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30–537 PDF 2006

H.R. 5039, THE SAVING AMERICA’S

RURAL HOUSING ACT OF 2006

HEARING

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 25, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–86

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

ROBERT W. NEY, Ohio, Chairman

GARY G. MILLER, California, Vice Chairman 

RICHARD H. BAKER, Louisiana 

WALTER B. JONES, JR., North Carolina 

CHRISTOPHER SHAYS, Connecticut 

PATRICK J. TIBERI, Ohio 

GINNY BROWN-WAITE, Florida 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

STEVAN, PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

CAMPBELL, JOHN, California 

MICHAEL G. OXLEY, Ohio 

MAXINE WATERS, California 

NYDIA M. VELA ́ ZQUEZ, New York 

JULIA CARSON, Indiana 

BARBARA LEE, California 

MICHAEL E. CAPUANO, Massachusetts 

BERNARD SANDERS, Vermont 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

EMANUEL CLEAVER, Missouri 

AL GREEN, Texas 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

April 25, 2006 ................................................................................................... 1

Appendix: 

April 25, 2006 ................................................................................................... 39

WITNESSES 

TUESDAY, APRIL 25, 2006

Anders, Gideon, Executive Director, National Housing Law Project .................. 15

Arbury, James N., Senior Vice President of Government Affairs, National 

Multi Housing Council, and National Apartment Association ......................... 17

Carew, Thomas, Red River Director, Frontier Housing, Inc ................................ 18

Davis, Russell T., Administrator, USDA Rural Housing and Community Programs ..................................................................................................................... 3

Loza, Moises, Executive Director, Housing Assistance Council ........................... 20

Rapoza, Robert A., Executive Secretary, National Rural Housing Coalition ..... 22

Rice, Robert L. Jr., President, Council for Affordable and Rural Housing ......... 24

Wehrwein, Charles, Senior Vice President, Mercy Housing, Inc. ........................ 25

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 40

Davis, Hon. Geoff .............................................................................................. 52

Waters, Hon. Maxine ........................................................................................ 44

Anders, Gideon ................................................................................................. 45

Arbury, James N. ............................................................................................. 55

Carew, Thomas ................................................................................................. 67

Davis, Russell T. ............................................................................................... 73

Loza, Moises ...................................................................................................... 81

Rapoza, Robert A. ............................................................................................. 89

Rice, Robert L. .................................................................................................. 98

Wehrwein, Charles ........................................................................................... 106

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Statement of the National Association of Home Builders ............................. 117

Letter from the National Association of Realtors .......................................... 121

(1)

H.R. 5039, THE SAVING AMERICA’S 

RURAL HOUSING ACT OF 2006

Tuesday, April 25, 2006

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:04 p.m., in room 

2128, Rayburn House Office Building, Hon. Geoff Davis presiding. 

Present: Representatives Davis of Kentucky, Neugebauer, Cleaver, and Waters. 

Mr. DAVIS OF KENTUCKY. [presiding] This hearing of the Subcommittee on Housing and Community Opportunity will come to 

order. The Subcommittee on Housing and Community Opportunity 

meets today for the purpose of hearing testimony on H.R. 5039, the 

Saving America’s Rural Housing Act, a bill to improve Section 515, 

Rural Multi-Family Housing Programs, through sensible and timely reform measures. 

The Housing Act of 1949 originally authorized the U.S. Department of Agriculture to make loans to farmers to improve their ability to provide decent living quarters for their employees and others. 

The program has evolved over the years to provide affordable housing for the rural community as a general population. 

Rural Development, an agency in the U.S. Department of Agriculture, released a November 2004 study prepared for USDA by a 

private consulting firm on the Section 515 portfolio. With an average property age of 28 years, the study revealed that nearly all 

Section 515 properties included in the study were in need of additional funds to cover essential repairs and maintenance costs. 

