Mr. Chairman and Members of the Subcommittee. Thank you for this invitation to testify today on the important issue of preserving the existing privately-owned affordable housing stock currently supported with public funds under a variety of federal housing insurance, subsidy and assistance programs.
The National Housing Law Project is a charitable nonprofit organization providing legal and technical support for housing advocates, tenant leaders and public officials nationwide on the housing issues confronting Americans with incomes at or near the poverty level. Our support role has included legal research, advice and co-counsel regarding litigation matters, legislative and administrative advocacy with Congress and state and local governments, publication of our Housing Law Bulletin and housing law manuals, and training and technical assistance. The views presented here reflect the work of the Project over more than 30 years since its creation in 1968. Working with local housing advocates, dealing with the day to day problems and opportunities presented by implementation of federal housing laws and programs, has developed the views we express today.
This privately owned, federally supported affordable housing stock totals more than 1.5 million units in more than 10,000 properties located throughout the urban, suburban and rural areas of our nation, providing affordable housing to more than 3 million seniors, people with disabilities and families with low and very-low incomes. These units, regulated by HUD and the USDA's Rural Housing Services under a variety of mortgage loan and rental assistance programs, represent more than one-third of our country's deeply subsidized affordable housing inventory intended to meet the critical and growing needs of lower-income Americans for decent affordable housing. The vast majority of residents who call these units home have very low annual incomes, many below $10,000.
One of the major design weaknesses of these programs is that the affordability restrictions accompanying the federal financing or the subsidy itself are time-limited and expire at some point. Without further federal budget authority and a commitment or requirement that the owner continue to provide affordable housing, the stock faces a risk of conversion to market-rate use.
Our statement first focuses on the recent legal and policy background of the preservation issue, before moving to several specific areas of concern that require Congressional oversight or legislation.
Over the last decade, federal budget priorities have driven substantial changes in federal preservation policy. Prior to 1994, virtually all units were protected through a variety of federally funded statutory policies and programs, such as the preservation program for units facing prepayment risks and the property disposition program for troubled developments. In 1994, Congress relaxed the preservation requirements governing HUD's multifamily foreclosure and disposition practices. "Multifamily Housing Property Disposition Reform Act of 1994," Pub. L. No. 103-233, 108 Stat. 342 (1994), primarily codified at 12 U.S.C.A. § 1701z-11 (West 2001). In 1995, a new Congress went even further in an emergency supplemental appropriations law, arguably granting HUD broad and standardless discretion over these issues. Pub. L. No. 104-19, 109 Stat. 194, 233 (1995). Simultaneously, HUD promoted its "Reinvention Blueprint," a radical proposal to substitute vouchers for all project-based assistance, including public housing. While not endorsing HUD's proposal, in 1996, Congress reduced funding for the Title VI preservation program for properties with HUD-subsidized mortgages, permitting owners to prepay their mortgages and terminate prior federal affordability and occupancy restrictions. Congress continued to reduce funding further, while not repealing the program, finally starving the preservation program of any federal funding in FY 1998. In 1996, Congress also re-enacted through the appropriations process the so-called "flexible authority"governing HUD's administration of troubled properties, making it permanent until changed. Pub. L. No. 104-204, § 204, 110 Stat. 2873, 2894 (Sept. 26, 1996) (for FY 1997 and thereafter), codified at 12 U.S.C.A. 1715z-11a(a) (West 2001).
About the same time, Congress faced the question of how to address the problem of expiring Section 8 contracts, some of which were requiring large "above-market" federal subsidies to support them. Rejecting HUD's voucher plan, in late 1997 Congress passed the "Multifamily Affordable Housing Reform and Affordability Act" ("MAHRAA"), which provided owners of such properties with the choice to terminate their participation by "opting out," or to remain in the Section 8 program, generally with new rent levels set at "market" rates. Pub. L. No. 105-65, Title V, 111 Stat. 1343, 1384 (Oct. 27, 1997), codified at 42 U.S.C.A. § 1437f (Historical and Statutory Notes, "Multifamily Housing Assistance"). Owners for whom new lower "market rents" would be too low to support debt service and operating expenses could pursue a restructuring plan to reduce their debt service obligations, while usually maintaining their project-based Section 8 contracts, addressing the property's rehabilitation needs, and committing to a long-term use agreement. HUD and other program administrators were also provided with authority to disqualify certain owners from further participation, due to serious prior program violations.
