On behalf of the National Alliance of HUD Tenants (NAHT), we are pleased to submit these comments regarding preservation of the nation's privately-owned, subsidized housing stock. As you know, NAHT has sought such a hearing for several months, as reports emerged of the alarming erosion of the nation's affordable housing due to unregulated owner decisions to opt out of federal subsidy programs. We want to thank you, Senator Reed, for your leadership in calling this hearing, and appreciate the opportunity to testify today.
Founded in 1991, the National Alliance of HUD Tenants (NAHT) is the nation's only membership organization representing the 2.1 million families who live in privately-owned, HUD-assisted housing. Our membership today includes voting member tenant groups and 45 area wide tenant coalitions or organizing projects in 30 states and the District of Columbia. We are governed by an all-tenant board of Directors elected by member organizations from all ten of HUD's administrative regions at our annual June Conference. I have served as NAHT Board President for the past year, and have been a NAHT Board member since 1997. I also serve as the Co-Chair of the Mitchell-Lama Residents Coalition, which represents over 101,000 families in Mitchell-Lama subsidized developments in New York State. I am also President of the Michelangelo Tenants Association, a 440 unit HUD-subsidized Mitchell-Lama development where I live in the Bronx.
As the first national tenant union in the US, NAHT has joined the International Union of Tenants (IUT), which named October 7 as International Tenant Day to coincide with World Habitat Day declared by the United Nations, in which the IUT has consultative NGO status. We appreciate that the timing of today's hearing has helped to honor the growing movement to meet the world's housing needs.
The Nation Is Losing Affordable Housing at an Alarming Rate
This past weekend, NAHT affiliates in several cities released a new Report documenting the dramatic loss of affordable housing in America since 1996, when the US pledged to do more, not less, to meet the nation's housing needs at the UN Habitat II Conference in Istanbul. Instead, our Report shows that the United States has lost more than 250,000 units of affordable housing since 1996, following Congress' restoration of owner's ability to "prepay" (i.e., pay off after 20 years) their 40 year HUD-subsidized mortgages and raise rents to high market levels. Of this amount, a total of 199,764 units of privately-owned HUD-subsidized housing was lost to owner decisions to prepay or to "opt out" of expiring project-based Section 8 contracts as of August, 2001. The remaining units lost consist of the net loss of Public Housing through HOPE VI demolitions. We are submitting a copy of this Report with my testimony today, which includes data on prepayments and opt outs by state.
NAHT was the only national organization to speak out against repeal of the regulatory structure of the Title VI Preservation Program in 1996, which provided additional HUD subsidies to owners in exchange for guaranteed repairs, permanent affordability, and the promotion of transfers to nonprofit and tenant ownership. We warned of dire consequences for the nation's affordable housing stock if this regulatory program were repealed. Unfortunately, the data show that these predictions have come true.
Mark Up to Market Has Not Been Enough
When press reports of tenant displacement spurred Congress and HUD to act in 1999 to stem the losses, many observers thought that the problem was "solved" through adoption of the Mark Up to Market program, whereby HUD offers generous increases in Section 8 subsidies to owners who voluntarily agree to maintain affordability for five to twenty years. In our Report, we compare the number of units lost through prepayment and opt out in the two and a half year period from 1996 to early 1999, when Mark Up to Market was adopted, with the equivalent two and a half year period through August 2001, using data compiled by the National Housing Trust from several HUD sources.
These data show that, despite Mark Up to Market, the average annual loss of housing nationally has remained roughly the same as before its adoption--about 41,000 units continue to be lost each year. While no doubt this figure would have been even higher without Mark Up to Market, clearly we need to do more to preserve the nation's affordable housing stock.
Some States Are Particularly Hard Hit
Looking at the data for each state, it is clear that the loss of affordable housing is a truly national problem. But some areas have been particularly hard hit. By August 2001, California and Texas alone had lost 65,863 units of privately-owned affordable housing, nearly a third of the national total lost.
A number of states have actually experienced a dramatic increase in the rate of loss, despite the adoption of Mark Up to Market. Overall, 14 states, including Missouri, Indiana and South Carolina, have seen an increase in the rate of at least one category of units lost by more than 300% since early 1999. Likewise, a number of smaller and more rural states such as Iowa, Nebraska, New Hampshire, and Montana, where HUD-subsidized housing represents a relatively large portion of the state's affordable housing and often the only affordable housing available in sparsely populated areas, have experienced a rapid rise in units lost. Some other large states, such as Pennsylvania, Ohio and Georgia, have also experienced a significant increase in the rate of loss.
