To authorize the Secretary of the Department of Housing and Urban Development to make grants to States for affordable housing for low-income persons, and for other purposes.

October 6, 2005

Mr. JEFFORDS (for himself, Mr. SARBANES, and Mr. DAYTON) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

To authorize the Secretary of the Department of Housing and Urban Development to make grants to States for affordable housing for low-income persons, 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 `Affordable Housing Preservation Act of 2005'.

SEC. 2. MATCHING GRANT PROGRAM FOR AFFORDABLE HOUSING PRESERVATION.

(a) Findings and Purposes-

(1) FINDINGS- Congress finds that--

(A) the availability of low-income housing rental units has declined nationwide in the last several years;

(B) as rents for low-income housing increase and the development of new units of affordable housing decreases, there are fewer privately owned, federally assisted affordable housing units available to low-income individuals in need;

(C) the demand for affordable housing far exceeds the supply of affordable housing, as evidenced by recent studies;

(D) the efforts of nonprofit organizations have significantly preserved and expanded access to low-income housing;

(E) a substantial number of existing federally assisted or federally insured multifamily properties are at risk of being lost from the affordable housing inventory of the Nation through market rate conversion, deterioration, or demolition;

(F) it is in the interest of the Nation to encourage transfer of control of such properties to competent national, regional, and local nonprofit entities and intermediaries, the missions of which involve maintaining the affordability of such properties;

(G) such transfers may be inhibited by a shortage of such entities that are appropriately capitalized; and

(H) the Nation would be well served by providing assistance to such entities to aid in accomplishing this purpose.

(2) PURPOSES- The purposes of this Act are--

(A) to continue the partnerships among the Federal Government, State and local governments, nonprofit organizations, and the private sector in operating and assisting housing that is affordable to low-income persons and families;

(B) to promote the preservation of affordable housing units by providing matching grants to States and localities that have developed and funded programs for the preservation of privately owned housing that is affordable to low-income families and persons; and

(C) to minimize the involuntary displacement of tenants who are currently residing in such housing, many of whom are elderly or disabled persons and families with children.

(b) Definitions- In this Act:

(1) CAPITAL EXPENDITURES- The term `capital expenditures' includes expenditures for acquisition and rehabilitation.

(2) CONSORTIUM- The term `consortium' means a group of geographically contiguous localities that jointly submit an application under subsection (d).

(3) ELIGIBLE AFFORDABLE HOUSING- The term `eligible affordable housing' means housing that--

(A) consists of more than 4 dwelling units;

(B) is insured or assisted under a program of the Department of Housing and Urban Development or the Department of Agriculture under which the property is subject to limitations on tenant rents, rent contributions, or incomes; and

(C) is at risk, as determined by the Secretary, of termination of any of the limitations referred to in subparagraph (B).

(4) ELIGIBLE ENTITIES- The term `eligible entities' means any entity that meets the requirements of subsection (e)(6) and the rules issued under that subsection.

(5) LOCALITY- The term `locality' means a city, town, township, county, parish, village, or other general purpose political subdivision of a State, or a consortium thereof.

(6) LOW-INCOME AFFORDABILITY RESTRICTION- The term `low-income affordability restriction' means, with respect to a housing project, any limitation imposed by law, regulation, or regulatory agreement on--

(A) rents for tenants of the project;

(B) rent contributions for tenants of the project; or

(C) income-eligibility for occupancy in the project.

(7) LOW-INCOME FAMILIES; VERY LOW-INCOME FAMILIES- The terms `low-income families' and `very low-income families' have the same meanings as in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b)).

(8) PROJECT-BASED ASSISTANCE- The term `project-based assistance' has the same meaning as in section 16(c) of the United States Housing Act of 1937 (42 U.S.C. 1437n(c)), except that the term includes assistance under any successor programs to the programs referred to in that section.

(9) QUALIFIED LIMITED LIABILITY COMPANY- The term `qualified limited liability company' means a limited liability company with respect to which a credit is allowed under section 42 of the Internal Revenue Code of 1986 with respect to the company's qualified basis (as defined in section 42 (c)(1) of such Code), in a qualified low-income building (as defined in section 42(c)(2) of such Code) for which grant funds received under this section shall be used.

(10) QUALIFIED PARTNERSHIP- The term `qualified partnership' means a limited partnership with respect to which a credit is allowed under section 42 of the Internal Revenue Code of 1986 with respect to the partnership's qualified basis (as defined in section 42(c)(1) of such Code) in a qualified low-income building (as defined in section 42(c)(2) of such Code) for which grant funds received under this section shall be used.

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

(12) STATE- The term `State' means each of the several States of the United States and the District of Columbia.

(c) Grants- The Secretary shall, to the extent that amounts are made available in advance under an appropriations Act, award grants under this section to States and localities for low-income housing preservation and promotion.

(d) Applications-

(1) IN GENERAL- Any State or locality that seeks a grant under this section shall submit an application (through appropriate State and local agencies) to the Secretary.

