[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5039 Reported in House (RH)]
Union Calendar No. 348
109th CONGRESS
2d Session
H. R. 5039
[Report No. 109-604]
To establish a program to revitalize rural multifamily housing assisted
under the Housing Act of 1949.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 29, 2006
Mr. Davis of Kentucky (for himself, Mr. Frank of Massachusetts, Mr.
Ney, Mr. Davis of Alabama, Mr. Gary G. Miller of California, Mr.
Hinojosa, and Mr. Renzi) introduced the following bill; which was
referred to the Committee on Financial Services
July 27, 2006
Additional sponsors: Mr. Clay, Mr. Cuellar, Mr. Young of Alaska, and
Mr. Pearce
July 27, 2006
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on March
29, 2006]
_______________________________________________________________________
A BILL
To establish a program to revitalize rural multifamily housing assisted
under the Housing Act of 1949.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Saving America's Rural Housing Act
of 2006''.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds that--
(1) section 502(c) of the Housing Act of 1949 restricts the
rights of certain owners of projects for which loans were made
or insured under section 515 of such Act to prepay such loans;
(2) expensive litigation against the Department of
Agriculture has cost the taxpayers of the United States
millions of dollars to date, funds that would be better spent
preserving affordable multifamily housing;
(3) if such section 502(c) is partially repealed and the
prepayment restrictions are eliminated for multifamily housing
loans made before 1989 under section 515, it is expected,
according to a report, that approximately 10 percent of the
portfolio of such loans would be prepaid and those projects
would leave the program;
(4) the average age of a multifamily housing project with a
section 515 loan is 28 years, and therefore much of the
portfolio of such projects is aging and in need of
revitalization, while the need for affordable rural housing is
increasing;
(5) section 515 projects house some of the poorest families
in rural America, with almost 60 percent of the units occupied
by senior citizens or persons with disabilities and an average
annual household income among all occupants of approximately
$10,000;
(6) in many small towns and communities, rental housing
financed by direct loans under section 515 is the only decent,
affordable rental housing available.; and
(7) consequently, any revitalization or disposition of this
portfolio, which houses nearly 450,000 low-income families and
seniors, should be handled with great care.
(b) Purposes.--The purposes of this Act are--
(1) to authorize the Secretary of Agriculture to carry out
a program that encourages, to the extent practicable, the
retention of section 515 housing project developments for long-
term use and the repair and preservation of such properties,
and ensures that the minimum number of residents are displaced;
(2) to repeal a portion of section 502(c) of the Housing
Act of 1949 to avoid further costly litigation against the
Department of Agriculture;
(3) to preserve the availability of affordable rural
housing by providing a voluntary mechanism for owners of
multifamily rural housing projects with loans under section 515
to enter into loan restructuring agreements with the Secretary
to provide capital for revitalization activities; and
(4) to provide for affordable rents for tenants who live in
such projects that are revitalized under this Act and to
protect tenants who live in such projects for which the loan is
prepaid.
SEC. 3. REVITALIZATION OF MULTIFAMILY HOUSING.
(a) Revitalization Program.--Title V of the Housing Act of 1949 (42
U.S.C. 1471 et seq.) is amended by adding at the end the following new
section:
``SEC. 544. REVITALIZATION AND TENANT PROTECTION VOUCHERS.
``(a) Purpose.--The purposes of this section are--
``(1) to protect tenants who live in multifamily housing
projects that are subsidized under this title and, in the case
of prepayments of loans under section 515, to protect tenants
that are displaced when the projects cease being eligible
projects;
``(2) to strengthen the long-term viability of eligible
projects;
``(3) to promote the revitalization of rural multifamily
housing projects; and
``(4) to accomplish such several purposes--
``(A) by providing a voluntary mechanism for
project owners to enter into loan restructuring
agreements with the Secretary to obtain new types of
financial assistance to rehabilitate and maintain the
projects; and
``(B) by deregulating certain projects in a manner
that still provides measurable performance standards
and effective financing and rehabilitation of
multifamily housing.
``(b) Revitalization.--
``(1) In general.--The Secretary shall, subject to the
availability of amounts appropriated, carry out a
revitalization program in accordance with this subsection to
provide financial incentives and other assistance to owners of
eligible projects through voluntary long-term use agreements
entered into between the project owners and the Secretary.
``(2) Applications to participate.--The Secretary may
accept applications from owners of eligible projects to
participate in the revitalization program under this section.
``(3) Long-term viability plan.--
``(A) Requirement.--The Secretary may prepare and
approve a long-term viability plan under this paragraph
with respect to each eligible project for which the
owner requests to participate.