Housing Crisis in New York City
Most startling of all, however, is the new data we are releasing today regarding New York City, where I live. Our Report includes a chart prepared by the Mitchell-Lama Residents Coalition, which I serve as Co-Chair. The Mitchell-Lama program is a resource unique to New York, where the state developed more than 101,000 units of mixed income, affordable housing using a variety of subsidy tools, including HUD mortgage insurance and subsidies under the Section 236, RAP and Section 8 programs. As in other states, owners of Mitchell-Lama buildings are now eligible to "prepay" or "buyout" their government subsidized mortgages.
The results are shocking. We have already lost 3,151 units through prepayment, and owners of another 5,767 units in 11 developments have filed Notices of Intent to Prepay with HUD and the State. In addition, four co-ops housing 25,585 families, including the 15,378 unit Co-op City development, are planning to "privatize", prepay their mortgages, and convert to high market rates in the next year. All told, we have lost or expect to lose 34,503 units of Mitchell-Lama housing in New York City by the end of next year.
Nor are these the only affordable housing units at risk in our City. Another 4,965 units in HUD-subsidized, non-Mitchell-Lama buildings have been lost in New York City since 1996. An unknown number of these buildings remain at risk throughout the City.
In the wake of the traumas inflicted on New York City in the past year, the imminent loss of more than 40,000 affordable housing units is a crisis which we can neither bear nor ignore. The people of our city are still reeling from the after shocks of 9/11. Mitchell-Lama housing in particular is home to many of the police, firefighters and health service workers who performed heroically after the 9/11 attacks, as well as many low income and elderly people who simply have no options in the high rental market of New York City.
Homeland security begins with a home. Action by Congress is urgently needed to give us the tools to preserve these affordable units.
Congress Should Adopt a New Regulatory Program to Save At Risk Housing
STRONG>It is now clear that voluntary incentives, such as the Mark Up to Market Program, are insufficient to deter owners who choose to opt out of HUD contracts in high market areas. NAHT believes that Congress should establish a national regulatory framework to limit owners' ability to opt-out and pre-pay. For example, restoring the regulatory framework of the Title VI Preservation Program and extending its concepts to expiring Section 8 contracts would preserve more units and be cheaper in the long run than replacing lost units with new construction.
Ironically, in buildings where HUD is executing five to twenty year Mark Up to Market contracts, the cost of additional annual Section 8 Budget Authority and outlays is approaching, and possibly exceeding, the cost of the Title VI Preservation Program, but with none of the benefits Although Congress repealed Title VI due to concerns about costs, at least residents and HUD negotiated major repair programs, permanent affordability, and transfers to nonprofit purchasers in 30,000 units.
The equivalent expenditures of Mark Up to Market yield none of these offsetting benefits--in fact, short term extensions of five years leave residents and HUD at continued risk that owners will opt out down the road. As long as owners have an unrestricted choice to opt out of HUD programs, they will be able to leverage ever-increasing subsidy commitments from HUD--which residents and communities will doubtless support--since the alternative of losing affordable housing is unacceptable. The restoration of a Title VI regulatory program will in fact likely save money, since mandatory negotiations will lessen owner windfalls and ensure that Congress receives guaranteed benefits on its investment. Substituting capital grant funds for ever-increasing Section 8 contracts, in this context, will likewise achieve savings while preserving housing.
Deregulation is a strategy that has failed in the energy, telecommunications, banking, and airline industries in the US and in countries around the globe. The evidence is in--deregulation is a failure in the subsidized housing industry as well. Congress should act now to restore regulations to save our homes.
HUD Policies Have Contributed to the Loss of Housing
While Congress must provide the funds and regulatory tools to save affordable housing, HUD needs to do more to preserve at-risk buildings. In fact, the record shows that in a number of ways, HUD policies have added to the loss of housing, rather than its preservation.
Nowhere has HUD's failure been more dramatic than in the agency's policies on Property Disposition and Foreclosure for "troubled" HUD housing. In March 2000, the Senate VA/HUD Appropriations Subcommittee held hearings on the loss of affordable housing stock through HUD's policy of dumping properties it owns or controls for sale on the open market, with only Section 8 vouchers for tenants, no screening of new owners and toothless use restrictions. According to the Subcommittee, more than 26,000 units of formerly project-based Section 8 affordable housing had been sold off in this fashion--a significant portion of the 86,402 project-based Section 8 "opt out" units listed in our report as lost between 1996 and August, 2001.
