. H.R.
2930 broadens the definition of assisted living facility to
include a broader range of service providers, while
safeguarding a high quality of service provided to residents.
Hearings
The Subcommittee on Housing and Community Opportunity held
a hearing on September 6, 2007 entitled ``H.R. 2930, the
Section 202 Supportive Housing for the Elderly Act of 2007''.
The following witnesses testified:
PANEL ONE
Mr. John Garvin, Senior Advisor to the
Assistant Secretary for the Office of Housing/Acting
Deputy Assistant Secretary for the Office of Multi-
Family Housing
PANEL TWO
Mr. David Lizarraga, President and Chief
Executive Officer, TELACU
Mr. Thomas W. Slemmer, Chief Executive
Officer, National Church Residences
Ms. Deje Kondon, Executive Director,
Presbyterian Homes & Housing
Ms. Ellen Feingold, President, Jewish
Community Housing for the Elderly
Mr. Michael Frigo, Administrator, Mayslake
Village
Mr. Steve Protulis, President, Elderly
Housing Development and Operations Corporation
Ms. Terry Allton, Vice President of Support
Services, National Church Residences
Committee Consideration
The Committee on Financial Services met in open session on
September 25, 2007, and ordered H.R. 2930, Section 202
Supportive Housing for the Elderly Act of 2007, as amended,
reported to the House by a voice vote.
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. No
record votes were taken with in conjunction with the
consideration of this legislation. A motion by Mr. Frank to
report the bill, as amended, to the House with a favorable
recommendation was agreed to by a voice vote.
During the consideration of the bill, the following
amendment was considered:
An amendment by Mr. Frank, No. 1, a manager's amendment
making various technical and substantive changes, was agreed to
by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee held a hearing and 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:
H.R. 2930 facilitates the construction, rehabilitation and
preservation of affordable, supportive housing for very-low
income elderly persons. The goal of the bill is to streamline
the development of new 202 housing units, while enabling owners
of older Section 202 projects to rehabilitate and preserve
their properties as affordable for very low-income elderly
persons, while preserving the highest quality of housing and
services available.
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 new 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, October 22, 2007.
Hon. Barney Frank,
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. 2930, the Section
202 Supportive Housing for the Elderly Act of 2007.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Chad Chirico.
Sincerely,
Peter R. Orszag,
Director.
Enclosure.
H.R. 2930--Section 202 Supportive Housing for the Elderly Act of 2007
Summary: H.R. 2930 would amend the American Homeownership
and Economic Opportunity Act of 2000 to increase the number of
properties that are eligible to prepay loans issued under
Section 202 of the Housing Act of 1959. The bill also would
authorize a new demonstration program for the sale of loans
made under Section 202 and allow the savings generated through
the refinancing of Section 202 loans to be used for additional
purposes. Finally, the bill would authorize a new program for
project-based rental assistance for certain properties that are
currently financed with a Section 202 loan.
CBO estimates that enacting H.R. 2930 would increase direct
spending by $94 million in 2008 because the bill would
effectively modify the terms of existing federal loans--
reducing the present value of expected cash flows for such
loans. We also estimate that implementing the bill would have a
net discretionary cost of $212 million over the 2008-2012
period, assuming appropriation of the necessary amounts.
H.R. 2930 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA);
any costs to state, local, or tribal governments would be
incurred voluntarily.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 2930 is shown in the following table.
The costs of this legislation fall within budget functions 370
(mortgage and housing credit) and 600 (income security).
------------------------------------------------------------------------
By fiscal year, in millions of
dollars--
---------------------------------------
2008 2009 2010 2011 2012
------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Mortgage Sale Demonstration:
Estimated Budget Authority.. 88 0 0 0 0
Estimated Outlays........... 88 0 0 0 0
Use of Unexpended Amounts:
Estimated Budget Authority.. 5 0 0 0 0
Estimated Outlays........... 5 0 0 0 0
Refinancing:
Estimated Budget Authority.. 1 0 0 0 0
Estimated Outlays........... 1 0 0 0 0
Total Changes in Direct
Spending:
Estimated Budget Authority.. 94 0 0 0 0
Estimated Outlays........... 94 0 0 0 0
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Project-Based Rental Assistance:
Estimated Authorization 0 23 52 78 111
Level......................
Estimated Outlays........... 0 14 40 68 98
Delegated Processing Fees:
Estimated Authorization 0 2 3 5 5
Level......................
Estimated Outlays........... 0 1 2 4 5
Multifamily Loan Guarantees:
Estimated Authorization 0 -5 -5 -5 -5
Level......................
Estimated Outlays........... 0 -5 -5 -5 -5
GNMA Offsetting Collections:
Estimated Authorization 0 * * * *
Level......................
Estimated Outlays........... 0 * * * *
Total Changes in Spending
Subject to Appropriation:
Estimated Authorization 0 20 50 78 111
Level......................
