Congress has completed action on a housing bill that, while relatively modest in scope, contains some important provisions for the multi-family housing industry.
The bill (S. 1494) incorporates the provisions for low-income housing preservation that were included in the fiscal 1997 HUD-VA appropriations bill (H.R. 2099) vetoed by President Clinton. It provides guidance on the use of available funds to implement plans of action under the Emergency Low Income Housing Preservation Act (ELIHPA) and Low Income Housing Preservation and Resident Homeownership Act (LIHPRHA). ELIHPA and LIHPRHA are aimed at keeping Section 221(d)(3) below market interest rate (BMIR) and Section 236 projects in the low-income inventory after they become eligible for mortgage prepayment and conversion to other uses.
Under S. 1494, until Aug. 15, preservation funding will be provided for sales of projects to priority purchasers, tenant organizations and nonprofits. HUD will provide capital grants to enable the purchasers to keep the projects affordable as low-income housing.
After Aug. 15, HUD will give priority to four categories of projects, as long as funds are committed by Sept. 15. They are certain projects for which appraisals have been submitted to HUD's New York State office; projects in disaster areas; projects whose owners entered into a settlement or repayment agreement with HUD before Sept. 1, 1995; and projects whose owners filed a notice with HUD by April 15, 1996, converting their plans from refinancings to sales. The bill also allows owners to prepay their mortgages without going through the preservation program, but they must agree not to raise rents for 60 days after prepayment.
The bill extends the Federal Housing Administration multifamily risk-sharing pilot programs through fiscal 1996, with up to 12,000 units for the housing finance agency program and up to 7,500 units for the program with other lenders, including Fannie Mae and Freddie Mac.
To facilitate FHA multifamily and single-family financing through Government National Mortgage Association-guaranteed mortgage-backed securities, the bill authorizes $110 billion in Ginnie Mae guarantee commitments for fiscal 1996.
To promote safety and security in multifamily housing, the bill directs public housing agencies to bar Section 8 assistance to anyone who is illegally using a controlled substance or whose abuse of alcohol interferes with the health, safety or right to peaceful enjoyment of the premises by other project residents. In determining whether to deny Section 8 assistance to a person with a pattern of alcohol abuse or use of a controlled substance, the PHA may consider whether that person has successfully completed a drug or alcohol rehabilitation program.
The bill also authorizes but doesn't require - HUD to renew, for one year at current rents, Section 8 moderate rehabilitation contracts that expire during fiscal 1996. Separate appropriations legislation has already mandated one year renewals for other expiring project-based subsidies, but HUD has expressed its intent to replace expiring moderate rehab contracts with Section 8 certificates or vouchers.
For rural housing, the bill extends the authorization for the Rural Housing Service Section 515 rural rental housing loan program through fiscal 1996. The authorization expired at the end of fiscal 1994, though the program has continued to operate under appropriations bills. The legislation also authorizes a new Section 515 guaranteed loan program.
Military housing offers
investment opportunities
With budgetary pressures squeezing the traditional government housing programs, investors may find new opportunities in an unfamiliar place - the Pentagon.
The fiscal 1996 defense authorization bill (S. 1124) created new programs under which the military services will support the acquisition and development of privately owned housing for service personnel and their families.
The legislation authorizes the services to provide direct loans and loan guarantees to finance housing, and it also authorizes debt and equity investments in nongovernmental entities engaged in the acquisition or development of military housing. Investments can include the purchase of limited partnership interests. The cash amount of an investment can't exceed one-third of project costs, and the total investment, including any land or facilities conveyed to the nongovernmental entity, can't exceed 45% of project costs.
To encourage the development of rental housing, a military service can enter into contracts for the leasing of housing to be constructed, provide guarantees of the level of rental income or occupancy or enter into agreements to provide landlords rental payments in addition to the amounts paid by service members.
The legislation also authorizes all services to enter into limited partnerships to develop military family housing. This authority previously was limited to the Navy.