To this day, HUD has not collected any data on what happened to the former occupants, or to check on building conditions, rents and incomes of current occupants, or the effectiveness of HUD's use restrictions. In the absence of any attempt by HUD to monitor or enforce these use restrictions or any data to the contrary, it is reasonable to assume that many of these units no longer serve as housing for the poor, especially in higher market areas. The Subcommittee should require HUD to investigate and report annually on these questions, as Congress required in its 1994 Property Disposition amendments, but HUD has never done.
NAHT member organizations and affiliates in Texas, New Jersey, California, Pennsylvania and Colorado have challenged HUD's "dumping" policies in a number of Property Disposition cases. In addition, NAHT has challenged other HUD policies which have added to the needless loss of housing, such as the rubber-stamping of mortgage prepayments where HUD approval is required, and HUD's failure to enforce its own rules where owners violate federal or state laws regarding Notices to Opt Out or Prepay to tenants or local governments. Since 1997, NAHT has also recommended to HUD that it adopt policies explicitly maximizing the preservation of affordable housing where HUD has discretion to do so. There has been little response by HUD to date.
The testimony submitted today by the National Housing Law Project details several of these policies, and the campaigns waged by NAHT member organizations to save affordable housing in these cases. In the interests of time, we will highlight today a few cases where immediate intervention by the Subcommittee may yet save at-risk buildings affected by these HUD policies of neglect:
Brick Towers (Newark, New Jersey). Last week, HUD reportedly "closed" on a sale to the Newark Housing Authority of this 324 unit high-rise building, where residents have been fighting for years to save their homes. In this case, HUD failed to exercise its discretion to negotiate with a nonprofit Joint Venture formed by residents with a reputable developer to save the building with local subsidies, at no cost to HUD. Instead, HUD is providing a $12 million grant to the Housing Authority to demolish the building, with no guarantee of replacement housing. So HUD is spending $12 million to destroy housing which it could save it for nothing. HUD should use its remaining leverage with the Housing Authority to arrange three-way negotiations with the tenant-endorsed Joint Venture to keep the developer's resources and HUD's grant in the City, while saving Brick Towers as part of the deal
RAP UP II-B (Boston, Massachusetts). In this 51 unit building in Boston, HUD is poised to sign off on a mortgage prepayment by a defunct "nonprofit" whose Board President/ property manager was caught "equity skimming" by HUD's Inspector General in 1996, and who is selling the building to new owners who plan to keep him on as manager and convert the buildings to condominiums when HUD's Section 8 contracts expire in two years. HUD's Enforcement Center is prepared to look the other way as long as the $110,000 stolen from the property is paid back out of sales proceeds. Instead, HUD could use its discretion under Section 250 to reject the mortgage prepayment (HUD has no documents establishing that there is a 20 year prepayment option), not approve transfer of the Section 8 contract, and not accept payment for or sign-off on audit findings unless the owner sells to a legitimate nonprofit organization pledged to preserve affordable housing and bar former equity-skimmers from management of HUD's Section 8 contracts. If the owner fails to comply, HUD should exercise its foreclosure option to preserve affordable housing.
East Liberty Properties (Pittsburgh, Pennsylvania). A broadly supported nonprofit purchase and redevelopment plan for three troubled housing developments is threatened by HUD's refusal to allow the transfer of existing project-based Section 8 contracts to newly developed replacement housing, even though HUD clearly has authority to do so. HUD should approve this request forthwith.
Los Angeles Section 8 opt-outs. Several owners in Los Angeles have recently attempted to opt out of expiring Section 8 contracts in violation of state law in California, which requires a two-year Notice before they can do so. The Los Angeles HUD Office has refused to apply HUD's own Section 8 Policy Guide, which stipulates that HUD staff will certify compliance with state and local laws before signing off on opt outs or prepayments. The City of Los Angeles has intervened, and tenants are now winning Section 8 contract extensions in court, with no help from HUD. HUD could still help by requiring owners in the city to restart the Notice process to comply with state law, as required by HUD's Guide.
