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[House Report 110-464]
[From the U.S. Government Publishing Office]

110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-464

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  SECTION 515 RURAL HOUSING PROPERTY TRANSFER IMPROVEMENT ACT OF 2007

                                _______
                                

December 4, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 3873]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3873) to expedite the transfer of ownership of 
rural multifamily housing projects with loans made or insured 
under section 515 of the Housing Act of 1949 so that such 
projects are rehabilitated and preserved for use for affordable 
housing, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     3
Performance Goals and Objectives.................................     3
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Committee Cost Estimate..........................................     3
Congressional Budget Office Estimate.............................     3
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     5
Earmark Identification...........................................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill, as Reported............     6

                          Purpose and Summary

    H.R. 3873, the Section 515 Rural Housing Property Transfer 
Improvement Act of 2007, reforms the process by which the 
United States Department of Agriculture (``USDA'') considers 
applications for transferring Section 515 rural multifamily 
housing projects from one owner to another. The bill also 
provides for a review of the bureaucratic procedure within USDA 
for rural housing projects specifically where such programs 
involve low income housing tax credits.

                  Background and Need for Legislation

    Section 515 of the Housing Act of 1949 is a direct loan 
program administered by the USDA that provides for low interest 
loans to construct and renovate rural multi family housing 
projects. The program serves approximately 450,000 families in 
approximately 16,000 buildings nationwide. The families that 
live in Section 515 housing are low and very low income, most 
living off less than $9,000 annually. When a transfer of 
ownership occurs with a Section 515 property, it is generally 
good for the residents because the building will receive new 
sources of capital that result in building renovations. 
Additionally, the building will most likely be subject to new 
use restrictions, which will keep it affordable 20, or more, 
years.
    A transfer of ownership must be approved by the USDA. 
Applications for transfer of ownership in Section 515 
properties are processed and approved/denied by the USDA 
through state Rural Development (RD) offices. The national 
office within the USDA that administers rural housing is the 
Rural Housing Service (RHS). The RHS currently does not have 
control over processing such applications.
    Applications to transfer ownership in a Section 515 
property are not processed in a timely manner in some state RD 
offices. Non-action or a lengthy delay on an application by a 
state RD office often prevents the underwriting of the deal 
from going forward. Both Section 515 project owners and tenants 
desire that these deals move in a timely manner so that the 
owners who desire to leave the Section 515 program can transfer 
the properties to owners who want to operate the 515s. The 
change in ownership is also good for the tenants because the 
deals will likely provide for rehabilitation of the properties 
and preservation of the properties through long-term use 
restrictions.
    H.R. 3878 transfers unprocessed completed applications to 
the national RHS office for processing after so many days of 
non-action by the state RD office. (After 45 days for a single 
application, after 90 days for a portfolio application of 10 or 
fewer properties, and after 120 days for a portfolio 
application of 11 or more properties. The national office then 
has, respectively, 30 days, 60 days, or 120 days to process the 
application(s) transferred to its office.) Therefore, if a 
state RD office does not act in a timely manner, it will loose 
its control over the process. State RD offices that are 
processing applications in a timely manner should not be 
affected by the bill.
    The bill also requires the USDA to make administrative and 
procedural changes to expedite the approval of applications; 
requires the USDA to consult with the IRS and HUD to better 
coordinate LIHTC deals; and requires the USDA to report to 
Congress on the requirements in the bill by July 1, 2008.

                                Hearings

    No hearings were held on this legislation in the 110th 
Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
October 31, 2007, and ordered H.R. 3873, the Section 515 Rural 
Housing property Transfer Improvement Act of 2007, favorably 
reported to the House by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. A motion by Mr. Frank to 
report the bill to the House with a favorable recommendation 
was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 3873 reduces the regulatory burden for participants in 
USDA housing programs with the goal of providing for an 
improved approval process in order to preserve and create more 
affordable housing in rural America.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                 November 15, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3873, the Section 
515 Rural Housing Property Transfer Improvement Act of 2007.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3873--Section 515 Rural Housing Property Transfer Improvement Act 
        of 2007

