To authorize the Secretary of Housing and Urban Development to provide assistance for privately owned low- and moderate-income housing with expiring Federal subsidies to prevent displacement of low- and moderate-income tenants, and for other purposes.

June 24, 2004

Mr. FRANK of Massachusetts (for himself, Mr. KANJORSKI, Ms. WATERS, Mr. SANDERS, Mrs. MALONEY, Mr. GUTIERREZ, Ms. VELAZQUEZ, Mr. WATT, Ms. CARSON of Indiana, Ms. LEE, Mr. CAPUANO, Mr. CROWLEY, Mr. CLAY, Mr. ISRAEL, Mrs. MCCARTHY of New York, Mr. BACA, Mr. LYNCH, Mr. EMANUEL, Mr. SCOTT of Georgia, and Mr. DAVIS of Alabama) introduced the following bill; which was referred to the Committee on Financial Services

To authorize the Secretary of Housing and Urban Development to provide assistance for privately owned low- and moderate-income housing with expiring Federal subsidies to prevent displacement of low- and moderate-income tenants, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Displacement Prevention Act of 2004'.

SEC. 2. FINDINGS AND PURPOSE.

(a) Findings- The Congress finds that--

(1) there exists throughout the United States a need for decent, safe, and affordable housing;

(2) the General Accounting Office (GAO) estimates that--

(A) there are 11,267 multifamily properties, serving approximately 914,441 households nationwide, that are financed with mortgages subsidized by the Department of Housing and Urban Development;

(B) 1,835 of these properties, which contain over 193,000 subsidized units, are financed with mortgages insured under the below-market interest rate program under section 221(d)(3) of the National Housing Act or the interest reduction payments program under section 236 of such Act, and these properties will be lost by 2013 when the mortgages mature and the mortgage subsidies and low-income affordability restrictions related to those subsidies terminate; and

(C) as a result, owners of properties without rental assistance will be permitted to raise the rents in such properties to market levels, putting at risk approximately 200,000 individuals in over 101,000 units in properties having no other subsidy attached;

(3) the GAO concludes that neither the Department of Housing and Urban Development nor State or local agencies offer incentives to owners to keep properties affordable upon mortgage maturity;

(4) the GAO also concludes that no incentives exist, such as enhanced vouchers, to protect tenants in units without rental assistance when HUD-subsidized mortgages mature;

(5) the GAO further concludes that the Department of Housing and Urban Development does not require owners to provide written notice to tenants that the low-income affordability restrictions will terminate when the HUD-subsidized mortgages mature;

(6) when faced with similar crises in the past, the Congress acted to provide incentives for owners to continue the low-income affordability restrictions, thus ensuring that these properties remain affordable to low- and moderate-income households;

(7) the Congress also acted to provide enhanced vouchers to tenants living in multifamily units receiving assistance under Federal low-income housing programs in cases in which the owner prepaid the HUD-subsidized mortgage or opted out of the rental assistance contract; and

(8) the Congress also required owners to provide tenants with written notice of their intent to prepay their HUD-subsidized mortgage or to opt-out of their section 8 rental assistance contract.

(b) Purpose- It is the purpose of this Act--

(1) to promote the preservation of affordable housing units by providing assistance to owners to ensure that these dwelling units remain affordable to low- and moderate-income households; and

(2) to minimize the involuntary displacement of low- and moderate-income tenants who are currently residing in multifamily properties that are currently receiving subsidies under Federal low-income housing programs, many of whom are elderly or disabled persons.

SEC. 3. FEDERAL ASSISTANCE AND EXTENSION OF AFFORDABILITY REQUIREMENTS.

(a) Provision of Assistance-

(1) AUTHORITY- The Secretary may use amounts made available under subsection (e) to provide assistance under subsections (b), (c), and (d) with respect to covered multifamily housing properties.

(2) APPLICATIONS AND SELECTION CRITERIA- The Secretary shall provide for owners of covered multifamily housing properties to submit applications for assistance under subsections (b), (c), and (d) for covered multifamily housing properties. Subject to paragraph (3), the Secretary shall establish criteria for selection of properties to receive assistance under each of subsections (b), (c), and (d), which shall take into consideration the need of a property for assistance for the purpose under this Act for which the assistance is made available.