Until mid-1999, HUD did nothing to implement its authority to provide higher Section 8 rent levels at contract expiration to those owners of properties with "below-market" rents. Many owners left the program during this period. In 1999, HUD finally adopted an "emergency initiative" (HUD Notice H 99-15, June 1999) to offer such basic incentives to owners to preserve affordable housing. Recognizing the importance of expanding preservation initiatives, Congress soon after enacted similar "Mark Up to Market" policies into law later that year. Pub. L. No. 106-74, §531, 113 Stat. 1110 (1999) (extensively revising Section 524 of MAHRAA concerning rent levels HUD can and must offer to various types of properties with expiring Section 8 contracts). While many owners have apparently pursued the "mark up" option, still many others have opted out of the program.
To its credit, HUD made certain adjustments to the Mark to Market restructuring program to provide improved financial incentives for participating owners and purchasers in September of 2000.
However, as part of MAHRAA, Congress also established specific authority for interest reduction payments on Section 236 properties with IRP contracts terminated through prepayment or foreclosure be recaptured and used for rehabilitation for other eligible HUD multifamily projects. Pub. L. No. 105-65, §531, 111 Stat. 1409 (1997). Despite its inclusion in the Administration's FY ‘01 and ‘02 budgets, HUD has never implemented this grant/loan program, while the available fund grew to $300 million. In July of 2002, Congress rescinded these funds in the Supplemental Appropriation to pay for anti-terrorism activities. Pub. L. No. 107-206, 116 Stat. 820, 892 (Aug. 2, 2002). Both the FY ‘03 Budget and the Senate Appropriations bill project another $100 million being made available in the coming year to preserve and improve properties still at risk of conversion to market-rate.
Congress has also recently expressed concern about the mounting losses of affordable housing, specifically concerning HUD's disposition activities. In March of 2000, Senator Bond, then Chair of the HUD-VA-IA Appropriations Subcommittee, issued a statement that was extremely critical of HUD's lax preservation efforts for its troubled projects inventory, and later spearheaded efforts to win passage of provisions explicitly requiring HUD to renew Section 8 contracts at a foreclosure or disposition sale for projects primarily occupied by the elderly and disabled, unless renewals are determined "infeasible." Pub. L. No. 106-377, § 233 (Oct. 27, 2000) (for FY ‘01); Pub. L. No. 107-73, § 212 (Nov. 26, 2001) (for FY ‘02). Senator Bond has recently introduced a bill which would extend this requirement to all Section 8 properties. S. 2967, 107th Cong. 2d Sess., § 203.
Finally, Congress has emphasized the importance of preservation in enacting the "Mark to Market Extension Act" last January, extending authority for the restructuring program for another five years. Pub. L. No. 107-116, 115 Stat. 2220 (Jan. 10, 2002). One provision requires HUD to develop procedures to ensure that the rents being offered owners to stay in the Section 8 program are comparable to the "Enhanced Voucher" rents supported by PHAs and federal subsidies when they "opt out." §613. We have heard of no initiative by the Department to address Congress' directive.
HUD has demonstrated little capability or initiative to address preservation issues. The agency has resisted preservation strategies for decades, responding only to statutory mandates that leave it little choice. Left alone, HUD will continue to pursue practices that permit maximum conversion of units to vouchers, reducing its role to only providing annual funding, while shifting all administrative responsibilities to local PHAs.