Estimated Outlays........... 0 10 37 67 98
------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding; GNMA =
Government National Mortgage Association; * = between 0 and -$500,000.
Basis of estimate: For this estimate, CBO assumes that H.R.
2930 will be enacted in fiscal year 2008, that the full amounts
authorized will be appropriated for each year, that outlays
will follow historical patterns, and that appropriation laws
necessary to implement the Federal Housing Administration (FHA)
and Government National Mortgage Association (GNMA) programs
will be enacted each year. Components of the estimated costs
are described below.
Background
The Section 202 Housing for the Elderly program was
established as part of the Housing Act of 1959. The program
currently makes capital grants and rental assistance available
to nonprofit entities to develop housing that is affordable to
very low-income elderly households. Prior to 1990, the
Department of Housing and Urban Development (HUD) made direct
loans to nonprofit developers, rather than capital grants, with
an average term of 40 years for those loans. HUD holds about
4,000 Section 202 loans with a total unpaid balance of over $5
billion. The interest rates for those loans range from 3
percent to 9 percent, with an average maturity date of 2025.
Property owners who agree to operate their project until the
maturity date of the original loan (under terms that are at
least as advantageous to tenants as under the original loan
agreement) may prepay their loans if such refinancing results
in a lower interest rate and a reduction in debt service. The
prepayment rate for Section 202 loans averages about 15 percent
per year and most refinancing transactions involve FHA-insured
loans; however, FHA insurance is not required.
Direct spending
Because several provisions of the legislation would change
the expected cash flows associated with existing federal loans
made under the Section 202 program, those changes constitute a
modification of the existing loans. Under credit reform
procedures, the costs of loan modifications are estimated on a
present-value basis and recorded as changes in direct spending
in the year in which the legislation is enacted. In total, CBO
estimates that enacting H.R. 2930 would increase direct
spending by $94 million in 2008.
Mortgage Sale Demonstration. Section 205 of H.R. 2930 would
authorize HUD to sell mortgages associated with Section 202
loans. It would require the department to carry out a
demonstration program in not more than three states to sell
portfolios of those mortgages to state housing finance agencies
for a price not to exceed the unpaid principal balances of such
mortgages. Based on HUD data, CBO estimates that the average
outstanding principle balance is about $100 million per state
and that HUD would select three states with average-size
portfolios for the demonstration program by the end of 2009.
Because the majority of those mortgages have interest rates
that are above the federal cost of funds and are estimated to
have low default rates, selling those mortgages at a price less
than or equal to the unpaid principal balances would result in
a loss to the government on a present-value basis. CBO
estimates those loan sales would cost $88 million in 2008. The
cost of the demonstration program could be higher or lower
depending on the particular states selected.
Use of Unexpended Amounts. Section 203 of the bill would
expand the eligible uses for savings generated by refinancing
Section 202 loans. Those new purposes include the
reconfiguration or reduction in the number of rental units that
are functionally obsolete and the payment of equity to the
project owner or seller. This section also would eliminate the
restriction on the amount of savings that owners can use to
provide supportive services to elderly tenants as well as
restrictions on the owners' ability to direct savings to other
properties. Finally, the bill would allow HUD to waive the
requirement that borrowers repay any debt incurred through the
flexible subsidy program under section 201 of the Housing and
Community Development Amendments of 1978 if such waiver is
necessary for the financial feasibility of the transaction.
Currently, about 15 percent of Section 202 loans are
refinanced each year and fewer than 2 percent of property
owners that apply for prepayment are denied. CBO estimates that
these provisions would increase the prepayment rate by making
such transactions more attractive to property owners and
increase the likelihood that HUD would approve the
transactions. Based on data provided by HUD, CBO estimates that
several additional properties would have their loans prepaid
each year. CBO estimates such prepayments would cost $5 million
in 2008 on a present-value basis.
Refinancing. Section 201 of the bill would allow owners of
properties financed with a Section 202 loan to refinance if the
new financing were used to address the physical needs of the
project, even if the refinancing would not result in a lower
interest rate. Loans made prior to 1974 have interest rates of
approximately 3 percent, and borrowers may not prepay their
debt under current law. Based on data provided by HUD, CBO
estimates that HUD currently holds about 260 loans of this type
with a total unpaid balance of about $190 million. Taken by
itself, this section would result in direct spending savings,
but enacted in conjunction with section 205, it would slightly
increase direct spending.
Section 205 of the bill would allow HUD to approve the
subordination of existing debt in lieu of prepayment. When
refinancing to address a property's physical needs, CBO expects
that the owners of Section 202 properties would be more likely
to subordinate those low-interest loans than to prepay them
because the interest rates on those old loans are substantially
lower than current market rates. Issuing new primary debt on
top of the existing 3 percent loans would increase the risk of
default for those loans. Based on data provided by HUD, CBO
estimates that Section 202 loans have an annual default rate of
0.25 percent. CBO expects that under section 205, the majority
of those loans would be refinanced by 2012 and that the default
rate for the subordinated loans would increase but remain below
1 percent per year. CBO estimates that the increased default
rates would cost $1 million in 2008 on a net-present-value
basis.
