nations of rental housing stock let me begin by thanking you for the strath comprehensive legislation federally subsidized housing is an essential housing resource in nearly every community in the united states of america our analysis demonstrates that in this committee alone over one hundred ninety thousand subsidized housing units are located and will expire over the next decade and we have a committee district by district list located in attachment  housing and we will need that rental housing stock as a backstop to the situation that we're in today funded by the macarthur foundation the joint center at harvard just published a study which indicated that as placed orders are  a growing number of renters are competing for a limited supply of affordable housing addressing this challenge begins with preserving the rental housing numbers erving rental housing will be much much helped by the legislation drafted by this committee resources to save tens of thousands throughout the nation these decisions to emphasize preservation are particularly sensible because preserving an existing home is significantly less expensive than constructing new affordable housing trust recently concluded that across approximately forty percent less to build to preserve a multifamily rental unit than to preserve one in the same community  expense the cost of building new affordable housing is almost double preserving affordable housing in the same neighborhood however in order for federally assisted housing to stand the test of time the federal government  as a fair and consistent partner by honoring its commitments the stock of a privately owned affordable rental housing is the result of a successful four decade partnership between the federal partnership and the private sector however last summer many owners went responsibility we owe the world there are many of us out there who are our responsibility to preserve and improve affordable rental housing we are doing our obligation we ask the federal government to meet its obligation halfway principles that we would urge you to consider in your legislation number one to encourage and support responsible long term ownership of affordable rental housing number two to encourage and streamline sales and transfers  originally built in one hundred seventy one under the hud section two thirty six program also had a project based assistance contract the property had been well cared for by the prior owner but for any property the thirty plus years old needed to be replaced and all of the assistance we provided with an independent study showing the expected market rents after a planned twenty thousand dollars per unit renovation as a section two thirty six project allows a budget rent increase to be as improved market rents and what allows that budget to include the new debt service and the cost structure after the renovation approved the rent increase and the use of the two thirty six subsidy and that project was successfully acquired and renovations began in april two and obvious decision to acquire and renovate the gardens we negotiate a purchase and sale agreement obtain the same subsidies from the state of new jersey and look forward to the day our residents adelphi village would drive through an improved neighborhood property and we look towards the day that both terminated the purchase contract and shortly after the property sold to an owner who continues to operate at the current level the pictures that you see before you were taken last week this rule which differentiates outcomes for different properties without the direction of congress the proposed million dollars in value the residents have had no choice but to be patient as they enter their fourth summer without renovations and they might expect continued problems broken elevators and deteriorating windows we think we are finally close to getting an approval with a differen result in properties that would otherwise have been renovated and preserved today instead to be put at risk of loss in the future this draft legislation would address the issue so more properties will be preserved and renovated when the need is there a presser and a preservation buyer is willing and able to purchase a property thank you for your time i'm happy to answer any questions on behalf of the tenants of lincoln place apartments in venice california i'm pleased to be here we applaud you for recognizing this critical issue the tenants of lincoln place have been victimized by the failure to protect the government's investment in affordable and workforce rental housing and their story will hopefully lend support to the position of janet before you today lincoln place is not currently a good property but because of rent control and long term at seventy a seven hundred ninety five unit it provided much of the affordable housing available in venice the property subsequent sale to investment speculators and the fo h of the tenant chill of the heart community space when we do not take steps to protect our investment in low to moderate income housing lincoln place was financed under section six zero weight of title six of the of the national housing act of one nine hundred thirty four it was an aggressive program and acted by congress which was designed to stimulate investment and low and moderate income rental housing during a period in which private enterprise was reluctant to invest in the child and a link in place was the largest development in california it was a particularly successful development due to the progressive design ideas of the most multicultural team that created it the team included a jewish developer an african american architect a asian american draftsman all working in an unusual combination and post world war two california there go it was to create a luxury on a budget their effort in one thousand nine hundred eighty nine was designated a historic resource in two thousand and five lincoln place is a wonderful example of how architecture and fight planning can be a social a successful social tool in creating ideal communities the tenants varied ethnically and an age there was economic diversity including section eight house teachers postal workers architects designers and lawyers  under the ownership of the original developer until the one nine hundred eighty s when it was first sold in two thousand and three called a repeat and one of the largest