Federal policy must change. Congress should first request HUD to provide specific information about its activities. Congress should then determine the additional policies and funding resources necessary to establish clearer duties and workable procedures for implementing preservation policies.
Broad agency discretion and occasional isolated policies or expressions of concern from Congress are an utter failure.
More funding will be needed to preserve more housing, to purchase properties and ensure their proper rehabilitation. While state and local governments have recently begun to allocate some of their own resources or other funds within their control (e.g., bond financing and tax credits) to meet preservation needs, as well as taking other preservation initiatives such as improved notices and rights of first refusal, they cannot solve this problem on their own. Congress should pursue adoption of legislation (e.g., H.R. 425, S. 1365) to provide "matching grants" to state and local governments that make preservation investments.
Reevaluating the principle of owner choice underlying the current prepayment and opt-out policies should also be reconsidered. Some restrictions that express conscious public policies about which properties should be preserved through additional financial incentives or transfers to tenant-endorsed preservation purchasers will be essential.
The central irony of current federal preservation policy is that, without preserving housing, the federal government is still paying the cost of preserving much of the housing by supporting new "market rents" through the Enhanced Voucher program This is true for both units lost through mortgage prepayment and Section 8 opt-outs, at least as long as the tenants choose to remain in place.
Congress' grant of broad discretion to HUD for handling troubled properties and mortgages has not been used creatively to preserve those properties where sufficient tenant and community support has been demonstrated.
The following review highlights several areas where Congress should exercise greater oversight of HUD's activities in light of previously expressed statutory preservation policies or expectations, and develop responsive statutory policies. These areas include:
Background. When privately-owned HUD-insured or assisted properties become severely deteriorated or financially mismanaged, HUD must take corrective action as the responsible regulatory agency, and often as the actual note-holder following default and assignment. In enacting the "Multifamily Housing Property Disposition Reform Act of 1994" (Pub. L. No. 103-233, codified at 12 U.S.C. §1701z-11), Congress granted HUD's request for greater flexibility in substantially revising HUD's statutory obligations with respect to properties being sold at foreclosure or from the agency's inventory of HUD-owned properties, reducing the agency's preservation duties but still requiring some minimum standards and procedures. Starting in 1995, in large part to save budget authority, Congress provided even greater "flexible authority" (12 U.S.C. §1715z-11a(a)) for HUD's foreclosure and disposition activities, later adding authority to HUD to provide "up-front" repair grants from the Insurance Fund to purchasers of HUD-owned properties. In 1996, HUD revised its disposition regulations (24 C.F.R. Part 290) to implement the 1994 statute. In 2000, Congress first explicitly required renewal of Section 8 contracts at a foreclosure or disposition sale for projects primarily occupied by the elderly and disabled, unless "infeasible" (Pub. L. No. 106-377, § 233 (Oct. 27, 2000)), and renewed that mandate for FY ‘02. Pub. L. No. 107-73, § 212 (Nov. 26, 2001). Also in 2000, Congress extended indefinitely HUD's authority to make up-front grants for rehabilitation (Pub. L. No. 106-377, § 204), and later amended the "flexible authority" statute to require transfer of HUD-owned properties to state or local government where the project is unoccupied or there are more than 25% severely defective units. Pub. L. No. 106-554, App. G, §141, 114 Stat. 2763, 2763A–614-617 (Dec. 21, 2000).
Issues Raised By HUD's Policy and Practices. HUD has essentially pursued policies of dumping troubled properties on the private market, much as was done in the 1970s. Since 1995, HUD's customary approach has been to dispose of as many properties as possible and cease any federal responsibility after the point of foreclosure:
HUD has never published any rules describing how it proposes to use its "flexible authority" to override its responsibilities under the 1994 statute and 1996 regulations. Similarly, we have seen no published guidelines to implement the 2000-2001 requirement to preserve project-based Section 8 contracts at elderly and disabled properties.