Hedco Properties (Rhode Island). These consist of three properties totaling approximately 200 units where, as in California, HUD ignored a state law requiring two year Notice before prepayment can occur. Tenants sued in state court, which upheld the state law and blocked prepayment. However, last week tenants learned that HUD had sold the HUD-held mortgages on August 28, 2002, to a bank in Plano, Texas, as part of an auction of an unknown number of HUD-held mortgages nationally. HUD's attorneys are now arguing that the mortgage sale has nullified the Regulatory Agreements on these properties, so that the owners are now free to prepay, thus mooting the state court decision. Although details are scarce, including the legal rationale for HUD's position, this is a HUD policy with potentially far-reaching impact on the nation's housing stock. We urge the Subcommittee to explore this issue with HUD, determine the extent of the damage, and correct it if possible.
HUD Appears Unwilling to Enforce the Law
As the Los Angeles and Rhode Island examples illustrate, the problem goes beyond HUD's unwillingness to use its discretion to preserve housing; HUD appears unwilling to enforce or uphold the law, or to use its enforcement powers to penalize owners who violate its regulations.
Perhaps the clearest example of this is HUD's position on enforcing the "Right to Remain" language adopted by Congress in the Enhanced Voucher program two years ago. Where owners opt out or prepay, Congress has adopted language saying that tenants "may elect to remain" in their units with Enhanced Vouchers, which guarantee owners the full market rent for their unit, implying that owners have a duty to accept the vouchers. HUD's Section 8 Policy Guide, published in January 2001, clearly states that owners have the Duty to Accept these vouchers as long as tenants wish to remain, and Congress votes the money each year. However, the Guide actually states that HUD will not enforce this requirement if owners violate it, forcing tenants to find local legal counsel to enforce the law.
As a result, tenants in several states, aided by NAHT affiliates and legal aid programs in Minnesota, California, Missouri, Philadelphia, and New York, have had to file or threaten to file suit to enforce this statute. Although so far all tenants have prevailed in all these cases, the spectacle of the federal government refusing to enforce the law, and leaving it up to poor people to do so, does not engender confidence in HUD.
NAHT has also presented numerous other cases to HUD where owners have failed to follow federal or state law Notice requirements, to provide Enhanced Vouchers, or to enforce Right to Organize regulations, with spotty results. These examples are too numerous to describe here, although we would be happy to document these for the Subcommittee if you wish. The problem is deeply institutionalized at HUD, ranging from inadequate and/or poorly trained staff at the field office level, to hostility from HUD's Office of General Counsel on some issues, to a lack of protocols for assessing civil monetary penalties where owners violate the law. NAHT has submitted detailed recommendations to HUD on revisions to Handbook 4350.3, the Occupancy Handbook for Multifamily Housing, to beef up HUD enforcement on these matters. We would appreciate the Subcommittee's help in securing these changes, and shoring up HUD's willingness and capacity to enforce the law.
HUD's New Leadership Appears Unable to Provide Resources for Tenant Involvement
Since tenants founded NAHT in 1991, we have sought to establish a partnership with HUD, whereby tenants--the people with the strongest stake in the successful operation of HUD housing--serve as the unpaid, volunteer "Eyes and Ears" of HUD in overseeing owners and managers of our buildings. Over the years, we have built up a complex institutional relationship with HUD, including on-going relationships with HUD field offices in some 30 states through NAHT's local affiliates; periodic "Eyes and Ears" meetings at the HUD regional level, between tenants in the region and local and Headquarters HUD staff; plenary meetings during NAHT's Annual Conferences in Washington, D.C., with HUD's top leadership; and quarterly meetings with key Headquarters staff and the elected NAHT Board.
Key to this relationship, and the ability of tenants at the local building level to participate meaningfully with HUD, has been HUD's provision of resources to enable tenants to organize and articulate their concerns. In MAHRAA, Congress supported this vision by encouraging tenant participation in decisions affecting their homes, and the provision of "up to $10 million" annually through Section 514 to promote tenant and community participation in Section 8 programs.
Since the advent of the new Administration, however, this vision of cooperation has been turned into a nightmare of bungling and broken promises. Administration "froze" all funding to all Section 514 grantees, including the Corporation for National and Community Service and recipients of Outreach and Training Grants (OTAGs) and Intermediary Technical Assistance Grants (ITAGs), because of bureaucratic bungling by HUD. Only when Congressional hearings secured a commitment from the Secretary did the Department resume processing invoices to small nonprofits--several months after funds had been frozen. HUD delays, unnecessarily intrusive audits, and constantly changing financial requirements have meant that OTAG agencies which received new contracts in January 2001 have been able to able to receive reimbursements for program outlays for only 10 of the 22 months since these grants commenced--forcing chronic program layoffs and closures. In effect, small nonprofit agencies who applied for OTAG funds to help tenants have been punished by the new Administration's incompetence and neglect.