(3) PRIORITY- The criteria established pursuant to paragraph (2) for selection of properties to receive assistance under each of subsections (b), (c), and (d) shall provide priority for selection of properties based on the following factors:

(A) The proximity in time of the termination date for the property.

(B) The extent to which the dwelling units in the property are occupied by low-income families.

(C) The extent to which assurances by the owner of the property provide that the affordability restrictions for the property will be extended beyond the period required under subsection (b)(4), (c)(5), or (d)(6), as applicable.

(D) Such other factors as the Secretary may provide.

(b) Rehabilitation Assistance- The Secretary may provide a grant under this subsection to the owner of the property, subject to the following requirements:

(1) PURPOSE- The assistance shall be provided for the purpose of rehabilitating the property for continued use as housing affordable to low- and moderate-income families.

(2) ELIGIBLE USE- Amounts from the grant may be used only for payment of nonrecurring maintenance and capital improvements for the property, under such terms and conditions as are determined by the Secretary.

(3) PER UNIT AMOUNT LIMITATIONS- The amount from a grant used with respect to a dwelling unit in the property may not exceed the per unit dollar amount limitation as the Secretary shall establish for purposes of this subsection for dwelling units of the applicable size.

(4) REQUIRED EXTENSION OF AFFORDABILITY RESTRICTIONS- The Secretary may provide assistance under this subsection for a property only if the owner of the property enters into such binding commitments as the Secretary may require, which shall be applicable to any subsequent owner, to ensure that the property will be operated, for a period of not less than 20 years that begins on the termination date for the property, in accordance with all affordability restrictions that are applicable to the property under the multifamily housing subsidy program under which the property is assisted before the termination date.

(c) Assistance for Purchase by Nonprofit Entities- The Secretary may provide a grant under this subsection to a nonprofit organization for acquisition of a covered multifamily housing property, subject to the following requirements:

(1) PURPOSE- The assistance shall be provided for the purpose of facilitating acquisition of properties by nonprofit organizations whose missions are to provide affordable housing to low- and moderate-income families.

(2) ELIGIBLE NONPROFIT ORGANIZATIONS- A grant under this section may be made only to a nonprofit organization that provides such assurances as the Secretary may require that the organization--

(A) will acquire the property; and

(B) is capable of managing the property and related facilities (either directly or through a contract) for the remaining useful life of the property and related facilities.

(3) ELIGIBLE USE- Amounts from the grant may be used only to cover any direct costs (other than the purchase price) incurred by the nonprofit organization in purchasing and assuming responsibility for the property and related facilities involved.

(4) PER UNIT AMOUNT LIMITATIONS- The amount from a grant used with respect to a dwelling unit in the property may not exceed the per unit dollar amount limitation as the Secretary shall establish for purposes of this subsection for dwelling units of the applicable size.

(5) REQUIRED EXTENSION OF AFFORDABILITY RESTRICTIONS- The Secretary may provide assistance under this subsection for a property only if the owner of the property enters into such binding commitments as the Secretary may require, which shall be applicable to any subsequent owner, to ensure that the property will be operated, for the remaining useful life of the property, in accordance with all affordability restrictions that are applicable to the property under the multifamily housing subsidy program under which the property is assisted before the termination date.

(d) Low- and Moderate-Income Affordability Assistance- The Secretary may make assistance available under this subsection to the owner of a covered multifamily housing property, subject to the following requirements:

(1) PURPOSE- The assistance shall be provided for the purpose of maintaining the affordability of dwelling units, in properties located in strong rental markets, for low- and moderate-income families residing in the property.

(2) ELIGIBILITY- Assistance may be made available for a property only if--

(A) the property is located in an area in which the Secretary determines, based on housing market indicators, such as low vacancy rates or high absorption rates, that there is not adequate available and affordable housing; and

(B) the property is not owned by a nonprofit organization whose purpose in owning the housing is to provide affordable housing to low- or moderate-income families.