Since 1995, HUD apparently has not produced any comprehensive data or reports for the properties are disqualified from the program, or sold through foreclosure or property disposition. Such annual reports on June 1 of each year detailing many related issues are required by the 1994 Act, 12 U.S.C. §1701z-11(l). Yet no one knows how HUD has exercised its existing authority to preserve properties, or the results of its decisions for affected properties, for surrounding communities and for the residents.
Examples. Even in instances where tenant or community organizations or public agencies have demonstrated substantial support for preserving and improving these properties, HUD has refused to explore alternatives that would preserve and improve viable properties as housing affordable for the extremely low-income families served by Section 8. The following are specific cases that have come to our attention, but more detailed oversight would likely produce additional information.
Rotella Park Manor (Thornton, CO). This 100% Section 8 property in substandard condition was scheduled for foreclosure sale. The Colorado Housing Finance Authority sought to acquire the property and preserve the project-based Section 8 contract while financing the purchase and rehabilitation, either as lender or as purchaser. Despite this request, backed by significant technical information and community support, and despite its "flexible authority," HUD refused to permit the transfer of the Section 8 contract. The state agency purchased property, but the subsidy has been converted to vouchers, jeopardizing the viability of a substantial state investment if the market softens, and removing the property from guaranteed use for very-low income families. Most units will not pass the necessary housing quality inspection until completion of rehabilitation.
Brick Towers (Newark, NJ). Tenants have been fighting to save this 324-unit property for years. The residents have established a non-profit corporation and entered into a joint venture with a reputable developer who has lined up private financing for a $10 million rehabilitation, using Tax Credits and perhaps preserving the Section 8 contract, which has not yet been terminated (as of early September). Despite solid community support for preserving the property (City Council has passed resolutions and in June 2002 enacted an 18-month moratorium on demolition; federal legislators and local public officials have written in support), HUD plans to give the buildings and $12 million to the Newark Housing Authority, which plans to demolish them, and redevelop a lesser number of units on the site for mixed-income use. The residents' plan would preserve 324 affordable units, avoid the involuntary displacement of hundreds of African-American families and save taxpayers $12 million. HUD gave the NHA repeated extensions to close the transfer (scheduled for around September 13), while refusing to discuss the merits of the residents' proposal.
East Liberty Properties (Pittsburgh, PA). In Pittsburgh, a community effort to redevelop three troubled projects (the former "Federal American" properties in East Liberty) proposes to demolish the existing buildings (three high rises and adjacent low-rises, all of which are obsolete and physically deteriorated), and construct a number of less dense, mixed-income residential developments, on the existing sites and on other nearby sites. Two of these properties were recently processed through the "Mark to Market" program, while another remains in default on its first mortgage, and awaits foreclosure and disposition. This effort enjoys broad support among the local community, city officials, and a coalition of resident organizations in the properties. However, that support - and to some extent the viability of the development plan itself - is threatened by HUD's refusal to allow a transfer of the existing project-based Section 8 contracts to newly developed replacement housing, even where that housing is constructed prior to the demolition of the existing structures.
Satsuma Gardens (Pasadena, TX). HUD sold this 232-unit property at foreclosure on August 28 to a for-profit developer on the courthouse steps with virtually meaningless affordability restrictions on only 79 units. Tenants were entitled to 60 or more days notice. No one knew about it because HUD had provided a notice dated June 27, 2000, stating that HUD intends to foreclose "within the next few months," but then delayed the sale for more than two years. The notice failed to comply with HUD's own regulations, by not indicating the deadlines for offers or any comments, and failed to state that the full disposition recommendation and analysis and other supporting information would be available for inspection and copying at the HUD field office (per 24 C.F.R. §290.11(d)). The notice also stated that the complex (not just 79 units) must be maintained as affordable housing for low-income persons for 20 years, while the actual 2002 sale imposed no restrictions on the remaining 153 units. At least three nonprofits were interested in possible acquisition.