Spending subject to appropriation
CBO estimates that H.R. 2930 would authorize the net
appropriation of $20 million in 2009 and $259 million over the
2009-2012 period. CBO estimates that appropriation of those
amounts would result in spending of $212 million over the next
five years.
Project-based Rental Assistance. Section 205 would
authorize a new program for project-based rental assistance to
be used in connection with the prepayment of a Section 202
loan. This provision would primarily affect properties with
loans made prior to 1974 that do not have existing rent
subsidies on all units. Based on HUD data, CBO estimates that
beginning in 2009 around 50 properties each year (averaging 80
units per property) would receive such rental assistance at an
average cost of about $5,300 per unit. Thus, by 2012, a
cumulative total of about 200 properties would be assisted by
the new program. Assuming appropriation of the necessary
amounts, CBO estimates that providing project-based rental
assistance to these properties would cost $14 million in 2009
and $220 million over the 2009-2012 period.
Delegated Processing Fees. Section 102 would require HUD to
delegate the processing of certain capital grants to interested
state or local housing agencies. The provision would direct HUD
to develop a schedule of reasonable fees to be paid to the
delegated processing agencies and would allow the fees to be
included as part of the total capital grant amount. Based on
information provided by HUD, industry groups, and state
agencies, CBO assumes that the fee structure would be similar
to those used for Participating Administrative Entities in the
Section 8 Mark-to-Market program and for the underwriting of
low-income housing tax credits. CBO estimates that, over time,
about two-thirds of capital grants would be processed by state
or local housing agencies and that those agencies would be paid
a fee of about 1 percent of the grant value. Grants currently
average a little more than $4 million per property. Assuming
appropriation of the necessary amounts, CBO estimates that
paying fees for the delegated processing of capital grants
would cost $1 million in 2009 and $12 million over the 2009-
2012 period.
Multifamily Loan Guarantees. As described above, H.R. 2930
would increase the number of Section 202 loans that are
refinanced each year. Although not required by law, most of the
refinanced loans are likely to be insured by FHA's multifamily
mortgage insurance or risk-sharing programs. The Federal Credit
Reform Act of 1990 requires an appropriation of the subsidy
costs and administrative costs associated with loan guarantees.
The subsidy cost is the estimated long-term cost to the
government of the loan guarantee, calculated on a present-value
basis, excluding administrative costs. Under current law, HUD
estimates that FHA's guarantees of multifamily loans will
result in net offsetting collections (that is, negative outlays
that are recorded as a credit against discretionary spending)
because guarantee fees collected on those mortgages will more
than offset the costs of expected defaults, calculated on a
present-value basis. CBO estimates that the average subsidy
cost for the multifamily programs that could be used to
refinance Section 202 loans is -2 percent and that this
legislation would result in about 50 additional loan guarantees
each year. CBO estimates that implementing this legislation
would result in additional offsetting collections of $5 million
in 2009 and $20 million over the 2009-2012 period, contingent
on enactment of appropriation bills that would establish
authority to make loan guarantees by specifying annual loan
commitment levels.
GNMA Offsetting Collections. GNMA is responsible for
guaranteeing securities backed by pools of mortgages that are
insured by the federal government (known as the mortgage-backed
securities, or MBS program). In exchange for a fee charged to
lenders or issuers of the securities, GNMA guarantees the
timely payment of scheduled principal and interest due on the
pooled mortgages that back those securities. The Administration
estimates that the value of the fees collected by GNMA will
exceed the cost of loan defaults each year. Accordingly, under
credit reform, the GNMA MBS program will have an estimated
subsidy rate of -0.21 percent in 2008, resulting in net
collections to the federal government.
Because most FHA multifamily loan guarantees are included
in GNMA's MBS program, CBO estimates that increasing the number
of Section 202 loans refinanced with FHA insurance would result
in additional GNMA collections over the 2008-2012 period, but
they would total less than $500,000 per year. Those savings
would affect discretionary spending because, like FHA, GNMA
requires appropriation action to establish the total amount of
its guarantees.
Intergovernmental and private-sector impact: H.R. 2930
contains no intergovernmental or private-sector mandates as
defined in UMRA. The bill would benefit state, local, and
tribal governments that participate in affordable housing
projects and programs. Any costs those governments incur to
comply with program requirements would be incurred voluntarily.
Estimate prepared by: Federal Spending: Chad Chirico and
Susanne S. Mehlman; Impact on State, Local, and Tribal
Governments: Lisa Ramirez-Branum; Impact on the Private Sector:
Keisuke Nakagawa.
Estimate approved by: Peter H. Fontaine, 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
general welfare of the United States) and clause 3 (relating to
the power to regulate 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.