``(B) Contents.--Each long-term viability plan for
an eligible project shall include the following
information:
``(i) Physical needs assessment.--A
physical needs assessment of the project that
identifies and projects, for the following 20
years--
``(I) all necessary repairs,
improvements, maintenance, and
management standards for the project,
and when they will be made, in order to
meet the requirements of this title;
and
``(II) the costs associated with
the items referred to in this
subparagraph (A).
``(ii) Financial plan.--A financial plan
for the project that--
``(I) reviews the financial
stability of the project;
``(II) includes the loan
restructuring elements, rent
adjustments, management and operational
efficiencies, and other financial
adjustments to the project that are
necessary to cover operating expenses
for the project and maintain an
adequate financial reserve for the
future maintenance and capital needs of
the project;
``(III) provides the project owner
with a long-term rate of return on new
capital, as determined by the
Secretary, commensurate to comparable
commercial multifamily housing
projects;
``(IV) meets the physical needs for
the project determined under the
physical needs assessment;
``(V) ensures that rents available
under the plan are affordable to
eligible households in accordance with
paragraph (7); and
``(VI) addresses any costs
associated with any temporary tenant
displacement resulting from renovations
or rehabilitation undertaken as a
result of participation of the project
in the revitalization program.
``(C) Development through participating
administrative entities.--The Secretary may develop
long-term viability plans through the use of third-
party participating administrative entities, who may be
a private contractor, a State housing finance agency,
or a nonprofit organization.
``(D) Revitalization determination.--Based on the
long-term viability plan for an eligible project, the
Secretary shall determine whether to offer the project
owner a financial restructuring plan under paragraph
(4) and the financial incentives to be included in any
such plan offered.
``(E) Final review and comment.--With respect to
any long-term viability plan prepared by the Secretary,
the Secretary shall provide the project owner an
opportunity to review the plan and discuss the plan
with the Secretary or its agent before a determination
is made under subparagraph (D).
``(F) Fees.--The Secretary may charge the project
owner a fee for preparation of the long-term viability
plan.
``(G) Payment of fees.--If a long-term viability
for a project is approved, the payment of such fee may
be incorporated into a project owner's financial
restructuring plan for the project provided by the
Secretary pursuant to paragraph (4)
``(4) Financial restructuring plan; revitalization
incentives.--Based on the long-term viability plan for an
eligible project, the Secretary may offer a project owner a
financial restructuring plan for the project. Such a plan may
include one or more of the following revitalization incentives:
``(A) Reduction or elimination of interest on the
loan or loans for the project made under section 515.
``(B) Partial or full deferral of payments due
under such loan or loans.
``(C) Forgiveness of such loan or loans.
``(D) Subordination of such loan or loans, subject
to such terms and conditions as the Secretary shall
determine.
``(E) Reamortization of loan payments under such
loan or loans over extended terms.
``(F) A grant from the Secretary for the project.
``(G) Payment of project costs associated with
developing the long-term viability plan.
``(H) Opportunity for project owners to obtain
further investment equity from third parties in the
project.
``(I) A direct loan or guarantee of a loan for the
project, with a subsidized interest rate without regard
to the value of the project.
``(5) Long-term use agreement.--
``(A) In general.--If the owner of an eligible
project agrees to the terms of a financial
restructuring plan for the project providing
revitalization benefits under paragraph (4), in
exchange for such benefits, the Secretary and the
project owner shall enter into a long-term use
agreement under this paragraph for the project.
``(B) Agreement.--A long-term use agreement for an
eligible project shall include--
``(i) the terms of the financial
restructuring plan for the project, including
any revitalization incentives to be provided;
``(ii) an agreement by the project owner--
``(I) to continue the property use
restrictions with respect to the
project in accordance with this title
for a period of (aa) 20 years, or (bb)
the remaining term of any loans under
this title for the project, whichever
ends later;
``(II) to comply with the long-term
viability plan for the project;
``(III) to comply with the rent
terms under paragraph (7) for the
project; and
``(IV) to make value payments under
paragraph (6) to the Secretary, and the
terms of such payments;
``(iii) provisions terminating the
agreement if any revitalization incentives for
the project to be provided under the agreement
are no longer available and the Secretary
determines that such unavailability is not the
fault of the owner;
``(iv) any rent terms for the project
pursuant to paragraph (7);
``(v) a covenant which runs with the land;
and
``(vi) such other terms as the Secretary
determines are necessary to implement the
purposes of this section.