Village of Eastgate (Garland, TX). This 878-unit property is 98% occupied and in good shape. HUD sold the property to the City of Garland for $1 in 1996, requiring that it be kept as affordable housing for only 7 years. The City plans to demolish it with the hope of major hotel development.
Ellison Apartments (Red Bluff, CA) - For many years, by its blatant failure to exercise oversight, HUD contributed to this property's troubled status (default on mortgage, serious and pervasive HQS problems, drug activities). Rather than working with the community, HUD tried to auction it off at foreclosure without preserving affordability and ensuring needed repairs. This project represented 12% of all the affordable housing in Tehama County, one of the poorest counties in California. This project was also a critical source of housing for individuals protected by the Fair Housing Act. After months of concerted advocacy by tenant leaders, community groups, and city and federal executives and legislators, along with threatened litigation, HUD finally agreed in 2000 to bid its full debt to acquire the property at the foreclosure sale, and transfer it to the city with an up-front grant for resale to a community-based nonprofit for rehabilitation.
Prepayment of a federally subsidized mortgage terminates the regulatory agreement and the accompanying federal use restrictions on rent levels and occupancy. While many HUD-subsidized developments are eligible for unrestricted prepayment under statutes passed since 1996, many other properties cannot be prepaid without HUD approval. These include properties originally owned or still owned by nonprofits, many properties with Flexible Subsidy restrictions, and properties with Rent Supplement or Section 236 RAP contracts. HUD's approval decisions are governed by Section 250 of the National Housing Act, passed in 1983, which requires HUD to undertake a specified process and make certain findings, including that "the project is no longer meeting a need for rental housing for lower-income families." HUD has published no regulations or other administrative guidelines to implement this statute. Yet, in an unknown number of cases, HUD has approved prepayment for these properties without making the required findings. Despite the fact that Congress amended Section 250 in 1988 to remove its authority to do so, HUD has specifically allowed the availability of "other federal assistance" such as tax credits and enhanced vouchers to influence its approval decisions under Section 250. These prepayments often result in restructuring rents at affected properties at higher levels at or near market at considerable public expense. While some existing tenants may receive vouchers, many will experience significant rent increases even with the voucher. In any case, these prepayments remove units from availability to very low-income families in need of affordable housing that cannot afford the higher rents.
Examples. At least three such prepayments under Section 250 have occurred in the past few years (two in Texas and one in California). HUD has never published or otherwise explained its policy and how it complies with Section 250, nor accounted for its specific approval decisions.
Bryte Gardens (West Sacramento, CA). HUD approved a prepayment and transfer plan for this Section 236 property that was originally owned by a nonprofit and sold to a for-profit owner in 1982. Using tax credits and bond financing, a new purchaser obtained HUD approval for a new rent structure based on the tax credits, which approximate market rent levels in the area, memoralized in a HUD "Use Agreement." HUD made no findings required by Section 250 regarding the current and future need for the property under its current Section 236 subsidized status, instead creating its own illegal standard of accepting a use agreement. Nor did HUD make any effort to ensure that the owner had complied with applicable state law concerning prepayments. About one-third of the tenants have experienced rent increases, some in excess of $200 monthly. A federal court's refusal to enjoin the transaction and dismissal of the case as moot is now on appeal to the Ninth Circuit.
Many HUD-subsidized properties (reportedly more than 60,000 units) received assistance under the Flexible Subsidy program in the late 1970s and 1980s to address physical needs or other financial difficulties. In exchange for this assistance, many owners signed form Flexible Subsidy Assistance Contracts that prohibit prepayment of the insured or subsidized first mortgage note without HUD approval, and require the owner to execute an amendment to the note. Presumably, such prepayments should be governed by the standards and procedures of Section 250, supra. The Assistance Contract also required the owner to maintain the low and moderate-income character of the project for the full remaining mortgage term, including compliance with all of the provisions of the applicable program (usually Section 236 or Section 221(d)(3) BMIR) and the regulations, the heart of which was budget-based HUD-regulated rents. Usually, HUD also required owners to execute a Flexible Subsidy Use Agreement imposing identical or similar obligations.