Earmark Identification
H.R. 2930 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
SHORT TITLE: SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY ACT OF 2007
Title 1: New construction reforms
Section 101. Project rental assistance. Requires the
Secretary to adjust the annual contract amounts for renewal of
Project Rental Assistance contracts to provide for reasonable
project costs (including adequate reserves, service
coordinators, and service cost) and to cover emergencies such
as utility cost spikes. Prohibits the use of previously
appropriated unspent contract funds from being applied to
adjustments.
Section 102. Selection Criteria. (a) Amends the Selection
Criteria for grant selection to include the extent to which a
project will provide a service coordinator. (b) Requires
delegated processing for 202 projects which combine capital
advance funds with other sources of financing and that have
already been approved by HUD, for the purpose of issuing a
capital advance, to a state or local agency which (1) is in
geographic proximity to the property, (2) has demonstrated
experience in underwriting multifamily housing loans that
provide housing and supportive services, (3) may or may not be
providing LIHTC in combination with the 202 capital advance and
(4) agrees to issue a firm commitment within 12 months of
delegation. (c) Waives the delegated underwriting requirement
where no State or local agency has applied to provide delegated
underwriting. (d) Permits the state or local agency to charge a
reasonable fee for processing, which will be included in the
capital advance amount. Require the Secretary to develop a
schedule for reasonable fees to be paid for delegated
underwriting. (e) Confirms HUD Secretary's authority to approve
rents and development costs and requires that the Secretary
execute a capital advance within 90 days of receipt of
commitment.
Section 103. Development Cost Limitations. Amends
development cost limitations by adding the term ``reasonable''
to the phrase ``developments cost limitation.''
Section 104. Owner Deposits. Amends use of owner deposits
by limiting use to operating deficits during first three years,
clarifying that deposits shall not be used to cover
construction shortfalls.
Section 105. Definition of Private Nonprofit Organization.
Amends definition of ``owner'' to create an exception for
national nonprofit organizations that run multiple projects.
Such projects may use local advisory boards to meet the
governing board requirement, except that the national
organization will maintain responsibility for the operation of
the housing.
Section 106. Preferences for Homeless Elderly. Permits
project sponsors to implement preferences for homeless elderly,
where such persons meet all program eligibility requirements
and the project provides supportive services to meet their
needs.
Title II: Refinancing
Section 201. Approval of Prepayment of Debt. Authorizes a
202 project to seek new financing to permit the owner to
address the physical needs of the project, even if the new
financing does not result in a lower interest rate, on the
condition that (1) HUD Section 8 costs do not increase, and (2)
rent charges on tenants will not increase.
Section 202. Sources of Refinancing. Authorizes new lenders
to underwrite loans refinanced with risk sharing loans.
Section 203. Use of Unexpended Amounts. Permits use of
unexpended amounts to include uses in the provision of
affordable rental housing and related social services for
elderly persons by the private nonprofit organization's project
owner, sponsor, or developer. Includes: (1) striking the 15
percent limitation on supportive services; (2) covering the
cost of reducing and reconfiguring obsolete units; (3)
conditionally covering the payment of a developer's fee; and
(4) in the case of sale or refinance, permitting equity
payments to be calculated based on the appraised value of the
project.
Section 204. Use of Project Residual Receipts. Authorizes
the use of residual receipts held for a project in connection
with a prepayment or refinancing in excess of $500 per unit for
activities to increase supportive services or other purposes
approved by the Secretary.
Section 205. Additional Provisions. (a) Authorizes Senior
Preservation Rental Assistance Contracts. Senior Preservation
Contracts would be made available to private nonprofit owners
whose 202 loan predates the accompanying rental subsidy, for
whom the cost of refinancing and rehabbing a project could
otherwise significantly raise the rents. This contract would
allow the sponsor to cover this cost increase with the project-
based assistance in conjunction with a refinancing and
preservation transaction.
(b) Authorizes a Mortgage Sale Demonstration in up to three
states, in which the Secretary may sell 202 mortgages to state
housing finance agencies (in accordance with Section 203 of the
Housing and Community Development Amendments of 1978) for a
price not to exceed the unpaid principal balance of the loans.
(c)(1) Clarifies that HUD has authority to subordinate 202
and other subordinate debt to new financing; and (2) authorizes
HUD to approve assumption of 202 loans in connection with a
transfer of a project with such a loan, to a private nonprofit
organization.
(d) Waives the required payment of a Flexible Subsidy loan
upon prepayment or refinancing of a 202 loan, if such a waiver
is necessary for the financial feasibility of the transaction
or to preserve the long-term affordability of the project.
(e) In connection with a prepayment where approval from the
secretary is not required (1) enables all tenants to be
eligible for enhanced vouchers, and (2) permits owners to enter
into a Senior Preservation Contract with HUD, on the condition
that the project will continue to be owned by a private
nonprofit organization.
(f) Confirms definition of private nonprofit organization
as defined in section 202(k) of the Housing Act of 1959.