owners of subsidized housing in the country purchased the property and shortly thereafter even proceedings began on december sixth two thousand and five the sheriff's department locked out fifty two households including twenty one children it was the largest lockout in a single day in los angeles history these tenants were not a victim because they didn't pay their rent they were a victim because they were not paying enough rent a some of these tenant have still not found housing some have had to move out of date of families report that their children still suffer a nightmare some have moved to areas in los angeles where their children often hear gunfire at night after the two thousand and five lockout many of the remaining tenant who because of age and disability were entitled to a longer notice period now they had no choice but to move but they did not give up hope and their struggle has not been in vain the california court of appeal read recently ruled the evictions were unlawful negotiations are now under way to find a friendly buyer who will reinstate the tendencies of those who were a victim and rehabilitate the property the city is now poised end habitability standard while we are hopeful about the future the fight has been long and it is not over yet the success of our efforts to save lincoln place is due to a unique set of circumstances that cannot be easily replicated across the nation it took a group of tenants who love their community so much they simply refused to move they risk their credit standing they organized community meeting a stablished tent city they pursued the court system an activist community supported them when it was not fashionable to do so a team of lawyers worked on a pro bono basis or reduce b s to defend their rights some politicians lent their support including notably a member of this committee congresswoman maxine waters the personal sacrifice made by so many people has been extraordinary but it should not have been this hard and it should not have taken this long you have the opportunity to give janet the tools they need to save their home in my view the most important protection is the national right to purchase and the definition of a nonprofit  broad enough to cover tenet based cooperatives and land trust other important provisions include the tenant empowerment measures particularly those that provide the tenets of third party benefit beneficiaries under contract so that they can require enforcement legal should be awarded to prevailing parties in the hood contract in order to encourage legal support for efforts to enforce legitimate tenant right thank you for holding this hearing and allowing us to participate we'd be happy to answer any questions that you may have thank you mr joseph the chairman frank members of the committee for the opportunity to testify morning on one of the most critical issues in affordable housing i've submitted my written comments for the record my name is over and joseph i'm president c e o of retirement housing foundation headquartered in long beach california r h s phones and operates about fifteen thousand affordable rental homes assisted living units and nursing beds in twenty four states i'm testifying today on behalf of stores in affordable housing for the future known as safe r h s and say seven other members together provide affordable housing to more than one hundred thousand persons in forty eight states the district of columbia puerto rico and the virgin islands already jeff is also and active member of the american association of homes and services for the aging i'm a member of asa's affordable housing finance committee and safe and asa collaborate on policy issues that affect low income seniors the need for  our society is a very pressing issue and yet we're losing as you know much of what we have the first order of business is to keep fordable houses that we have already built great expense to the taxpayer your letter of invitation lays out many of the discouraging statistics i'm not going to repeat them i would only add that the loss of project based section eight housing is particularly damaging since tax credit housing without section eight cannot serve the very poor moreover as a rule preservation is cheaper faster and greener than new construction the importance of preservation is underlined by the decision of the john d and catherine macarthur foundation to invest one hundred fifty million dollars  initiative titled window of opportunity preserving affordable housing like arthur is making a difference by one strike and then the nonprofit sector to supporting the policy analysis three researching the impact of affordable housing on residents thanks immunities and for simulating the preservation work of state and local government any legislation to preserve affordable housing inventory will be complicated because as we've heard today all of the programs are very complex this morning i'd like to briefly f a size just for the first congress should extend the availability of down and protection vouchers to residents in a much wider range of properties when despite all efforts federally assisted or insured property is lost to affordability we have a moral obligation to give the residents access to affordable housing and current law falls well short of meeting this obligation secondly we need long term project basis systems for example with our h f we have had direct experience when the need for twenty year project basis systems to preserve affordable housing in tight markets made it possible for us to buy and preserve ten properties with nearly sixteen hundred apartments without passage of preservation legislation we would be blocked from acquiring the rest of this in the tories so we look forward to its passage when older section two zero two properties without section eight are refinanced or their mortgages mature they should also be eligible for project based rental assistance or they will continue to deteriorate in weak markets or be converted to expensive rentals or crowd owes in strong markets legislation to permit the use of project basis systems in place of enhanced boucher's and the conversion of rents up and wrap contracts to sections section a third congress should recognize the key role played by social enterprises like safe members and preserving affordable housing we operate efficiently at a scale to serve nonprofit