To make matters worse, it now appears that several 2001 OTAG grantees will be punished by HUD's IG for not providing HUD with cost allocation plans and timesheet forms which HUD never asked for, had no procedure for accepting, and provided absolutely no training on, despite NAHT's repeated requests for training and offers to help, starting in March 2001.
Last March, the Secretary promised two Congressional Committees that action would be taken to restart the ITAG and VISTA Volunteer program in multifamily housing, and to designate the Acting Deputy Assistant Secretary for Multifamily Housing, Fred Tombar, to operate the programs. To date, HUD has failed to deliver on these promises.
For example, to date the ITAG mini-grant remains closed. No applications have been approved or accepted for future grants since October, 2001. The contracts for the administering agencies have not been extended. This failure effectively shuts down resources to nonprofit groups seeking to acquire at-risk buildings, and deprives tenant groups and small nonprofits with resources they need to assist tenants in their communities. The Office of Multifamily Housing has been given neither the authority, staff resources, funding or program control over Section 514, which remains shut down and unstaffed in the Commissioner's office.
National HUD Multifamily VISTA Project Remains Stalled
Most devastating to tenants has been HUD's continued failure to restart the national VISTA Volunteer project in HUD housing. Funded by a HUD Interagency Agreement with the Corporation for National and Community Service (CNCS), this highly successful project has served as a leading model and prototype for President Bush's call for national service. Since 1995, the project has helped to empower tens of thousands of residents in HUD multifamily housing to participate in saving and improving their homes. The project funded an average of 50 VISTA Volunteers assigned through State VISTA Offices to locally-based nonprofit agencies in 25 states. About 40% of the VISTA Volunteers have been themselves HUD tenants, who bring new knowledge and leadership skills to their communities at the end of their year of service. The program cost HUD very little money (an average of $750,000 annually for 50 VISTAs and support) and leveraged an equal amount of resources from CNCS. CNCS Chief Executive Officer, Les Lenkowski, has pledged his support for a three-year extension of the program.
Despite this record, the project has been frozen since November 2001, when HUD failed to honor its contract with CNCS. The effect on tenants across the nation has been absolutely devastating. Since HUD never processed the balance of $600,000 owed to CNCS under a $3 million contract signed in 1998, CNCS had to absorb some $133,000 in VISTA Volunteer payroll costs from other sources to prevent a catastrophic Christmas time layoff of Volunteers. As a result, CNCS was forced to "freeze" the program, with VISTAs in the field unable to renew and agencies unable to hire new recruits. Today, only six VISTAs remain, and their terms will end next month.
In March, Secretary Martinez and Commissioner Weicher reported to Congress that the VISTA project would be restarted immediately, and that the $600,000 owed to CNCS by HUD was being processed. This turned out not to be true. HUD now says that the "old" Agreement cannot be extended. But there should be no barrier for HUD to execute a new Interagency Agreement at $1.4 million per year with CNCS to restart the project; in fact, it can be restarted for as little as $700,000. This can be done either from remaining Section 514 funds from FY02, or the new $10 million which will be available for Section 514 from FY 03, pursuant to Congressional authorization in the Mark to Market Extender bill passed last fall.
It is hard to understand why a simple Interagency Agreement with another federal agency, for a successful program costing HUD very little money, has proven so difficult for the Commissioner's office to process. We request the Subcommittee's assistance in securing an immediate jumpstart to this project, on an urgent basis, while there is still time to recruit VISTA Volunteers this fall.
Top Officials Refuse to Communicate with NAHT
Much of HUD's embarrassment in the on-going Section 514 fiasco could have been avoided had the new leadership team communicated with NAHT. For example, in the one meeting which the NAHT Board has had with the new Secretary and Commissioner Weicher, in October 2001, we tried to explain that there was unlikely to have been any ADA violation at OMHAR or at HUD. Our views were rejected, as were repeated attempts to communicate subsequent to this meeting. Even when the IG report exonerated OMHAR, our extensive knowledge of these programs--which could have saved HUD much embarassment and grief--has neither been sought out nor heard by anyone in a position to make decisions at HUD.