Title III: Assisted living facilities
Section 301. Definition of Assisted Living Facility. Amends
the definition of assisted living facility to make the
requirement regarding project eligibility more flexible. The
bill would require projects to be either (1) licensed and
regulated by the State or local government, or (2)(a) make
available directly a recognized and experienced third party
service provider's supportive services to assist residents with
the activities of daily living, and (b) provide separate
dwelling units each of which includes a full kitchen and
bathroom for residents. Under current law, a project must
comply with all three of these requirements.
Section 302. Monthly Assistance Payment Under Rental
Assistance. Permits voucher holders in assisted living
facilities to pay more than 40 percent of their income for
rent, subject to HUD approval.
Title IV: Facilitating affordable housing preservation transactions
Section 401. Use of Sale or Refinancing Proceeds. Prohibits
HUD from imposing additional restrictions, other than those
already required by law, in connection with a sale of
refinancing of a multifamily housing project where HUD approval
of prepayment is required.
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):
HOUSING ACT OF 1959
* * * * * * *
TITLE II--HOUSING FOR THE ELDERLY OR HANDICAPPED
* * * * * * *
SEC. 202. SUPPORTIVE HOUSING FOR THE ELDERLY.
(a) * * *
* * * * * * *
(c) Forms of Assistance.--
(1) * * *
(2) Project rental assistance.--(A) Initial project
rental assistance contract._Contracts for project
rental assistance shall obligate the Secretary to make
monthly payments to cover any part of the costs
attributed to units occupied (or, as approved by the
Secretary, held for occupancy) by very low-income
elderly persons that is not met from project income.
The annual contract amount for any project shall not
exceed the sum of the initial annual project rentals
for all units so occupied and any initial utility
allowances for such units, as approved by the
Secretary. Any contract amounts not used by a project
in any year shall remain available to the project until
the expiration of the contract. The Secretary [may]
shall adjust the annual contract amount if the sum of
the project income and the amount of assistance
payments available under this paragraph are inadequate
to provide for reasonable project costs.
(B) Renewal of and increases in contract amounts.--
(i) Expiration of contract term.--Upon the
expiration of each contract term, the Secretary
shall adjust the annual contract amount to
provide for reasonable project costs, and any
increases, including adequate reserves,
supportive services, and service coordinators,
except that any contract amounts not used by a
project during a contract term shall not be
available for such adjustments upon renewal.
(ii) Emergency situations.--In the event of
emergency situations that are outside the
control of the owner, the Secretary shall
increase the annual contract amount, subject to
reasonable review and limitations as the
Secretary shall provide.
* * * * * * *
(f) [Selection Criteria.--] Initial Selection Criteria and
Processing._(1) Selection Criteria._The Secretary shall
establish selection criteria for assistance under this section,
which shall include--
[(1)] (A) the ability of the applicant to develop and
operate the proposed housing;
[(2)] (B) the need for supportive housing for the
elderly in the area to be served; , taking into
consideration the availability of public housing for
the elderly and vacancy rates in such facilities
[(3)] (C) the extent to which the proposed size and
unit mix of the housing will enable the applicant to
manage and operate the housing efficiently and ensure
that the provision of supportive services will be
accomplished in an economical fashion;
[(4)] (D) the extent to which the proposed design of
the housing will meet the special physical needs of
elderly persons;
[(5)] (E) the extent to which the applicant has
demonstrated that the supportive services identified in
subsection (e)(4) will be provided on a consistent,
long-term basis;
(F) the extent to which the applicant has ensured
that a service coordinator will be employed or
otherwise retained for the housing, who has the
managerial capacity and responsibility for carrying out
the actions described in subparagraphs (A) and (B) of
subsection (g)(2);
[(6)] (G) the extent to which the proposed design of
the housing will accommodate the provision of
supportive services that are expected to be needed,
either initially or over the useful life of the
housing, by the category or categories of elderly
persons the housing is intended to serve; and
[(7)] (H) such other factors as the Secretary
determines to be appropriate to ensure that funds made
available under this section are used effectively.
(2) Delegated Processing.--
(A) In issuing a capital advance under this
subsection for any project for which financing for the
purposes described in the last two sentences of
subsection (b) is provided by a combination of a
capital advance under subsection (c)(1) and sources
other than this section, within 30 days of award of the
capital advance, the Secretary shall delegate review
and processing of such projects to a State or local
housing agency that--
(i) is in geographic proximity to the
property;
(ii) has demonstrated experience in and
capacity for underwriting multifamily housing
loans that provide housing and supportive
services;
(iii) may or may not be providing low-income
housing tax credits in combination with the
capital advance under this section, and
(iv) agrees to issue a firm commitment within
12 months of delegation.
(B) The Secretary shall retain the authority to
process capital advances in cases in which no State or
local housing agency has applied to provide delegated
processing pursuant to this paragraph or no such agency
has entered into an agreement with the Secretary to
serve as a delegated processing agency.