``(6) Shared value agreements.--Each long-term use
agreement shall include a shared value agreement secured by the
property of the eligible project that is the subject of the
long-term use agreement, which shall determine how proceeds are
divided at the end of the term of the loan or loans and shall
require the project owner, at the end of such loan term or
terms, to pay the lesser of--
``(A) the sum of--
``(i) the amounts of any loan writedowns,
write-offs, and interest subsidies provided in
connection with the loan restructuring under
this subsection, at the closing of
revitalization;
``(ii) any outstanding principal and
interest; and
``(iii) any non-loan funds provided by the
Secretary under this subsection; or
``(B) 75 percent of the appraised value of the
eligible project.
``(7) Rents under long-term use agreement.--In any eligible
project that is subject to a long-term use agreement, rents for
eligible households shall comply with the following
requirements:
``(A) Minimum rent.--The Secretary, acting through
the director of the applicable local agency or office
of the Department responsible for carrying out the
programs under this title in such area, may provide
that each eligible household is charged a minimum
monthly rent in an amount determined by such local
director that does not in any case exceed $25. The
Secretary may allow exceptions to such minimum rent for
an eligible household or groups of eligible households
for demonstrated hardship, as determined by the
Secretary, which hardship exceptions, if allowed by the
Secretary, shall include the hardship exceptions
provided or established by the Secretary of Housing and
Urban Development, as appropriate, under subclauses (I)
through (V) of section 3(a)(3)(B)(i) of the United
States Housing Act of 1937 (42 U.S.C.
1437a(a)(3)(B)(i)).
``(B) Maximum household contribution to rent.--
Notwithstanding any minimum monthly rent established
pursuant to subparagraph (A), the maximum household
contribution to monthly rent for any eligible household
may not exceed 30 percent of the adjusted income of the
eligible household. Such local director may take
actions as may be necessary to verify tenant incomes
for purposes of carrying out this subparagraph.
``(C) Rent adjustments.--The rents for eligible
households may be increased or decreased only on an
annual basis and only in accordance with standards
incorporated in such agreement. The Secretary shall
issue regulations establishing such standards, which
shall include standards for rents that are considered
affordable for eligible households for the area in
which a project is located and for establishing rents
that conform to such standards.
``(8) Lowest cost requirement.--In determining the terms of
a restructuring plan, and the type and amount of revitalization
benefits under such plan to approve under this subsection for
an eligible project, the Secretary shall, to the extent
practicable, approve assistance that imposes the least cost to
the Secretary while meeting the requirements of the long-term
viability plan for the project.
``(9) Authorization of appropriations.--There are
authorized to be appropriated for each fiscal year such sums as
may be necessary to carry out the revitalization program under
this subsection.
``(c) Homeownership Opportunities.--The owner of an eligible
project may, in conjunction with revitalization of the project pursuant
to this section, propose a sale to a tenant-based condominium or
cooperative. Any such proposal shall be subject to a notice to tenants
under terms that the Secretary shall establish.
``(d) Determination of Ineligibility.--
``(1) Procedure.--The Secretary may determine that a
project owner is ineligible for participation in the
revitalization program under this section in accordance with
the standards under paragraph (2).
``(2) Standards.-- The Secretary may determine that a
project owner is ineligible if--
``(A) the project owner has a history of poor
management or maintenance of multifamily housing
properties;
``(B) the project owner is in default on a loan
made available under the section 514 or 515 housing
program;
``(C) the Secretary is unable to enter into a long-
term use agreement for the project that is the subject
of the application with the project owner within a
reasonable time;
``(D) the project owner is suspended or debarred
from participating in Federal contracts or programs; or
``(E) the Secretary has other good cause for
withholding from the project owner the benefits made
available under this section.
``(e) Definitions.--For purposes of this section, the following
definitions shall apply:
``(1) Eligible household.--The term `eligible household'
means a household that, under section 515, is eligible to
reside in a project funded with a loan made by the Secretary
under such section.
``(2) Eligible project.--The term `eligible project' means
a housing project funded with a loan made at any time by the
Secretary under section 515, the principal obligation of which
has not been fully repaid.
``(3) Project owner; owner.--The terms `project owner' and
`owner' mean, with respect to an eligible project, an
individual or entity, or principals thereof that own, or plan
to purchase, the project.''.
(b) Priority for Section 515 Financing.--Subsection (j) of section
515 of the Housing Act of 1949 (42 U.S.C. 1485(j)) is amended--
(1) by inserting ``(1)'' before ``For''; and
(2) by adding at the end the following new paragraph:
``(2) The Secretary may give priority, in entering into contracts
under this section involving financing for new construction of a
project, for projects located in areas having a need for affordable
low-income rental housing due to prepayment of loans made or insured
under this section.''.