In fact, both the Secretary's and the Commissioner's office has refused to answer literally hundreds of phone calls, emails, and formal written letters signed by NAHT and its associated membership on this, or any other, issue since October of last year (save for a brief meeting with Commissioner Weicher last December arranged by another organization.) While NAHT enjoys regular access to and a good relationship with HUD career employees such as Acting DAS Fred Tombar and his staff and has opened a new dialogue with the Director of OMHAR, Hank Williams, it is clear that a number of policy issues are made at a higher level in the Department. Besides the Section 514 issues, these include the full range of issues discussed today which go to the heart of HUD's Preservation of at-risk housing.
In the 25 years NAHT and its leaders have been dealing with HUD, this is by far the least responsive and accessible leadership at the Agency we have ever seen. If tenants and their representatives cannot get a hearing with the key policy makers to raise their concerns about policy and enforcement matters which affect their homes, that sends a message the new Administration doesn't really care. When the Administration is unable to honor contracts and invoices with agencies who work with tenants, forcing constant layoffs, and fails to renew a VISTA Volunteer project which aids tenants, that, too, sends a message. Far from being treated as partners, this Administration treats tenants as if we were the enemy.
We ask the Subcommittee's help in helping us reestablish the kind of dialogue and partnership, through regular meetings with the Secretary and the Commissioner, which we have enjoyed with several previous Administrations.
Congress Must Adopt New Legislation to Save Our Homes
Although HUD clearly must do more to preserve affordable housing and reestablish communication with residents, the continued erosion of affordable housing underscores the need for new legislation to stop the continued loss of 40,000 units affordable housing each year. As many more as one million expiring Section 8 or prepayment-eligible units remain at risk. In a few years, the nation will be presented with yet another crisis of "expiring mortgages", as the original 40 year mortgages and regulatory agreements expire on some 450,000 units still regulated by HUD. Congress must act now to address this crisis.
The following legislative recommendations have been adopted by the NAHT Board and membership following extensive discussion and input from tenant groups and local tenant coalitions across the country:
1) Enact Preservation Grants to Save Housing. Congress' 1999 Mark Up to Market initiative has proven inadequate to stop the loss of housing. We urge Congress to complement this program with one or more strategies to provide capital funds for acquisition and repair of at-risk buildings as a further incentive for owners to stay in the program. Generally, formulating federal assistance in the form of capital grants with lower on-going Section 8 outlays (to cover lower debt costs) wherever possible will preserve housing at the least long-term costs to the government, since the alternative of higher Section 8 outlays (covering higher debt service) will cost more over time due to continuing higher interest payments. In addition, capital grant funds should not be "scored" as a 100% Budget Authority expense, since there will be net savings to the Section 8 Certificate Fund in a prepayment building which is "preserved" with capital grant assistance, where Enhanced Vouchers need not be provided as they would be if the building prepaid.
There are three current options for providing capital grant funds for at-risk housing:
a) Preservation Matching Grant. NAHT urges Congress to enact the Preservation Matching Grant to help save units and promote transfers of at-risk buildings to nonprofit organizations committed to housing preservation. The proposal would provide federal matching grants on a 2-to-l basis to match state and local preservation funding programs.
In this Congressional session, the Preservation Matching Grant bill has been refiled as H.R. 425 by Rep. Jerold Nadler and sponsored by 88 others in the House, and as S. 1365 by Senators Jeffords (I-VT), Grassley (R-IA), Chafee (R-RI), Sarbanes (D-MD), Feinstein (D-CA), Kerry (D-MA), Breaux (D-LA), Schumer (D-NY), Murray (D-WA), Dayton and Wellstone (D-MN). The Senate bill would allow direct HUD grants to nonprofits in states without a matching grant program, as recommended by NAHT. We urge the Subcommittee to support S. 1365.
b) Housing Trust Fund grants. Alternatively, the Roukema version of a Housing Trust Fund adopted by the House Financial Services Committee (HR 3995) would provide some limited grant funds to localities, which could be used for both preservation and new production of housing. Rep. Sanders version of the Trust Fund proposal, which NAHT supports, adopts the same principle, but at much higher funding and matching grant levels. If adequately funded, the Trust Fund approach could meet the need for a capital grant source for preservation as well.
c) Mandate Section 531 Grants. To date, HUD has failed to use its authority to spend recaptured Interest Reduction Payments (IRP) as capital grants to preserve at-risk housing. As a result, Congress rescinded $300 million in IRP funds last year--the same level of funding sought by NAHT through the Preservation Matching Grant. It is imperative that Congress and HUD not repeat this mistake next year. We urge Congress to direct HUD to spend these funds, estimated to be $100 million in FY 03.