(C) An agency to which review and processing is
delegated pursuant to subparagraph (A) may assess a
reasonable fee which shall be included in the capital
advance amounts and may recommend project rental
assistance amounts in excess of those initially awarded
by the Secretary. The Secretary shall develop a
schedule for reasonable fees under this subparagraph to
be paid to delegated processing agencies, which shall
take into consideration any other fees to be paid to
the agency for other funding provided to the project by
the agency, including bonds, tax credits, and other gap
funding.
(D) Under such delegated system, the Secretary shall
retain the authority to approve rents and development
costs and to execute a capital advance within 60 days
of receipt of the commitment from the State or local
agency. The Secretary shall provide to such agency and
the project sponsor, in writing, the reasons for any
reduction in capital advance amounts or project rental
assistance and such reductions shall be subject to
appeal.
* * * * * * *
(h) Development Cost Limitations.--
(1) In general.--The Secretary shall periodically
establish reasonable development cost limitations by
market area for various types and sizes of supportive
housing for the elderly by publishing a notice of the
cost limitations in the Federal Register. The cost
limitations shall reflect--
(A) * * *
* * * * * * *
(j) Miscellaneous Provisions.--
(1) * * *
* * * * * * *
(3) Owner deposit.--
(A) In general.--The Secretary shall require
an owner to deposit an amount not to exceed
$25,000 in a special escrow account to assure
the owner's commitment to the housing. Such
amount shall be used only to cover operating
deficits during the first three years of
operations and shall not be used to cover
construction shortfalls or inadequate initial
project rental assistance amounts.
* * * * * * *
(9) Preferences for homeless elderly.--The Secretary
shall permit an owner of housing assisted under this
section to establish for, and apply to, the housing a
preference in tenant selection for the homeless
elderly, either within the application or after
selection pursuant to subsection (f), but only if--
(A) such preference is consistent with
paragraph (2) of this subsection; and
(B) the owner demonstrates that the
supportive services identified pursuant to
subsection (e)(4), or additional supportive
services to be made available upon
implementation of the preference, will meet the
needs of the homeless elderly, maintain safety
and security for all tenants, and be provided
on a consistent, long-term, and economical
basis.
(k) Definitions.--
(1) * * *
* * * * * * *
(4) The term ``private nonprofit organization'' means
any incorporated private institution or foundation--
(A) * * *
(B) which has a governing board (i) the
membership of which is selected in a manner to
assure that there is significant representation
of the views of the community in which such
housing is located, and (ii) which is
responsible for the operation of the housing
assisted under this section; except that, in
the case of any national organization that is
the owner of multiple housing projects assisted
under this section, the organization may comply
with clause (i) of this subparagraph by having
a local advisory board to the governing board
of the organization the membership which is
selected in the manner required under clause
(i); and
* * * * * * *
SEC. 202B. GRANTS FOR CONVERSION OF ELDERLY HOUSING TO ASSISTED LIVING
FACILITIES.
(a) * * *
* * * * * * *
(g) Definitions.--For the purposes of this section--
[(1) the term ``assisted living facility'' has the
meaning given such term in section 232(b) of the
National Housing Act (12 U.S.C. 1715w(b)); and]
(1) the term ``assisted living facility'' means a
facility that--
(A) is owned by a private nonprofit
organization; and
(B)(i) is licensed and regulated by the State
(or if there is no State law providing for such
licensing and regulation by the State, by the
municipality or other political subdivision in
which the facility is located); or
(ii)(I) makes available, directly or through
recognized and experienced third party service
providers, to residents at the resident's
request or choice supportive services to assist
the residents in carrying out the activities of
daily living, such as bathing, dressing,
eating, getting in and our of bed or chairs,
walking, going outdoors, toileting, laundry,
home management, preparing meals, shopping for
personal items, obtaining and taking
medication, managing money, using the
telephone, or performing light of heavy
housework, and which may make available to
residents home health care service, such as
nursing and therapy, and certain health related
services; and
(II) provides separate dwelling units for
residents, each of which may contain a full
kitchen and bathroom and which includes common
rooms and other facilities appropriate for the
provision of supportive services to the
residents of the facility; and
* * * * * * *
----------
SECTION 811 OF THE AMERICAN HOMEOWNERSHIP AND ECONOMIC OPPORTUNITY ACT
OF 2000
SEC. 811. PREPAYMENT AND REFINANCING.