Over the past few tears, HUD has renegotiated Use Agreements on some of these properties, sometimes involving prepayment of the mortgage, again with no published standards and apparently little public scrutiny. The agency's compliance with Section 250 for any related prepayments remains unclear. An appropriate policy might allow HUD to approve prepayments and renegotiation of the Use Agreements in exceptional circumstances for clearly defined preservation transactions where trade-offs are justified due to increased affordability terms (including restricted tenant-endorsed nonprofit ownership), no harm to current and future tenants, and full utilization of and duty to accept project-based Section 8, etc. Because no policy has been published as a rule, Congress should request HUD to explain its policy and its specific decisions, and why the policy has not been published. In addition, Congress should investigate whether HUD has approved any new rent restrictions on properties formerly restricted by budget-based rents, other than those specifically contemplated under the Section 8 "Mark Up to Market" program, as well as the agency's asserted authority and reasons for doing so.
About five years ago, in Section 531 of MAHRAA (Pub.L. 105-65), Congress directed that authority for interest reduction payments on Section 236 properties with IRP contracts terminated through prepayment or foreclosure be recaptured and used for rehabilitation for eligible multifamily projects. In late 1999, HUD had developed a draft Notice to make this IRP Pool fund available, but it was never issued. Despite its inclusion in the FY ‘01 and ‘02 budgets, HUD never implemented this grant/loan program, and Congress recently rescinded $300 million for anti-terrorism activities. Both the FY ‘03 Budget and the Senate Appropriations bill project another $100 million being made available in the coming year. Congress should require that HUD take the necessary steps to immediately make these funds available, to provide important new incentives, coupled with new use restrictions, to preserve and improve properties still at risk of conversion to market-rate.
Background. Federal law (42 U.S.C. §1437f(c)(8)) requires a one-year written notice with specific content prior to contract expiration or termination. In the Section 8 Renewal Policy Guide (Jan. 2001), following a 1999 federal court decision, HUD clarified that owners seeking to opt-out must clearly state that intention. The statute also specifies that the owner must not evict the tenants and cannot increase tenant rents until one year after proper notice is provided, and authorizes HUD to offer noncomplying owners a renewal contract on HUD-set terms and conditions until proper notice is served and the applicable period has run. However, HUD has often provided enhanced vouchers at scheduled contract expiration to properties where owners have not provided legal termination notices, effectively providing financial rewards to owners for violating the law, while permitting simultaneous compliance with the statutory rent limits. Where valid notice has not been provided, the contract expiration date has passed and the owner has not executed a renewal contract, HUD has declined to provide renewal contracts to the current owner or to a preservation purchaser.
Last fall, the Chairman and several other Senators wrote to Secretary Martinez requesting that HUD provide enhanced vouchers only where the contract has been validly terminated with proper notice, but received no definitive written commitment to cease this practice.
Congress Should Require HUD to Pursue An Overall Policy Favoring Preservation and Create an Office of Preservation to Coordinate HUD Efforts
If Congress establishes or encourages HUD to more actively pursue a federal preservation policy, it should consider establishing a responsible official within HUD to coordinate the agency's efforts to ensure that the various programs and officials work toward that objective.
Since the mid-1980s, HUD has sought to raise revenue while divesting itself of oversight responsibilities by selling HUD-held multifamily mortgages to private lenders or to the project owners themselves. Because such note and mortgage sales can strip away federal regulatory protections such as rent and occupancy restrictions, courts enjoined such policies and Congress enacted statutory restrictions on such policies for subsidized properties in 1988. It is unclear whether HUD is taking the position that its recent "flexible authority" (12 U.S.C. §1715z-11a) relieves it of any obligation to comply with the 1988 statute and implementing regulations governing mortgage sales. Yet it appears that HUD is selling HUD-held mortgages on "unsubsidized" properties with no regard to the impact of such sales on the continuation of existing protections for tenants and the affordability of the housing in the regulatory agreement. Many such "unsubsidized" properties were not "deregulated" and apparently still have budget-based rent restrictions. HUD should not be selling these mortgages in a fashion that fails to protect tenants or housing affordability.