(3) FORM AND TERM- The assistance shall be in the form of an annual payment and shall be provided for such term as may be agreed to by the Secretary and the owner of the property.

(4) PREVENTION OF DUPLICATIVE SUBSIDIES- Assistance may not be provided for any dwelling unit in a property during any period during which such unit is provided project-based or tenant-based rental assistance of any kind from any source.

(5) AMOUNT AND RENT LEVELS- The Secretary shall determine the amount of annual assistance provided for a property based on rent levels, for the dwelling units in the property that are subject to affordability restrictions pursuant to paragraph (6), that are equal to the lesser of--

(A) comparable market rents for the market area in which the property is located for dwelling units of the applicable size; and

(B) 150 percent of the fair market rentals established under section 8(c) of the United States Housing Act of 1937 for the market area in which the property is located for dwelling units of the applicable size.

(6) REQUIRED EXTENSION OF AFFORDABILITY RESTRICTIONS- The Secretary may provide assistance under this subsection for a property only if the owner of the property enters into such binding commitments as the Secretary may require, which shall be applicable to any subsequent owner, to ensure that the property will be operated, for a period not shorter than the term of the assistance agreed to pursuant to paragraph (3) or 10 years, whichever is longer, that begins on the termination date for the property, in accordance with all affordability restrictions that are applicable to the property under the multifamily housing subsidy program under which the property is assisted before the termination date.

(e) Funding- For purposes of providing assistance under this section, the Secretary may make available--

(1) $675,000,000 from the amounts made available under the heading `Rent Supplement' in chapter VI of title I of the Supplemental Appropriations Act, 1983 (Public Law 98-63; 97 Stat 320) for amendments to contracts under section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s) and section 236(f)(2) of the National Housing Act (12 U.S.C. 1715z-1(f)(2) in State-aided, noninsured rental housing projects, that remain unobligated; and

(2) such other sums from the amounts made available in any fiscal year under the heading referred to in paragraph (1) that remain or may become unobligated.

SEC. 4. ENHANCED VOUCHERS.

(a) Requirement- Upon the termination date for each assisted multifamily housing project, to the extent that amounts for assistance under this subsection are provided in advance in appropriation Acts, the Secretary shall make enhanced voucher assistance under section 8(t) of the United States Housing Act of 1937 (42 U.S.C. 1437f(t)) available on behalf of each family described in subsection (b).

(b) Eligibility- A family described in this subsection is a family who--

(1)(A) is a low-income family; or

(B) is a moderate-income family that is--

(i) an elderly family (as such term is used in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b));

(ii) a disabled family (as such term is used in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)); or

(iii) residing in a low-vacancy area (as determined by the Secretary); and

(2) on such termination date, is residing in a dwelling unit of the project that--

(A) immediately before such termination date was assisted under the multifamily housing subsidy program for the project; and

(B) is not assisted after such termination date under section 8 of such Act or pursuant to assistance under section 3 of this Act.

(c) Eligibility Event- Section 8(t)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437f(t)(2)) is amended by adding after the period at the end the following new sentence: `Such term includes, with respect to an assisted multifamily housing project (as such term is defined in section 7 of the Displacement Prevention Act of 2004), the occurrence of the termination date for the project.'.

SEC. 5. NOTIFICATION REQUIREMENT.

(a) Timing- An owner of an assisted multifamily housing property who intends to terminate or alter the affordability restrictions for the property on or after the termination date for the property shall, not less than nine months before such termination date, provide written notice of such termination date to the Secretary of Housing and Urban Development, the chief executive officer of the State and the unit of general local government (as such term is defined in section 104 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704) in which the property is located, and each tenant of the project.

(b) Contents- The notice shall include--

(1) a statement specifying any changes in the terms or applicability of the affordability restrictions for the property that the owner intends to make on or after the termination date for the property;

(2) a statement that, if the owner proceeds with such intended changes and the Congress makes funds available, the Department of Housing and Urban Development will provide tenant-based rental assistance to all eligible residents, enabling them to choose the place they wish to rent, which may include the dwelling unit in which they currently reside; and

(3) a statement that, if the Congress makes funds available, the owner and the Secretary may yet agree to renewal of assistance and affordability restrictions for the project, thereby obviating the need for such tenant-based rental assistance.