(a) Approval of Prepayment of Debt.--Upon request of the
project sponsor of a project assisted with a loan under section
202 of the Housing Act of 1959 (as in effect before the
enactment of the Cranston-Gonzalez National Affordable Housing
Act), for which the Secretary's consent to prepayment is
required, the Secretary shall approve the prepayment of any
indebtedness to the Secretary relating to any remaining
principal and interest under the loan as part of a prepayment
plan under which--
(1) the project sponsor agrees to operate the project
until the maturity date of the original loan under
terms at least as advantageous to existing and future
tenants as the terms required by the original loan
agreement or any project-based rental assistance
payments contract under section 8 of the United States
Housing Act of 1937 (or any other project-based rental
housing assistance programs of the Department of
Housing and Urban Development, including the rent
supplement program under section 101 of the Housing and
Urban Development Act of 1965 (12 U.S.C. 1701s)), or
any successor project-based rental assistance program,
relating to the project; and
(2) the prepayment may involve refinancing of the
loan if such refinancing results in (A) a lower
interest rate on the principal of the loan for the
project and in reductions in debt service related to
such loan, or (B) a transaction in which the project
owner will address the physical needs of the project,
but only if, as a result of the refinancing (i) the
rent charges for unassisted families residing in the
project do not increase or such families are provided
rental assistance under a senior preservation rental
assistance contract for the project pursuant to
subsection (e), and (ii) the overall cost for providing
rental assistance under section 8 for the project (if
any) does not increase.
(b) Sources of Refinancing.--In the case of prepayment under
this section involving refinancing, the project sponsor may
refinance the project through any third party source, including
financing by State and local housing finance agencies, use of
tax-exempt bonds, multi-family mortgage insurance under the
National Housing Act, reinsurance, or other credit
enhancements, including risk sharing as provided under section
542 of the Housing and Community Development Act of 1992 (12
U.S.C. 1707 note). For purposes of underwriting a loan insured
under the National Housing Act, or approving the standards used
by authorized lenders to underwrite a loan refinanced with risk
sharing as provided by section 542 of the Housing and Community
Development Act of 1992 (12 U.S.C. 1701 note), the Secretary
[may] shall assume that any section 8 rental assistance
contract relating to a project will be renewed for the term of
such loan.
(c) Use of Unexpended Amounts.--Upon execution of the
refinancing for a project pursuant to this section, the
Secretary shall make available at least 50 percent of the
annual savings resulting from reduced section 8 or other rental
housing assistance contracts in a manner that is advantageous
to the tenants, or is used in the provision of affordable
rental housing and related social services for elderly persons
by the private nonprofit organization project owner, private
nonprofit organization project sponsor, or private nonprofit
organization project developer, including--
(1) [not more than 15 percent of] the cost of
increasing the availability or provision of supportive
services, which may include the financing of service
coordinators and congregate services;
(2) rehabilitation, modernization, or retrofitting of
structures, common areas, or individual dwelling units,
including reducing the number of units and
reconfiguring units that are functionally obsolete,
unmarketable, or not economically viable;
(3) construction of an addition or other facility in
the project, including assisted living facilities (or,
upon the approval of the Secretary, facilities located
in the community where the project sponsor refinances a
project under this section, or pools shared resources
from more than one such project); [or]
(4) rent reduction of unassisted tenants residing in
the project according to a pro rata allocation of
shared savings resulting from the refinancing[.];
(5) the payment to the project owner, sponsor, or
third party developer of a developer's fee in an amount
not to exceed--
(A) in the case of a project refinanced
through a State low income housing tax credit
program, the fee permitted by the low income
housing tax credit program as calculated by the
State program as a percentage of acceptable
development cost as defined by that State
program; or
(B) in the case of a project refinanced
through any other source of refinancing, 15
percent of the acceptable development cost; or
(6) the payment of equity, if any, to--
(A) in the case of a sale, to the seller or
the sponsor of the seller, in an amount equal
to the lesser of the purchase price or the
appraised value of the property, as each is
reduced by the cost of prepaying any
outstanding indebtedness on the property and
transaction costs of the sale; or
(B) in the case of a refinancing without the
transfer of the property, to the project owner
or the project sponsor, in an amount equal to
the difference between the appraised value of
the property less the outstanding indebtedness
and total acceptable development cost.
For purposes of paragraphs (5)(B) and (6)(B), the term
``acceptable development cost'' shall include, as applicable,
the cost of acquisition, rehabilitation, loan prepayment,
initial reserve deposits, and transaction costs.
(d) Use of Certain Project Funds.--The Secretary shall allow
a project sponsor that is prepaying and refinancing a project
under this section--
(1) to use any residual receipts held for that
project in excess of $500 per individual dwelling unit
for [not more than 15 percent of] the cost of
activities designed to increase the availability or
provision of supportive services; and
(2) to use any reserves for replacement in excess of
$1,000 per individual dwelling unit for activities
described in paragraphs (2) and (3) of subsection (c),
or (B) a transaction in which the project owner will
address the physical needs of the project, but only if,
as a result of the refinancing (i) the rent charges for
unassisted families residing in the project do not
increase or such families are provided rental
assistance under a senior preservation rental
assistance contract for the project pursuant to
subsection (e), and (ii) the overall cost for providing
rental assistance under section 8 for the project (if
any) does not increase.