(2) CONTENTS- Each application submitted pursuant to paragraph (1) shall contain any information and certifications necessary for the Secretary to determine who is eligible to receive a grant under this section.

(e) Use of Grants-

(1) ELIGIBLE USES-

(A) IN GENERAL- Grants awarded under this section may be used by States and localities only for the purposes of providing assistance--

(i) for acquisition, rehabilitation, capital expenditures, and related development costs for a housing project that meets the requirements of paragraph (2), (3), (4), or (5); or

(ii) to eligible entities under paragraph (6) for--

(I) operational, working capital, and organizational expenses; and

(II) predevelopment activities to acquire eligible affordable housing for the purpose of ensuring that the housing will remain affordable, as the Secretary considers appropriate, for low-income or very low-income families.

(B) USE AGREEMENT- A project receiving assistance under this paragraph shall be subject to an agreement (binding on any subsequent owner of such project) that ensures that the project will continue to operate, for a period of not less than 50 years after the date on which any assistance is made available under this paragraph, in a manner that will provide rental housing on terms at least as advantageous to existing and future tenants as the terms required by any program under which the project, if offered, was eligible for assistance, subject to available appropriations.

(C) SERVICE OF UNDER-SERVED AND RURAL AREAS- States receiving funds under this section shall ensure that, to the maximum extent practicable, that projects in under-served and rural areas in that State receive assistance.

(2) PROJECTS WITH HUD-INSURED MORTGAGES- A project meets the requirements of this paragraph if the project is financed by a loan or mortgage--

(A) that is--

(i) insured or held by the Secretary under section 221(d)(3) of the National Housing Act (12 U.S.C. 1715l(d)(3)); and

(ii) receiving loan management assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f) due to a conversion from section 101 of the Housing and Urban Development Act of 1965 (12 U.S.C. 1701s);

(B) that is insured or held by the Secretary and bears interest at a rate determined under the proviso of section 221(d)(5) of the National Housing Act (12 U.S.C. 1715l(d)(5)); or

(C) that is insured, assisted, or held by the Secretary or a State or State agency under section 236 of the National Housing Act (12 U.S.C. 1715z-1).

(3) PROJECTS WITH SECTION 8 PROJECT-BASED ASSISTANCE- A project meets the requirements of this paragraph if the project is subject to a contract for project-based assistance.

(4) PROJECTS PURCHASED BY RESIDENTS- A project meets the requirements of this paragraph--

(A) if--

(i) the project is or was eligible low-income housing (as defined in section 229 of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (12 U.S.C. 4119)); or

(ii) the project is or was a project assisted under section 613(b) of the Cranston-Gonzalez National Affordable Housing Act (12 U.S.C. 4125);

(B) if the project has been purchased by a resident council or resident-approved nonprofit organization for the housing, or is approved by the Secretary for such purchase, for conversion to homeownership housing under a resident homeownership program meeting the requirements of section 226 of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (12 U.S.C. 4116); and

(C) if the owner of the project has entered into binding commitments (applicable to any subsequent owner) to extend--

(i) project-based assistance for not less than 15 years (beginning on the date on which assistance is made available for the project by the State or locality under this section); and

(ii) any low-income affordability restrictions applicable to the project in connection with that assistance.

(5) RURAL RENTAL ASSISTANCE PROJECTS- A project meets the requirements of this paragraph--

(A) if--

(i) the project is a rural rental housing project financed under section 515 of the Housing Act of 1949 (42 U.S.C. 1485); or

(ii) the project is a farm labor housing development financed under section 514 of the United States Housing Act of 1949 (42 U.S.C. 1484); and

(B) if the restriction on the use of the project (as required under section 502 of the Housing Act of 1949 (42 U.S.C. 1472)) will expire not later than 12 months after the date on which assistance is made available for the project by the State or locality under this subsection.

(6) ELIGIBLE ENTITIES-

(A) IN GENERAL- The Secretary shall establish, by regulation, standards for eligible entities under this subsection.

(B) REQUIREMENTS- An eligible entity shall--

(i) be a nonprofit organization (as defined in section 104 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704)), or a qualified limited liability company or a qualified partnership the managing member or general partner of which, respectively, is--

(I) a nonprofit organization; or

(II) a for-profit entity that is wholly owned by an eligible non-profit organization;

(ii) have among its purposes, maintaining the affordability to low-income or very low-income families of multifamily properties that are at risk of loss from the inventory of housing that is affordable to low-income or very low-income families; and

(iii) demonstrate to the Secretary--

(I) the need for the types of assistance described under paragraph (1)(A)(ii);

(II) experience in providing assistance described under that paragraph; and

(III) its ability to provide the assistance described under that paragraph.

(7) FUNDING REQUIREMENTS-

(A) OPERATING SUPPORT- Each State and locality awarded a grant under this section shall transfer at least 5 percent, but not more than 10 percent, of such grant to eligible entities for the purposes described under paragraph (1)(A)(ii)(I).