missions we have invested heavily professional staff in technology and in training and yet sometimes continues to treat us as if we were captive organizations without a need for capital to deal with problem properties and to grow our missions where a for profit owner could make distribution of funds to investors for personal use a nonprofit subsidiary is barred from donating funds to its nonprofit parent corporation to expand the mission legislation should review should should remove these restrictions so that the distribution of cash flow and makes it possible to reuse these proceeds from recapitalization finally we must secure long term preservation in the sixty's and seventy's when america first began to attract developers to affordable housing congress offered a big upside on the eventual conversion of the housing to market rate in order to attract the necessary capital today we are often forced to use scarce tax credit resources to buy out the huge appreciation now there is a mature industry both nonprofit and for profit interests within owning affordable housing and there's no need for windfall rewards to attract investors to conserve tomorrow's resources say suggest that congress create a new category preservation owner in return for preserving in preserving preservation and saturdays these owners would be required to keep properties of affordable for at least forty years assuming continued availability of rental assistance thank you for inviting me to testify today thank you for the work that you have done on affordable housing for more than two decades and we look forward to continuing a tenant leader of the lower east side of manhattan new york city and also a board member of the national alliance of hud tenants in national ten unions representing families living in privately owned assisted multifamily housing since the title preservation bill to stop this last we also thank my own representative congresswoman nydia velazquez for falling into our forty four now titled four in the bill title four comes back full circle to center and brooks  demand market the four hundred eighty eight families at cherry street art a diverse working and middle class a microcosm of the city and the nation in two thousand and three our project based section they contract was such expired we were  what to do passage of the first right approaches where least give our tennis association and the city a fighting chance to save our homes by itself a first right approaches with not add to federal costs it was simply allow a city or nonprofit to purchase and at risk property using existing programs like mark up to market there is ample president besides title six for twenty years congress has provided a federal right a purchase for rural housing and several states have adopted similar laws the need for this measure is urgent in new york city we are losing affordable housing to real six pack speculators and alarming rate since two thousand and one over thirty two thousand units have already been lost and the rate has spiked dramatically and the show first write a purchase will help save twenty thousand more apartments like start city at immediate risk in the wake of nine eleven the loss of fifty ninety six just three investors have recently come very thirteen thousand subsidize apartments in new york city alone in harlem one investor flipped the sales price of four thousand units from three hundred million to one billion in just two years radical deregulation has failed in the mortgage industry and the subsidized multifamily industry alike we have lost too many affordable homes and communities is time to push back with judicious moderate regulations to save up for affordable rental housing as the committee has recommended for the single family stock congress this mental title six in ninety six due to concerns about excessive costs under title six residen benefits as long as owners like mine have an unrestricted choice to opt out they can extort ever increasing subsidies come in this from what taxpayer finance windfall profits since the alternative of losing a former housing it's unacceptable if first right a purchase will save money in the long run by removing subsidized housing from the speculative spiral less an owner of windfall and guaranteed benefits for an investment of any federal funds the section a funding shortfall reinforces these opt out trends and make the loss of hud housing a nationwide crisis as many as five hundred thousand units could be at risk due to funding uncertainty national natural also supports ten empowerment in the bill no cost measure well out of tennessee to join hud as partners to improve and save our homes tenants of the greatest stake and the first hand knowledge to make sure that public subsidies are use well owners and agents who provide quality housing should welcome us as partners in this mission we urge the committee to retain and strengthen these ten empowerment provisions and the first right of purchase went center save our homes we recommend the committee leadership for crafting a bill which reaffirms these principles and addresses the new challenges we face today to conclude in the three main language just that is spoken to in my comm would like to say in spanish going to ask you in my native tongue chinese share and in english thank you thank you very much chairman frank for holding this important hearing to examine preservation of affordable rental housing one of them is kemp and i'm honored to be here today on hat on behalf of the national portable housing management association i'm currently serving as secretary of issue preventing the loss of affordable rental houses an important public policy goal you have taken considerable effort to make preservation a national preservation is the heart of what mamma members do our organization represents managing agents and elders for the for profit and nonprofit community we participate in the federal rental assistance program my written written statement has been submitted for the record testimony well for today i will summarize the  or experiences with us as a business partner and concerns about long term sustainability projects insufficient operating cost adjustment factors and overall complexity of preservation transaction was very nice to hear hud say this morning they worked out all their problems to be relying on figures and statistics that were before