    Section 515 of the Housing Act of 1949 provides the Rural 
Housing Service (RHS) within the Department of Agriculture with 
the authority to make direct loans to developers to build 
multifamily rental housing in rural areas that is affordable to 
very low-income families, elderly people, and persons with 
disabilities. Developers of those projects can apply to the 
Secretary of Agriculture to transfer ownership or control of 
such housing to another entity. Those transfers (which are 
essentially sales), however, are made only if the Secretary 
determines that the transfer would support housing assistance 
for low-income people and would be in the best interest of the 
residents.
    H.R. 3873 would require RHS to make certain administrative 
and procedural changes to improve its process for reviewing 
requests for transfers of housing supported by section 515 
loans. Based on information from RHS, CBO estimates that 
implementing H.R. 3873 would cost about $1 million annually 
over the 2008-2012 period, subject to appropriation of the 
necessary amounts. Such funding would be used for additional 
personnel and contract support.
    In addition, CBO expects that some transfers of property 
would happen more expeditiously under this legislation, which 
could cause taxable events to occur sooner than they otherwise 
would. Although faster processing of property transfers could 
increase revenue from individual income taxes, CBO estimates 
that the total effect on revenues for any fiscal year would be 
less than $500,000; the effect over the 2008-2017 period also 
would be less than $500,000.
    H.R. 3873 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman. This estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 3873 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation

Section 1. Short title

    This section establishes the short title of the bill, the 
``Section 515 Rural Housing Property Transfer Improvement Act 
of 2007.''

Section 2. Congressional findings

    This section sets forth Congressional findings regarding 
rural housing and Section 515, including the population served 
by Section 515 projects, the desire of owners to transfer 
Section 515 projects, and the need for the USDA to protect the 
Section 515 portfolio.

Section 3. Transfers of Section 515 rural multifamily housing projects

    This section requires the USDA to make administrative and 
procedural changes to expedite the approval of applications for 
transfer of ownership in Section 515 properties, and requires 
the USDA to consult with the IRS and HUD to simplify the 
coordination of rules, regulations, forms, and approval 
requirements for housing projects assisted by low income 
housing tax credits. The section requires State RD offices to 
transfer unprocessed completed applications to the national RHS 
office for processing after so many days of non-action by the 
state RD office. (After 45 days for a single application, after 
90 days for a portfolio application of 10 or fewer properties, 
and after 120 days for a portfolio application of 11 or more 
properties. The national office then has, respectively, 30 
days, 60 days, or 120 days to process the application(s) 
transferred to its office.)

Section 4. Report

    This section requires the USDA to report to Congress by 
July 1, 2008, regarding its actions to better coordinate with 
the IRS and HUD on the regulatory and bureaucratic requirements 
for USDA rural housing programs involving low income housing 
tax credits. The report shall identify and describe 
improvements in transferring ownership in Section 515 
properties, and make recommendations on any necessary 
legislative changes.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                          HOUSING ACT OF 1949

TITLE V--FARM HOUSING

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DIRECT AND INSURED LOANS TO PROVIDE HOUSING AND RELATED FACILITIES FOR 
              ELDERLY PERSONS AND FAMILIES IN RURAL AREAS