(B) NONPROFIT PURCHASES- Each State and locality awarded a grant under this section shall transfer at least 15 percent of such grant to eligible entities for the purposes described under paragraph (1)(A)(ii)(II).

(8) RETURN OF UNUSED FUNDS- If any amount of a grant awarded to a State or locality under this section has not been obligated 3 years after the grant is awarded, such amount shall be returned to the Secretary to be redistributed in accordance with this section the following fiscal year.

(9) ADMINISTRATIVE COSTS- A State or locality that is awarded a grant under this section may use not more than 10 percent of such grant for costs associated with the administration of the grant.

(f) Amount of State and Local Grants-

(1) IN GENERAL- Subject to paragraph (3) and subsection (g), in each fiscal year, the Secretary shall award to each State and locality approved for a grant under this section a grant in an amount based upon the proportion of the need for assistance of that State or locality under this section (as determined by the Secretary in accordance with paragraph (2)) to the aggregate need among all States and localities approved for assistance under this section for that fiscal year.

(2) DETERMINATION OF NEED- In determining the proportion of the need of a State or locality under paragraph (1), the Secretary shall consider--

(A) the number of units in projects in the State or locality that are eligible for assistance under subsection (e)(1)(A)(i) that are, due to market conditions or other factors, at risk for--

(i) prepayment;

(ii) opt-out; or

(iii) otherwise at risk of being lost to the inventory of affordable housing; and

(B) the difficulty that residents of projects in the State or locality that are eligible for assistance under subsection (e)(1)(A)(i) would face in finding adequate, available, decent, comparable, and affordable housing in neighborhoods of comparable quality in the local market, if those projects were not assisted by the State or locality under subsection (e)(1)(A)(i).

(3) LIMITATIONS-

(A) MANDATORY ALLOCATION- In any fiscal year, of the total amount appropriated to carry out this section--

(i) 40 percent shall be allocated for grants to States; and

(ii) 60 percent shall be allocated for grants to localities.

(B) MINIMUM GRANT AMOUNT- Notwithstanding subsection (g), a State receiving a grant under this section shall receive no less than .4 percent of the total amount appropriated under subsection (k) in any fiscal year.

(g) Matching Requirement-

(1) IN GENERAL- Except as provided under paragraph (2), a grant under this section to a State or locality for any fiscal year may not exceed an amount that is twice the amount that the State or locality certifies, as the Secretary shall require, that the State or locality will contribute for such fiscal year, or has contributed since January 1, 2004, from non-Federal sources for the purposes described in subsection (e)(1).

(2) LIMITATIONS- Paragraph (1) shall not apply to any amounts to be used by a State or locality for--

(A) administrative costs under subsection (e)(9); and

(B) operating support and working capital of nonprofit organizations under subsection (e)(7)(A).

(3) TREATMENT OF PREVIOUS CONTRIBUTIONS- Any portion of amounts contributed after January 1, 2004, that are counted for the purpose of meeting the requirement under paragraph (1) for a fiscal year may not be counted for that purpose for any subsequent fiscal year.

(4) TAX CREDITS AND PRIVATE ACTIVITY BONDS- Fifty percent of the annual amount of tax credits allocated to the project under section 42 of the Internal Revenue Code of 1986, or proceeds from private activity bonds issued for qualified residential rental projects under section 142 of that Code, shall be considered funds from non-Federal sources for purposes of paragraph (1).

(h) Treatment of Subsidy Layering Requirements- Neither subsection (g) nor any other provision of this section may be construed to prevent the use of tax credits allocated under section 42 of the Internal Revenue Code of 1986, in connection with housing assisted with amounts from a grant awarded under this section, to the extent that such use is in accordance with section 102(d) of the Department of Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3545(d)) and section 911 of the Housing and Community Development Act of 1992 (42 U.S.C. 3545 note).

(i) Reports-

(1) REPORTS TO SECRETARY- Not later than 90 days after the last day of each fiscal year, each State and locality that receives a grant under this section during that fiscal year shall submit to the Secretary a report on the housing projects and eligible entities assisted with amounts made available under the grant.

(2) REPORTS TO CONGRESS- Based on the reports submitted under paragraph (1), the Secretary shall annually submit to Congress a report on the grants awarded under this section during the preceding fiscal year and the housing projects assisted and eligible entities with amounts made available under those grants.

(j) Regulations- Not later than 6 months after the date of enactment of this Act, the Secretary shall issue regulations to carry out this section.

(k) Authorization of Appropriations- There are authorized to be appropriated for grants under this section, such sums as may be necessary for each of fiscal years 2006 through 2010.

SEC. 3. PRESERVATION PROJECTS.

Section 524(e)(1) of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (42 U.S.C. 1437f note) is amended by striking `amounts are specifically' and inserting `sufficient amounts are'.

END