the debacle last summer when many operators were faced with three and four months of no subsidy the number of property owners that are going to be opting out this year remains to be seen we've also received a lot of indicators indication from our members that in fact they will be opting out because they're receiving pressure from limited partners limited partners are looking at no return a risky project it's not receiving it's regular funding and no rental adjustments to to make corrections the mark to market program underwriting or in the to make up for miscible help to private vendors who are now raising rates which are on accountable for there is no way under the current system for us to adjust for those five for those increase many of the projects that went through the mark to market process have in sufficient funds or ministre to a problem addressed in regulatory issues that affect timeliness of happiness and script approval of representative maxine waters want to market extension and enhancement act h r thirty nine sixty five which includes a section requiring hud to pay interest on late happening as the owner is getting more difficult for managing agents to convince owners to stay in the program owners especially the limited partners are looking at a situation where their costs are increasing returns are diminishing and the uncertainty of hop on them is putting the project at risk of default on the mortgages their mortgages nama recommends incentives which encourage voluntary transfer qualified preservation and of the weather for profit or nonprofit more successful preservation a successful preserve property should be physically and financially sustainable for twenty to thirty years properties will have to be recapitalized sitting on the proposal now for over a year and a half they've made no no comment on it we'd like to thank you for allowing nominees here to testify and be happy to answer any questions you  r chairman thank you for inviting me to testify in this important topic of affordable housing preservation my name is brian poole and i'm a partner in evergreen partners which is based in portland maine my partners i slowly focus on the acquisition that program more than seven hundred fifty section to thirty six properties approximately seventy five thousand units have been substantially rehabbed in preserved hyde recognizes that decoupling program as one of its premier preservation initiatives that being said not much has been done to take the lessons learned in that program and applying them throughout the hud portfolio no question that we need more affordable housing and there's no question that we have a lot of expiring units notwithstanding the benefits of that to thirty six program we need to take those lessons and actually apply them to the deed for threes and the other other programs out there many of these properties continue to be at risk to convert to market a housing or an crucial need of updating repairs aging properties or approaching the end of the use restrictions as we discussed earlier today it is much less expensive to preserve an existing asset than to build a new one the many lenders and equity providers are willing to take market risk they're not willing to take hud risk and we need to know what the rents are going to be unfortunate the section eight guidelines do not allow for  the second second item that worked in the two thirty six program was the increase of annual distributions for preservation owners both for profit and for non profit both the section two thirty six decoupling and the section two zero two preservation programs f it in order to receive a distribution of six percent of new equity six percent of the new money they're putting into the transaction that annual distribution is a critical incentive donors again the section eight guidelines do not allow for updating of the annual distribution and today in many preservation transactions the new owner must accept the original owner's manual distribution limitation but as a regulatory authority to make this change but it chose not to do so this is a no cost item to hutton and to the federal government the rents are not  based on owner distribution they're based on expenses or on market market factors so this really isn't accosting implication to what it basically incentivized wholly to keep people in the affordable program versus converting the market where there is no distribution limitation whatsoever my partners and i personally have experience with that issue and find it difficult to justify the purchase and rehab of properties because of that we've worked with we worked through many of the program issues and they've been successful but there are others that we have not full guidelines actually allow for this to be rolled over however teams have a policy where they're not allowing it to happen in which case they have an older property with non servicing debt where all they need to do is the rollover and we would have a long term preservation transaction the senate but i mean with regard to that and some other issues and i know you've got some very decent people and people were simply maximizing their property wouldn't be in the affordable housing business there were easier ways to make money than dealing send a message to many of you give us a year i understand and they've done good work depending on what happens frankly you november we may be in a position now where we will have done some of the things that they want to do so they can hang on for the year about it any of the owners any anyone could people if we did it right if we did it in a way that did not require the owner who had independent of this decided to sell  exorbitant prices to get their foot in the door they're then ignoring the afford long term affordability requirements causing the project to default and forcing the general partners to sell i think if we can come up with  out right now they're driving you can have an appraisal on a property at one hundred ten unit property in jersey city building have an appraisal that says the property is worth four million dollars the group that came in to buy some of the limited partners affordable i think the preservation imperative is obvious we know that preservation is about fifty percent less than most states and in your city new construction is double the price of preservation so i think in this environment