(c) Partial Repeal of Prepayment Restrictions; Administration of
Prepayment Requests.--Section 502 of the Housing Act of 1949 (42 U.S.C.
1472) is amended--
(1) in subsection (c)--
(A) by striking ``or 515'' each place such term
appears;
(B) in paragraph (4)(B)--
(i) by striking clause (iv);
(ii) by redesignating clauses (v) and (vi)
as clauses (iv) and (v), respectively; and
(iii) by realigning clause (v) (as so
redesignated by clause (ii) of this
subparagraph) so as to be indented two ems from
the left margin; and
(C) in paragraph (5)(G)(i)(I), by striking ``, as
the case may be,''; and
(2) by adding at the end the following new subsection:
``(i) Prepayment of Section 515 Multifamily Housing Loans.--
``(1) Administration.--
``(A) Plan.--The Secretary shall develop a plan to
administer requests to prepay (not made in connection
with any revitalization under section 544) any loan
made under section 515. The plan shall provide for
administration of voucher assistance in accordance with
paragraph (3). The plan shall encourage and facilitate
owners of projects to maintain the projects, or to
transfer projects to owners who will maintain projects,
as housing affordable to low-income residents, but
shall not prevent an owner from prepaying.
``(B) Implementation.--The Secretary shall
implement this subsection not later than the expiration
of the 90-day period beginning on the date of the
enactment of the Saving America's Rural Housing Act of
2006. Notwithstanding that full implementation of this
subsection may not have been completed, the Secretary
may not delay the processing of any request to prepay a
loan made under section 515.
``(2) Notice of prepayment or sale.--In preparation for
prepayment of a loan made or insured under section 515, the
project owner shall, not less than 120 days before the date of
prepayment of the loan or sale of the project for which the
loan was made, provide the following notices:
``(A) Notice to tenants.--To the tenants of the
project, notice of the prepayment, as follows:
``(i) The notice shall include information
sufficient to inform each tenant of the plan
after prepayment for the project, in which they
reside as a tenant, and whether such plan may
result in, or is likely to result in, the
tenant being required to move and the earliest
date that the tenant's lease will expire or the
tenant may have to move, and of the
availability of vouchers pursuant to paragraph
(3), actions tenants must take to receive
voucher assistance, the date prepayment is
expected to take place, a telephone number and
electronic mail address at which to contact the
owner of the project, and any limitations, use,
and other terms the Secretary considers
appropriate.
``(ii) In the case of any prepayment
involving transfer of the ownership of a
project, the notice shall include the name of
the transferee, the date that the transfer was
agreed to, the date the transfer is to take
place, and telephone numbers and electronic
mail addresses at which to contact the
transferor and transferee.
``(B) Notice to secretary.--To the Secretary,
notice that the requirements under subparagraph (A)
have been met, which shall identify the date that
notice under such subparagraph was made and the names
of each tenant to which such notice was provided.
``(3) Rural tenant protection vouchers.--
``(A) In general.--In the case of a housing project
subject to a loan made under section 515, if the loan
is prepaid or foreclosed upon, the Secretary shall, to
the extent that amounts for assistance under this
paragraph are provided in advance in appropriation
Acts, offer voucher assistance to each low-income
family who on the date that notice is provided in
accordance with paragraph (2)(A) is residing in a
dwelling unit in the project.
``(B) Use.--A voucher under this paragraph for a
family may be used for rental of a dwelling unit in the
project that the family resides in on the date of the
notice in accordance with paragraph (2)(A) or for a
dwelling unit elsewhere.
``(C) Renewal.--Vouchers under this paragraph shall
be renewed annually, subject to the availability of
appropriations for such renewal, during the period that
the family assisted remains eligible for such
assistance.
``(D) Right to use.--In the case of a project for
which a loan made under section 515 is prepaid--
``(i) a family residing in such project on
the date of prepayment may elect to remain in
the unit in which the family was residing on
such date; and
``(ii) the owner of the project may not
refuse to lease, to a family for whom voucher
assistance under this paragraph is made
available, any available rental dwelling unit
in the project.
``(E) Amount of assistance.--The amount of rental
assistance provided under a voucher under this
paragraph on behalf of a tenant shall be the amount by
which--
``(i) the lesser of
``(I) the rent for the dwelling
unit rented using such voucher, or
``(II) the rent for a comparable
unit in the same market area as the
housing project for which the loan was
prepaid; exceeds
``(ii) the lesser of
``(I) the amount of rent paid by
the tenant for the dwelling unit
occupied by the tenant at the time of
the prepayment referred to in paragraph
(1), or
`` (II) the amount equal to 30
percent of the tenant's adjusted income
(as such term is defined in section
3(b) of the United States Housing Act
of 1937 (42 U.S.C. 1437a(b)).
