Preservation Policy Provisions in FY12 Spending Bill

The “minibus” appropriations bill, H.R. 2112, that set program funding levels for both HUD and the Department of Agriculture Rural Development also contains legislative language to create or update policy provisions relating to preservation. The biggest news was the last-minute inclusion of an amendment, co-sponsored and championed by Oregon Senator Jeff Merkley, that allows for the project-basing of tenant protection vouchers issued after project-based rental assistance contract expirations or opt-outs at properties with Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), or Section 8 moderate rehab (Mod Rehab) contracts. Owners with expiring Rent Supp and RAP contracts do not have the ability to renew and those with Section 8 moderate rehab contracts can only renew for one-year terms, greatly limiting long-term preservation possibilities. Project-basing of tenant-based vouchers can ensure the affordability of the units involved, both for the current residents and in the long term, while also increasing the ability to recapitalize the property if rehabilitation is needed. Eligibility is limited to properties with one of the three contract types noted above and at which HUD has issued tenant protection vouchers since FY07. The authority will last through FY13. HUD will issue guidelines for owners to obtain resident input and secure agreement from the PHA administering the vouchers before the project-basing can occur. The provision also waives the project- and PHA-level caps on the percentage of tenant-based vouchers allowed to be project-based.

H.R. 2112 incorporates some of HUD’s Rental Assistance Demonstration (RAD) program proposal. While RAD was not funded, the language included allows owners of Mod Rehab properties to apply to convert their rental assistance to project-based Section 8 or project-based voucher contracts, thus opening up the possibility of renewals longer than one year. This ability is subject to a 60,000 unit national limit, for which public housing also qualifies, and expires at the end of FY15.

Other preservation-related provisions in the bill allow HUD to transfer the project-based Section 8 contracts of physically or financially distressed properties; continue and expand the requirement to preserve project-based rental assistance contracts before and during the foreclosure process; and extend, through FY15, the Mark to Market program, which allows owners to restructure HUD-assisted mortgages when the rents are marked down to market levels during contract renewals.

Click here for the full text of H.R. 2112.

— Posted on 11/21/2011