* * * * * * *
(e) Senior Preservation Rental Assistance Contracts.--
Notwithstanding any other provision of law, in connection with
a prepayment plan for a project approved under subsection (a)
by the Secretary or as otherwise approved by the Secretary, to
prevent displacement of elderly residents of the project in the
case of refinancing or recapitalization and to further
preservation and affordability of such project, at the election
of the private nonprofit organization owner of the project, the
Secretary shall provide project-based rental assistance for the
project under a senior preservation rental assistance contract,
as follows:
(1) Assistance under the contract shall be made
available to the private nonprofit organization owner--
(A) for a term of at least 20 years, subject
to annual appropriations, and
(B) under the same rules governing project-
based rental assistance made available under
section 8 of the Housing Act of 1937.
(2) Any projects for which a senior preservation
rental assistance contract is provided shall be subject
to a use agreement to ensure continued project
affordability having a term of the longer of (A) the
term of the senior preservation rental assistance
contract, or (B) such term as is required by the new
financing.
(f) Mortgage Sale Demonstration.--
(1) In general.--The Secretary may sell mortgages
associated with loans made under section 202 of the
Housing Act of 1959 (as in effect before the enactment
of the Cranston-Gonzalez National Affordable Housing
Act) in accordance with the relevant terms for sales of
subsidized loans on multifamily housing projects under
section 203 of the Housing and Community Development
Amendments of 1978 (12 U.S.C. 1701z-11). For the
purpose of demonstrating the efficiency, effectiveness,
quality, and timeliness of asset management and
regulatory oversight of certain portfolios of such
mortgages by State housing finance agencies, the
Secretary shall carry out a demonstration program, in
not more than three States, to sell portfolios of such
mortgages to State housing finance agencies for a price
not to exceed the unpaid principal balances of such
mortgages and otherwise in accordance with the
requirements of such section 203.
(2) Limitations.--In carrying out the demonstration
program, the Secretary shall--
(A) prohibit State housing finance agencies
from giving preference to, or conditioning the
approval of, awards of subordinate debt funds,
allocations of tax credits, or tax exempt bonds
based on the use of financing for the first
mortgage that is provided by such State housing
finance agency; and
(B) require such agencies to allow
refinancing or prepayment of loans made under
section 202 of the Housing Act of 1959 with a
loan selected by the owners, except that any
use restrictions on the property for which the
loan was made shall remain in effect for the
duration provided under the original terms of
such loan.
(g) Subordination or Assumption of Existing Debt.--In lieu of
prepayment under this section of the indebtedness with respect
to a project, the Secretary may approve--
(1) in connection with new financing for the project,
the subordination of the loan for the project under
section 202 of the Housing Act of 1959 (as in effect
before the enactment of the Cranston-Gonzalez National
Affordable Housing Act) and the continued subordination
of any other existing subordinate debt previously
approved by the Secretary to facilitate preservation of
the project as affordable housing, or
(2) the assumption (which may include the
subordination described in paragraph (1)) of the loan
for the project under such section 202 in connection
with the transfer of the project with such a loan to a
private nonprofit organization.
(h) Flexible Subsidy Debt.--The Secretary shall waive the
requirement that debt for a project pursuant to the flexible
subsidy program under section 201 of the Housing and Community
Development Amendments of 1978 (12 U.S.C. 1715z-1a) be prepaid
in connection with a prepayment, refinancing, or transfer under
this section of a project if such waiver is necessary for the
financial feasibility of the transaction and is consistent with
the long-term preservation of the project as affordable
housing.
(i) Prepayment When Secretary's Consent Not Required.--In
connection with the prepayment under this section of a loan for
which the Secretary's consent to prepayment is not required, at
the project owner's election--
(1) all tenants of the project shall be eligible for
enhanced vouchers in accordance with section 8(t) of
the United States Housing Act of 1937 (42 U.S.C.
1437f(t)); or
(2) if the project will continue to be owned by a
private nonprofit organization owner, such private
nonprofit organization owner may enter into a senior
preservation rental assistance contract with the
Secretary in accordance with subsection (e).
(j) Definition of Private Nonprofit Organization.--For
purposes of this section, the term ``private nonprofit
organization'' has the meaning given such term in section
202(k) of the Housing Act of 1959 (12 U.S.C. 1701q(k)).
----------
-
SECTION 8 OF THE UNITED STATES HOUSING ACT OF 1937
lower income housing assistance
Sec. 8. (a) * * *
* * * * * * *
(o) Voucher Program.--
(1) * * *
* * * * * * *
(18) Rental assistance for assisted living
facilities.--
(A) * * *
(B) Rent calculation.--
(i) * * *
* * * * * * *
(iii) Monthly assistance payment.--
The monthly assistance payment for a
family assisted under this paragraph
shall be determined in accordance with
paragraph (2) (using the rent and
payment standard for the dwelling unit
as determined in accordance with this
subsection), except that a family may
be required at the time the family
initially receives such assistance to
pay rent in an amount exceeding 40
percent of the monthly adjusted income
of the family by such an amount or
percentage as the Secretary deems
appropriate.
* * * * * * *