In Section 516(e) of MAHRAA, for properties disqualified from approval from a restructuring plan because of prior program violations by the owner, Congress directed HUD to "establish procedures to facilitate the voluntary sale or transfer of a property" as part of a restructuring plan, with a preference "for tenant organizations and tenant-endorsed community-based nonprofit and public agency purchasers meeting" reasonable HUD-established qualifications, thus preserving the Section 8 contract and providing for necessary rehabilitation of the property. HUD's regulations provide only that any such owner facing disqualification provide a notice to nonprofit organizations if they are intending to sell the property. Not one of HUD's other powers as insurer or holder of the mortgage or as contract administrator on the existing Section 8 contract are brought to bear upon the proposed disqualification or the owner's intent to hold the property. Congress intended that HUD do more to "facilitate" transfers of these properties than sit on the sidelines and watch owners do whatever they choose, unencumbered by other HUD leverage such as foreclosure, taking possession, pursuing other contract remedies or seeking civil money penalties.
Nonprofits seeking to purchase properties with expiring below-market Section 8 contracts at risk of conversion can often take advantage of the federal "mark up" in Section 8 contract rents as a vital preservation tool, increasing project income. However, because the federal subsidy commitment is limited to one year at a time, obtaining financing to purchase and rehabilitate the property is often extremely difficult, forcing resort to public agencies or underwriting properties at lower rent levels (e.g., tax credit rents). More grants or deferred loans from public agencies are therefore required to complete the financing package. HUD should consciously provide federal mortgage insurance for the the security that most lenders require, and allow preservation purchasers to take full advantage of the higher Section 8 subsidies to save scarce state and local resource and thus preserve more properties..
On numerous occasions, it has been reported that "market rent" levels determined by the required Rent Comparability studies for the renewal of expiring Section 8 contracts were less than those same "market rents" available under the Enhanced Voucher program to owners who opt-out. These two rent levels substantially affect an owner's decision to remain in the program or opt-out, but are determined by different agencies and personnel. Consequently, owners who can get more rent under the voucher program had no incentive to remain in the project-based program. In Section 613 of the "Mark to Market Extension Act" last January, Congress required HUD to develop procedures to ensure that the rents being offered owners to stay in the Section 8 program are comparable to the "Enhanced Voucher" rents supported by PHAs and federal subsidies when they "opt out." Congress should require HUD to report on the steps it has taken to address Congress' directive, and a timetable for completion of its policymaking process to end this inexplicable dichotomy.
In Section 514 of MAHRAA, Congress recognized that tenant participation in the renewal and restructuring process for properties with expiring contracts was an essential feature of the program, and authorized HUD to provide up to $10 million annually to support outreach and tenant participation in the future of their homes. Congress reiterated the importance of technical assistance in the Mark to Market Extension Act. For more than a year, in the wake of unfounded allegations concerning HUD's compliance with the Anti-Deficiency Act, HUD has failed to take the necessary steps to reactivate two important components of the program: the VISTA program providing outreach and support to tenants in eligible properties, and the Intermediary Technical Assistance Grant program, providing primarily grants for predevelopment and resident capacity building. HUD has also unnecessarily expended almost all of the FY ‘02 technical assistance program funding to re-record prior commitments to address what the HUD Inspector General found were non-existent ADA violations.
Congress should ensure that HUD takes immediate steps to restart these important program components, and develops a workable plan to commit FY ‘03 appropriations as soon as they are available for all program components, including Outreach and Technical Assistance Grantees who contracts expire toward the end of 2003.
Thank you, Mr. Chairman and Members of the Subcommittee, for requesting our views on the preservation issue.
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