  Sec. 515. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) Condition.--Project Transfers.--After the date of the 
enactment of the Act entitled ``An Act making appropriations 
for Agriculture, Rural Development, Food and Drug 
Administration, and Related Agencies programs for the fiscal 
year ending September 30, 1997, and for other purposes'', the 
ownership or control of a project for which a loan is made or 
insured under this section may be transferred only if the 
Secretary determines that such transfer would further the 
provision of housing and related facilities for low-income 
families or persons and would be in the best interests of 
residents and the Federal Government.
  (2) Transfers for Preservation and Rehabilitation of 
Projects.--
          (A) In general.--The Secretary shall make such 
        administrative and procedural changes as may be 
        necessary to expedite the approval of applications to 
        transfer ownership of projects for which a loan is made 
        or insured under this section for the preservation, 
        continued use restriction, and rehabilitation of such 
        projects. Such changes may include changing approval 
        procedures, increasing staff and resources, improving 
        outreach to project sponsors regarding information that 
        is required to be submitted for such approvals, 
        changing approval authority between national offices 
        and the State and local offices, simplifying approval 
        requirements, establishing uniformity of transfer 
        requirements among State offices, and any other actions 
        which would expedite approvals.
          (B) Consultation.--The Secretary of Agriculture shall 
        consult with the Commissioner of the Internal Revenue 
        Service and the Secretary of Housing and Urban 
        Development, and take such actions as are appropriate 
        in conjunction with such consultation, to simplify the 
        coordination of rules, regulations, forms (including 
        applications for transfers of project ownership), and 
        approval requirements for housing projects for which 
        assistance is provided by the Secretary of Agriculture 
        and under any low-income housing tax credits under 
        section 42 of the Internal Revenue Code of 1986 or tax-
        exempt housing bonds. The Secretary of Agriculture 
        shall involve the State Rural Development offices of 
        Department of Agriculture and the Administrator of the 
        Rural Housing Service in the consultations under this 
        subparagraph as the Secretary considers appropriate.
          (C) Preservation and rehabilitation.--The Secretary 
        shall actively facilitate transfers of the ownership of 
        projects that will result in the preservation, 
        continued use restriction, and rehabilitation of such 
        projects.
          (D) Final authority over transfers.--The Office of 
        Rental Housing Preservation of the Rural Housing 
        Service, established under section 537 (42 U.S.C. 
        1490p-1), shall have final regulatory authority over 
        all transfers of properties for which a loan is made or 
        insured under this section, and such Office may, with 
        respect to such transfers, work with and seek 
        recommendations from the State Rural Development 
        offices of the Department of Agriculture.
          (E) Deadlines for processing of transfer 
        applications.--
                  (i) Procedure.--If a complete application, as 
                determined by the Secretary, for a transfer of 
                ownership of a project or projects is not 
                processed, and approved or denied, by the State 
                Rural Development office to which it is 
                submitted before the applicable deadline under 
                clause (ii)--
                          (I) such State or local office shall 
                        not have any further authority to 
                        approve or deny the application;
                          (II) such State or local office shall 
                        transfer the application in accordance 
                        with subclause (III); and
                          (III) such application shall be 
                        processed, and approved or denied, in 
                        accordance with clause (iii) and only 
                        by the Office of Rental Housing 
                        Preservation, which may make the final 
                        determination with the assistance of 
                        other Rural Development employees.
                  (ii) Deadline for state and local offices.--
                The applicable deadline under this clause for 
                processing, and approval or denial, of a 
                complete application for transfer of ownership 
                of a project, or projects, shall be the period 
                that begins upon receipt of the complete 
                application by the State Rural Development 
                office to which it is submitted and consists 
                of--
                          (I) in the case of an application for 
                        transfer of ownership of a single 
                        project, 45 days;
                          (II) in the case of an application 
                        for transfer of ownership of multiple 
                        projects, but not exceeding 10 
                        projects, 90 days; and
                          (III) in the case of an application 
                        for transfer of ownership of 11 or more 
                        projects, 120 days.
                  (iii) Deadline for office of rental housing 
                preservation.--In the case of any complete 
                application for a transfer of ownership of a 
                project, or projects, that is transferred 
                pursuant to clause (i), shall be processed, and 
                approved or denied, before the expiration of 
                the period that begins upon receipt of the 
                complete application and consists of--
                          (I) in the case of an application for 
                        transfer of ownership of a single 
                        project, 30 days;
                          (II) in the case of an application 
                        for transfer of ownership of multiple 
                        projects, but not exceeding 10 
                        projects, 60 days; and
                          (III) in the case of an application 
                        for transfer of ownership of 11 or more 
                        projects, 120 days.
                  (iv) Appeals.--Only decisions regarding 
                complete applications shall be appealable to 
                the National Appeals Division of the Department 
                of Agriculture.

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