2) Enact Regulatory Measures to Prevent Displacement and Preserve Affordable Housing. The record shows that voluntary financial incentives are insufficient to fully halt the continued erosion of affordable housing. Congress should re-establish a national regulatory framework to limit owners' ability to prepay and prepay, similar to the now-defunct Title VI Preservation Program. For example, Congress could enact rent restrictions for former HUD-subsidized buildings, require owners to accept HUD subsidy offers, and provide tenants and tenant-endorsed nonprofits a Right of First Refusal when owners sell.. NAHT urges Congress to consider these approaches to complement the voluntary incentives for owners provided by existing HUD programs. It is not too early for Congressional leaders to work with NAHT to develop a long-term legislative vehicle to save our homes.
3) Strengthen Congress' Goal of Last-Resort "Enhanced Vouchers for All."
a) Clarify that HUD must enforce owner acceptance of Enhanced Preservation Vouchers for multiple year terms. Congress should mandate enforcement by HUD of owner compliance.
b) Improve Preservation Vouchers. Congress should make several technical adjustments to make the goal of "sticky vouchers for all" work better. For example, NAHT proposes more flexible "occupancy standards" so that Section 236 moderate income tenants are not forced out or into smaller units when tenants receive Section 8 Preservation Vouchers when owners prepay. Congress should also eliminate the problem of unnecessary "rescreening" of tenants in good standing by local Housing Authorities when voucher conversions occur. NAHT supports language proposed by Senator Sarbanes in his Voucher bill to address these problems.
c) Provide Enhanced Vouchers for tenants when mortgage terms expire. In the near future, many buildings with 40 year HUD subsidized mortgages will near the end of their mortgage terms. Tenants in these buildings need protection from immediate displacement when this occurs. Congress should act now to anticipate this problem.
4) Mandate that HUD Maximize Preservation of At-Risk and HUD-Owned Housing
a) Mandate that HUD preserve at-risk buildings where owners must seek HUD approval to prepay or renegotiate HUD or local use agreements. NAHT urges Congress to mandate HUD to use its discretionary authority to enforce use restrictions (such as flexible subsidy, Title II/VI, and local use restrictions) and procedural requirements (to review fair housing impacts, use of reserves, etc. prior to prepayment) to maximize housing preservation.
b) Mandate that HUD maximize preservation of buildings sold or foreclosed through HUD's Property Disposition or Foreclosure programs. For the past two years, Congress has mandated that HUD preserve buildings it sells where tenants are elderly or handicapped, but not family developments, by providing grants and project-based Section 8 assistance at point of sale. Congress should extend this requirement to all buildings sold by HUD.
5) Empower Residents and Communities
a) Drop "preemption" language in Section 232 of LIHPRHA. Congress should amend the now-defunct Low Income Housing Preservation and Residential Homeownership Act (LIHPRHA) law to delete Section 232, which makes it more difficult to enact tenant protections at the local level in the event that federal ones are ended through prepayment. Owners argued for this provision to protect their appraisals under the previously mandatory program. In the absence of a federal regulatory framework such as LIHPRHA, the federal government should not interfere with the right of state and local governments to protect residents in accordance with local needs and conditions. (Such efforts have been adopted or are under way in Massachusetts, Washington, Oregon, California, Denver and New York.) Similarly, Section 524(f) of the FY'00 Appropriations bill, which preempts certain local restrictions on owner dividends, may also require amendment.
b) Expand tenant participation. Congress should clearly affirm that HUD, state and owner decisions (for mark-ups and grants, for example) are significant events requiring opportunities for tenant notice and comment.
c) Allow HUD technical assistance funds to be used more broadly in HUD housing. Congress should clarify that Section 514 Technical Assistance Funds (OTAGs, ITAGs, HUD-funded VISTA Volunteers) can provide assistance to tenants in Enhanced Voucher buildings, prepayment-eligible buildings without Section 8, and HUD-foreclosed properties.
We would be happy to provide more information to the Subcommittee upon request. Thank you for holding this hearing and allowing NAHT to submit its views.
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