The Push for Preservation
- Jun 17, 2010
Since the 1950s the Department of Housing and Urban Development (HUD) has subsidized approximately 1.7 million rental units in over 23,000 privately owned, multifamily properties that are affordable to low-income residents. But many are now over 40 years old and in need of recapitalization, at a time when the need for affordable housing may be more critical than ever.
Another problem looming on the horizon is that, according to a 2004 Government Accountability Office (GAO) report, approximately 193,000 subsidized units were projected to revert to market-rate housing in the next 10 years, as the HUD-subsidized mortgage matures and the mortgage subsidy and low-income affordability restrictions on the property terminate. The GAO estimates that about 200,000 individuals in over 100,000 units with no other subsidy attached to the property would have to pay higher rents because there were no resident protections, such as enhanced vouchers, to protect residents from paying higher rents or from being evicted when the mortgage matures.
The housing foreclosure crisis and high unemployment rate has meant that rents for low-income housing “have actually increased,” says Toby Halliday, vice president for federal policy for National Housing Trust.
In March, Rep. Barney Frank introduced H.R. 4868, the Housing Preservation and Tenant Protection Act, to address these concerns.
“While we, like our sister PHAs [public housing authorities] across the country, provide thousands of units of quality affordable housing, we welcome and need additional affordable housing provided by private-sector developers,” says Kellie O’Connell-Miller, director of research, reporting and communications for the Chicago Housing Authority.
The legislation attacks the problem on multiple fronts. For example, HUD would provide grants and loans to housing sponsors to help recapitalize and/or transfer the property to a purchaser who will preserve the property as affordable. It would also establish a voluntary Preservation Exchange program, encouraging owners to sell properties to purchasers who would keep the housing units affordable. Also, the bill establishes a first right of refusal that provides HUD the opportunity to purchase a property from an owner who wishes to sell, a passage that has engendered controversy within the multifamily industry (see sidebar).
As Adrienne Quinn, vice president of public policy and government relations for Enterprise, notes, one measure that converts legacy rental assistance contracts to Section 8 project-based rental assistance means cash flows will increase at these properties, making them likely to stay affordable and be rehabilitated by owners. Another provision will allow HUD to forgive or defer any loans it has made in the past to a purchaser who wants to buy an apartment and keep it affordable, or for an existing owner to extend the affordability period. Another provision provides qualified owners who will preserve the property’s affordability access to existing residual receipts to help with capital improvements, acquisition and rehabilitation. This allows for more flexibility in the use of residual receipts, with the goal of preserving existing affordable housing.
The bill also makes provisions in case an affordable apartment community is converted to market-rate housing. It will close gaps in the existing law that will ensure that all low- and moderate-income residents are eligible for enhanced vouchers if the assisted housing is converted to market-rate. The bill also contains provisions to revitalize low- and moderate-income housing in rural areas. “Many of these properties are in need of significant repair and have low reserves,” Halliday says. “The bill will allow these properties to be refinanced, so they will be viable for the long-haul.”
Also, the bill contains provisions to strengthen affordable housing for the elderly, making it easier for these properties to be refinanced and preserved.
The bill is due for mark-up in the Financial Services Committee on May 5, when amendments are offered and committee members vote on whether or not to move it to the House floor for a vote.
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