``(F) Rural affordable voucher.--For communities
with insufficient affordable housing alternatives, and
in the case of any elderly or disabled tenant who is
eligible for a voucher under this paragraph and has a
need to move to another community to be near immediate
family or necessary medical services, as determined by
the Secretary, voucher assistance under this paragraph
may be provided in accordance with section 8(t)(1) of
the United States Housing Act of 1937 (42 U.S.C.
1437f(t)(1)).
``(G) Administration.--To the maximum extent
practicable, the Secretary shall administer voucher
assistance under this paragraph in accordance with, but
not subject to, regulations and administrative guidance
for housing vouchers administered by the Secretary of
Housing and Urban Development under section 8 of such
Act.
``(H) Homeownership opportunities.--A voucher under
this paragraph may be used by a tenant to make payments
towards the purchase of a single-family home anywhere
in the United States, subject to subsidy limits for
vouchers under this title and the same limitations
applicable under section 8(y) of the United States
Housing Act of 1937 (42 U.S.C. 1437f(y)) to the use of
tenant-based assistance under such section 8 for
homeownership.
``(I) Authorization of appropriations.--There is
authorized to be appropriated for tenant protection
vouchers under this paragraph--
``(i) for fiscal year 2007, $74,000,000;
and
``(ii) for each of fiscal years 2008
through 2011, the amount necessary to provide
vouchers in each such fiscal year for all of
the families identified in subparagraph (A).
``(4) Prepayment standards for pre-1989 loans.--In the case
of a loan made or insured under section 515 pursuant to a
contract entered into before December 15, 1989:
``(A) In general.--Subject to subparagraph (B), the
Secretary shall approve any offer to prepay such a loan
that meets the following requirements:
``(i) The borrower under the loan has not
been provided any assistance to extend low-
income use pursuant to section 502(c)(4) of
this Act, as such section was in effect before
the date of the enactment of the Saving
America's Rural Housing Act of 2006.
``(ii) The loan was not at any time
restricted by servicing actions, including
transfers.
``(iii) The 20-year period during which the
project is subject to use restrictions under
the loan has concluded.
``(B) Prohibition.--The Secretary may not approve
any offer to prepay such a loan during the 20-year
period during which the project is subject to use
restrictions under the loan.
``(5) Sale restrictions and marketing assistance.--
``(A) Sale restrictions.--During the period that
begins upon the owner providing notice to the Secretary
under paragraph (2)(B) and having a duration of 75
days, the owner may not sell the property except to a
purchaser who enters into such binding agreements for
purchase at market rates as the Secretary considers
necessary to continue the property use restrictions
with respect to the project in accordance with this
title for a period of 20 years. This paragraph may not
be construed to prohibit an owner, during such period,
from soliciting or receiving any offers of sale or
purchase.
``(B) Marketing assistance.--
``(i) Database of potential buyers.--The
Secretary shall establish and maintain a
database of potential buyers of projects with
loans made under section 515. Such database
shall include only persons who have expressed
an interest to the Secretary in purchasing such
projects at fair market value and maintaining
the projects for use as affordable housing.
``(ii) Public notification of prepayment.--
Upon notification to the Secretary under
paragraph (2)(B) regarding prepayment of a loan
for a project, the Secretary shall make
publicly available, on the appropriate World
Wide Web site of the Department or by other
appropriate electronic method, including
individual notification, a notice containing
information sufficient, in the determination of
the Secretary, to notify persons with an
interest in purchasing the project of the
prepayment.''.
SEC. 4. CONFORMING AMENDMENTS TO TITLE V OF THE HOUSING ACT OF 1949.
Title V of the Housing Act of 1949 is amended--
(1) in section 502(b)(2) (42 U.S.C. 1472(b)(2))--
(A) by striking ``or 515''; and
(B) by inserting before the semicolon at the end
the following: ``and any prepayment of a loan made or
insured under section 515 shall be subject to the
provisions of subsection (i)''; and
(2) in section 537(b)(1) (42 U.S.C. 1490p-1(b)(1)), by
inserting before the semicolon the following: ``and to
administer the revitalization program under section 544''.
SEC. 5. EFFECTIVE DATE.
This Act and the amendments made by this Act shall take effect on
October 10, 2007.
Union Calendar No. 348
109th CONGRESS
2d Session
H. R. 5039
[Report No. 109-604]
_______________________________________________________________________
A BILL
To establish a program to revitalize rural multifamily housing assisted
under the Housing Act of 1949.
_______________________________________________________________________
July 27, 2006
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed