HR2895OCT12

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Week Ending October 12, 2007

H.R.2895 To establish the National Affordable Housing Trust Fund in the Treasury of the United States to provide for the construction, rehabilitation, and preservation of decent, safe, and affordable housing for low-income families.

A trust fund is established in the US Treasury to provide financial assistance to states and local jurisdictions, Indian Tribes and the consular areas to increase the supply of ‘decent quality’ affordable housing for low-income, extremely low-income and very poor families.

The bill is driven by a national shortage of such housing and so creates the National Affordable Housing Trust Fund by transferring amounts from the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation under previous law. The goal is to build 1.5 million new low- income housing units, for ownership or rental, in the next ten years.

Funds will be used for “the construction of new housing; the acquisition of real property; site preparation and improvement, including demolition; rehabilitation of existing housing;" The funds would be used specifically to facilitate affordability for homeless and other extremely low-income households of dwelling units assisted with Trust Fund grant amounts, in a combined amount not to exceed 20 percent of the project grant amount, for: “project-based rental assistance for not more than 12 months, project operating reserves for use to cover the loss of rental assistance or in conjunction with a project loan, or project operating accounts used to cover net operating income shortfalls for dwelling units assisted with Trust Fund grant amounts, providing incentives to maintain existing housing (including manufactured housing) as affordable housing and to establish or extend any low-income affordability restrictions for such housing, including covering capital expenditures and costs of establishing community land trusts to provide sites for manufactured housing provided such incentives, and in the case of affordable one- to four-family owner-occupied housing, down payment assistance, closing cost assistance, and assistance for interest rate buy-downs.”

The funds can also be used for mortgage insurance, housing counseling and for mortgage insurance technologies, procedures, processes, program performance and salaries. In some regions, funds can be used for disaster and / or flood insurance purposes. Applicants for funds who show energy savings plans could gain precedence over other grantees.

The funds would be made available at 40 percent for States, Indian Tribes and insular areas and 60 percent for participating local jurisdictions. First responders and teachers who can not afford higher-cost housing would be given preference.

Sponsor: Rep. Barney Frank (D-MA-4^th)

Vote: Passed the House 264 to 158 RC 958 October 10, 2007.

The motion to recommit the bill failed 199 to 218 RC 957

Cost to the taxpayers: “CBO estimates that implementing H.R. 2895 would result in a loss of $192 million in discretionary offsetting collections over the next five years stemming from the prohibition of fee increases for certain FHA guarantees.”

Earmark Certification: H.R. 2895 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9 of rule XXI.

The Motion to Recommit

The motion looked to add language establishing work requirements for residents of the housing. The motion required the Committee to report the bill back to the House 'promptly' with the provisions that require some residents to do volunteer work, others to work part time and that the work requirements are administered by the contractor who would be, for example, a religious or other non-profit organization that overseas the affordable housing project. Other provisions in the motion noted that a resident would be exempt from the work requirement if they could not get child care. The motion notes prior law that requires a resident to be 'able-bodied'. The sponsor of the motion conceded that most residents would not qualify as 'able-bodied' but that the motion makes sure the project does not become a give-away.

Opposition to the motion held that the work or volunteer requirement and the administration of those edicts would also require spending bill money on a thrid party to administer the work requirement program and that the requirements in the motion are complicated to administer. The opposition also held, as has been the case with numerous motions to recommit this session, that the use of the requirement for the Committee to report the bill back 'promptly' is a procedural ploy that would tie the bill up in Committee with the possibility that the bill would not again return to the floor. It is a procedure, bill supporters hold, that might kill the bill. The appropriate language to move the bill back to the Committee and assure that it is returned to the floor for final passage is the require that it is reported back 'forthwith'. The Minority has not made that change in this or past motions.

The motion to recommit the bill failed 199 to 218 RC 957

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MORE INFORMATION

Section-by-section Analysis of the bill

Amendments

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1--Short title

Titles the bill as the `National Affordable Housing Trust Fund Act of 2007.'

Section 2--National Affordable Housing Trust Fund

The bill amends title II of the Cranston-Gonzalez National Affordable Housing Act to add a new Subtitle G--National Affordable Housing Trust Fund, adding the following:

Section 291. Purposes

The major purposes of the bill are to: (1) address the national shortage of housing that is affordable to low-income families by creating a permanently appropriated fund, with dedicated sources of funding, to finance additional housing activities, without supplanting existing housing appropriations; (2) enable rental housing to be built for families with the greatest economic need in mixed income settings and in areas with the greatest economic opportunities; (3) promote homeownership for low-income families; and (4) construct, rehabilitate, and preserve at least 1,500,000 affordable dwelling units over the next decade.

Section 292. Trust fund

Establishes a `National Affordable Housing Trust Fund' in the U.S. Treasury. Deposits to the Trust Fund include: (1) amounts from Fannie Mae and Freddie Mac transferred into the Trust Fund under Title XIII of the Housing and Community Development Act of 1992 (see H.R. 1427); (2) amounts appropriated to the Trust Fund pursuant to the authorization in the Expanding American Homeownership Act of 2007 (see H.R. 1852), relating to the use of FHA savings for an affordable housing grant fund; and (3) any amounts that are or may be appropriated, transferred, or credited to such Fund under any other provisions of law. Authorizes expenditures from the Trust Fund by HUD and specifies that all assistance provided be considered to be federal financial assistance.

The bill includes a number of conditions on the use of any FHA funds for bill purposes, which include: (1) a prohibition against fund use unless FHA funds are first made available for (a) the amount, if any, needed to avoid a credit subsidy appropriation for the FHA 203(b) single family loan program in that year, (b) the amount needed to increase nationwide funding for housing counseling grants from the current level of $42 million to $100 million a year for each of the next five years, and (c) $25 million each of the next five years to increase funding for improving FHA technology, procedures, processes, and program performance, and salaries; (2) a prohibition against using any credit subsidies from the FHA 203(b) single family loan program; (3) a prohibition against FHA fund use unless HUD certifies each year that it has made a determination that FHA premiums being charged that year are sufficient to comply with the Section 205(f) MMIF capital ratio requirement and are also sufficient to ensure the safety and soundness of the other FHA mortgage insurance funds; and (4) a prohibition against FHA raising fees on any FHA loan program unless such program would require a credit subsidy appropriation that year absent such a fee increase.

Section 293. Allocations for States, Indian tribes, insular areas, and participating local jurisdictions

Requires that for 2008 and each fiscal year thereafter, HUD shall determine the total amount available for Trust Fund assistance. Of this total amount, HUD will allocate 40 percent to States, Indian tribes, and insular areas, and 60 percent to participating local jurisdictions (PLJs).

Section 294. Assistance from trust fund

Requires HUD to establish an affordable housing needs formula to allocate Trust Fund amounts among States, Participating Local Jurisdictions, Indian tribes, and insular areas based on the relative needs of such entities. The formula is to be based on a number of factors, which include population, the percentage of families living in substandard housing, the percentage of families that pay more than 50 percent of their annual income for housing costs, the percentage of persons having an income at or below the poverty line, the cost of constructing or carrying out the rehabilitation of housing; the percentage of the population that resides in counties having extremely low vacancy rates, the percentage of housing stock that is extremely old housing, the extent to which any jurisdiction with an extremely low percentage of affordable rental housing units increases their percentage of affordable rental housing units, and any other factors that HUD determines to be appropriate. For any year in which HUD fails to establish the formula by the time funds are available for allocation, allocations are to be made to States, PLJs, and insular areas pursuant to the HOME program formula, with the Indian tribe allocation to be determined by HUD.

If for any fiscal year the total Trust Fund amount available nationwide is less than $2 billion, any PLJ that would otherwise be entitled to an amount less than $750,000 shall not receive any funds directly, and instead their share will be allocated to the state in which they are located.

Each grantee shall contribute as a match: (a) at least 25 percent of funds from federal sources, (b) at least 12.5 percent of funds from state, local, or private resources, or (c) a combination of the two. HUD may reduce or waive the matching requirement for grantees in fiscal distress. Contributions by a jurisdiction to a Trust Fund-assisted project to provide services for residents may qualify as matching funds, provided that there is a binding commitment for such services. HUD may reduce or waive the match where a zoning variance or other waiver of regulatory barriers was required to site Trust Fund-assisted housing. The bill waives the match requirement in any area declared by the President as a major disaster or emergency.

HUD is required to make grants to Indian tribes on a competitive basis, based on criteria that HUD is required to establish.

Any funds awarded to a PLJ which notifies HUD that it does not intend to use the funds will be transferred to the state in which the PLJ is located. HUD is required to select an an alternative administrator [nonprofit or public entity] to allocate funds given to states, PLJs, or insular areas that go unused because (a) the grantee does not submit an allocation plan within 12 months of fund availability, (b) the grantee does not comply with the required match, or (c) funds are not used within 24 months of fund availability.

Section 295. Allocation plans

All grantees other than Indian Tribes are required to submit an allocation plan for each fiscal year, which is subject to approval by HUD. The allocation plan describes the use of Trust Fund monies, must be based on priority housing needs (including in rural areas), and must be consistent with the grantee's comprehensive housing affordability strategy (CHAS). The plan is to be made available to the public for comment and should contain a description of the eligible activities to be conducted and a certification that any housing assisted with Trust Fund amounts will comply with the provisions of the bill, the Fair Housing Act, and the Rehabilitation Act of 1973. The allocation plan must set out the process for the grantee to select eligible activities and include performance goals, benchmarks, and timetables. Allocation plans must be submitted to HUD within 6 months of notice of fund availability, and HUD must subsequently approve or disapprove of such proposed plan within 3 months of such submission. for review and approval. Detailed selection criteria are established which grantees must use in selecting among applicants for funds. Selection criteria include the merits of the project, the experience of the applicant, the ability to undertake the project in a timely manner, the extent of leveraging, and a number of factors dealing with housing affordability, age of the local housing stock, and local vacancy rates.

Section 296. Use of assistance by recipients

The bill requires grantees to distribute Trust Fund monies only to eligible recipients and only for eligible activities. Eligible recipients include an organization, agency, or other entity (including a for-profit entity, a nonprofit entity, a faith-based organization, a community development financial institution, a community development corporation, and a state or local housing trust fund) that demonstrates the experience, ability, and capacity to undertake the eligible activity, demonstrates a familiarity with the relevant housing program requirements, and make assurances to comply with the provisions of the Act. All Trust Fund monies must be used for the benefit of low income families (below 80 percent of median income)--except that in any year in which nationwide funding is less than $2 billion, all funds must be used for the benefit of families below 60 percent of local area median income. Additionally, at least 75 percent of funds must be used for the benefit of extremely low-income families (incomes that do not exceed 30 percent of median income or the national poverty line). Further, at least 30 percent of funds must be used for the benefit of families with incomes below the SSI income limit. Finally, at least 10 percent of funds must be used for the benefit of families making more than 50 percent of the local area median income. HUD is required to submit a report within 5 years regarding the need for and appropriateness of these targeting requirements.

States and PLJ are required to use a portion of Trust Fund monies for eligible activities located in rural areas that is proportionate to the identified need for such activities in such rural areas.

HUD is required to establish limits on the amount of Trust Fund grant amounts that may be used, on a per unit basis, for eligible activities. Trust Fund assistance may be distributed in the form of capital grants, noninterest-bearing or low-interest loans or advances, deferred payment loans, guarantees, loan loss reserves, and closing cost and interest rate buydown assistance for owner occupied housing. Assistance that has been repaid to a grantee shall be distributed in accordance with the grantee's allocation plan. Trust Fund assistance is to be coordinated with other housing program assistance programs, a number of which are enumerated. The bill includes prohibitions against any funds being used for political activities, advocacy, lobbying, counseling services, travel expenses, preparation of or advice on tax returns, and administrative and outreach costs (except that a grantee may use funds for such grantee's program administrative costs, subject to a percentage limitation as established by HUD, not to exceed 10 percent of allocated funds). Grantees are required to comply with labor standards and other federal laws, which include laws relating to tenant rights, Consolidated Plans and Fair Housing.