(c) Failure to Provide Notice- If the owner does not provide the notice required under this section, notwithstanding any inapplicability of the affordability restrictions for the project, the owner may not evict the tenants or increase the tenants' rent payments until such time as the owner has provided the notice and one year has elapsed.

(d) Other Terms- Any notice under this section shall comply with any additional requirements as the Secretary may establish.

(e) Savings Provision- This section may not be construed to annul, alter, affect, or preempt any provision of the law of a State or political subdivision thereof requiring notice regarding termination of assistance or affordability restrictions with respect to a multifamily housing project or to exempt any person from complying with such a law.

SEC. 6. ANNUAL AND SEMIANNUAL REVIEWS.

(a) Annual Review- To ensure compliance with this Act, the Secretary shall conduct an annual review on actions taken under this Act and the status of covered multifamily housing properties and submit a report to the Congress regarding each such annual review.

(b) Semiannual Review- Not less than semiannually during the 2-year period beginning on the date of the enactment of this Act and not less than annually thereafter, the Secretary shall submit reports to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate stating, for such periods, the total number of assisted multifamily housing properties for which notification has been provided under section 5 during such period, the total number of covered multifamily housing properties for which assistance has been provided under section 3, and the type or types of such assistance provided.

SEC. 7. DEFINITIONS.

For purposes of this Act:

(1) AFFORDABILITY RESTRICTIONS- The term `affordability restrictions' means, with respect to a covered multifamily housing property, limits imposed by regulation or regulatory agreement on tenant rents, rent contributions, or income eligibility.

(2) ASSISTED MULTIFAMILY HOUSING PROPERTY- The term `assisted multifamily housing property' means a multifamily housing project for which assistance is provided under a multifamily housing subsidy program.

(3) COMPARABLE PROPERTIES- The term `comparable properties' means, with respect to a covered multifamily housing property, properties in the same market area, where practicable, that--

(A) are similar to the covered multifamily housing property as to neighborhood (including risk of crime), type of location, access, street appeal, age, property size, apartment mix, physical configuration, property and unit amenities, utilities, and other relevant characteristics; and

(B) are not receiving project-based rental assistance of any kind from any source.

(4) COVERED MULTIFAMILY HOUSING PROPERTY- The term `covered multifamily housing property' means an assisted multifamily housing project for which the termination date will occur within the 10-year period beginning on the date of the enactment of this Act.

(5) LOW-INCOME FAMILY- The term `low-income family' has the meaning given such term in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)).

(6) MODERATE-INCOME FAMILY- The term `moderate-income family' has the meaning given such term in section 229 of the Low-Income Housing Preservation and Resident Homeownership Act of 1992 (12 U.S.C. 4119).

(7) MULTIFAMILY HOUSING SUBSIDY PROGRAM- The term `multifamily housing subsidy program' means--

(A) the below-market interest rate mortgage insurance program under section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l(d)(3)); and

(B) the program for interest reduction payments under section 236 of the National Housing Act (12 U.S.C. 1715z-1).

(8) NONPROFIT ORGANIZATION- The term `nonprofit organization' means any private organization that has no part of its net earning inuring to the benefit of any member, founder, contributor, or individual.

(9) SECRETARY- The term `Secretary' means the Secretary of Housing and Urban Development.

(10) TERMINATION DATE- The term `termination date' means, with respect to an assisted or a covered multifamily housing property, the date that--

(A) the mortgage for the property that is insured under the below-market interest rate program under section 221(d)(3) of the National Housing Act, or for which interest reduction payments are made under section 236 of such Act, matures; and

(B) the affordability restrictions applicable to the property because of assistance for the property pursuant to a multifamily housing subsidy program terminate with respect to the property.

SEC. 8. REGULATIONS.

The Secretary may issue any regulations necessary to carry out this Act.

END