Section 297. Affordable housing

Affordable rental housing is defined as a unit that bears a rent not greater than the lesser of the existing fair market rental rate or 30 percent of the adjusted income of a family whose income equals 65 percent of the median income for the area. The tenant rent contribution cannot exceed 30 percent the adjusted family income of the family being assisted. The bill prohibits discrimination against prospective tenants who are Section 8 voucher holders. The bill requires mixed income development by providing that no more than 50 percent of the rental units in a project that receives Trust Fund assistance may be rented initially to extremely low income families (or such higher percentage as may exist at time of rehab with regard to rehab use of funds). This mixed income requirement does not apply to projects having 25 or fewer units that are (1) located in a census tract in which the number of families having incomes less than the poverty line is less than 20 percent; or (2) located in a rural area; or (3) specifically made available only for elderly families or disabled families.

Units must comply with basic visitability standards and will continue to be subject to all requirements under this Act for 50 years. The bill defines the type of owner-occupied housing that is available for Trust Fund assistance. Such housing must be the principal residence of first-time homebuyers, have an initial purchase price that meets HOME requirements, and be subject to HOME program resale restrictions. Assisted homebuyers must also have, before purchase, completed a HUD approved program of counseling with respect to homeownership responsibilities and financial management. HUD may waive this counseling requirement under specific circumstances. Priority shall be given to families who have been on voucher or public housing waiting lists for more than 12 months.

Section. 298. Other provisions

The bill requires HUD to require each grantee to develop and maintain systems to track the use of Trust Fund monies, including financial and project reporting, record retention and audit requirements. Trust Fund recipients are required to reimburse grantees for misused funds, and return any unused or committed funds. Grantees are required to report to HUD on Trust Fund activities and grantee compliance on an annual basis and have these reports available to the public. The bill gives HUD the authority to impose penalties on states that do not comply with the Act's requirements, including reducing the amount of Trust Fund assistance, requiring grantees to reimburse misused funds and limiting or terminating Trust Fund assistance.

Section 299. Definitions

The bill defines the term eligible activities to include activities relating to the construction, preservation, or rehabilitation of affordable housing, including: construction; acquisition of real property; site preparation and improvement, including demolition; rehabilitation of existing housing; and up to 20 percent of funds to facilitate affordability for extremely low income families in the form of rental assistance, operating reserves or operating accounts.

Trust Fund monies may also be used to provide incentives to maintain existing housing (including manufactured housing) as affordable housing and to establish or extend any low-income affordability restrictions for such housing, including covering capital expenditures and costs of establishing community land trusts to provide sites for manufactured housing provided such incentives. The bill also defines the terms eligible recipient, extremely low vacancy rate, extremely old housing, families, fiscal distress, grantee, Indian tribe, insular area, participating local jurisdiction, poverty line, recipient, rural area, State, Trust Fund and Trust Fund grant amounts.

Section 300. Inapplicability of HOME provisions

Except as specifically provided otherwise in the bill, no HOME program requirements shall apply to Trust Fund assistance.

Section 301. Regulations

HUD is required to promulgate regulations to implement the provisions of this bill with 6 months of the date of enactment of the bill.

`The purposes of this subtitle are--

`(1) to address the national shortage of housing that is affordable to low-income families by creating a permanently appropriated fund, with dedicated sources of funding, to finance additional housing activities, without supplanting existing housing appropriations or existing State and local funding for affordable housing;

`(2) to enable rental housing to be built, for families with the greatest economic need, in mixed-income settings and in areas with the greatest economic opportunities;

`(3) to promote ownership of one-to-four family owner-occupied housing by low-income families; and

`(4) to construct, rehabilitate, and preserve at least 1,500,000 affordable dwelling units over the next decade.

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Amendments