I’d like to briefly share with the committee one of the most interesting observations of the study, ‘‘If new funds are not invested in 

these properties, two-thirds of the portfolio will only be able to 

maintain its current status, which keep in mind is not good already 

for the majority properties. If the roofs never leak, the paint jobs 

last forever, the building siding is everlasting, no potholes ever develop in the parking lot, no one will ever need to replace a furnace 

or air conditioner, no doors will ever rust or rot, and all windows 

will work forever.’’ 

If you’ve ever owned a home, you know that these things would 

be ridiculous assumptions on which to base your personal budget 

in an investment in a home or residential property. And they certainly aren’t assumptions on which I’d like to base national policy. 

2

The fact of the matter is that Section 515 properties need help, 

and they need it now, and they need our help. It will only become 

more expensive to maintain the program as time progresses. I’ve 

seen firsthand the dilapidated state of the Section 515 portfolio 

while traveling Kentucky’s diverse Fourth District during my first 

year as a representative. In the Fourth District alone, there are 40 

Section 515 properties. Many of the properties are in dire need of 

assistance and repair. 

Solutions are needed now to revitalize the program and ensure 

that it’s sustainable for the future. These reforms will have a direct 

and positive impact on over 1,000 families in the Fourth District 

of Kentucky and many, many more in rural communities across the 

United States. 

H.R. 5039 will create a revitalization program by offering restructuring plans to Section 515 development owners. This will preserve ailing Section 515 properties for the future, saving the 

United States taxpayers approximately $2 billion in maintenance 

and rehabilitation costs by addressing the programs preventively 

now. 

Section 502(c) of the Housing Act restricts the rights of owners 

of Section 515 properties to prepay their loan, even after they’ve 

fulfilled their contractual duty to the USDA. H.R. 5039 will nullify 

the onerous restrictions in Section 502(c) to allow for prepayment 

of certain Section 515 loans entered into before 1989, thereby alleviating expensive litigation against the Rural Housing Service, 

which has cost taxpayers in the United States millions of dollars 

today. 

Additionally, a voucher program will be created to protect tenants who live in the properties subject to prepayment. It’s estimated that only 10 percent of the current development owners 

would consider prepaying their loans. 

H.R. 5039 will save money on future litigation by nullifying the 

burdensome prepayment restriction and protecting tenants, while 

revitalizing the existing Section 515 portfolio to continue the tradition of providing housing assistance to our rural families. 

This is proactive legislation that seeks to deal with the apparent 

problems now rather than deal with more expensive solutions later. 

I’d like to thank the Administration, the Financial Services Committee, Ranking Member Frank, Chairman Ney, and other Members on both sides of the aisle for their help in putting together a 

good piece of legislation that will help to solve the problems of prepayment while combatting the aging portfolio of Section 515 properties. 

The bill institutes sensible and timely reforms that will enable 

the program to continue providing low income rural families with 

affordable housing. 

Thank you, Chairman Ney, and Ranking Member Waters, for 

holding the hearing today on such an important and relevant topic. 

I also want to thank the witnesses on both of our panels for participating, for their graciousness in attending the hearing today, and 

I look forward to hearing your testimony and your thoughts on the 

Section 515 program. 

Without objection, all members’ opening statements will be made 

part of the record. Does the gentleman from Texas have an opening 

3

statement? Then we’ll move to introducing the first panel, in which 

we have one witness. I’d like to introduce Mr. Russ Davis. He’s the 

Administrator for Rural Development Housing and Community Facilities Programs at the Department of Agriculture. 

Prior to joining the Department of Agriculture, Mr. Davis served 

as a Senior Policy Adviser with the Department of the Treasury, 

and during the Administration of President George Herbert Walker 

Bush, he served as the Acting Deputy Assistant Secretary for 

Housing Operations at the Department of Housing and Urban Development. 

Without objection, your written statement will be made part of 

the record, and you will be recognized for a 5-minute summary of 

your testimony. 

STATEMENT OF RUSSELL T. DAVIS, ADMINISTRATOR, USDA 

RURAL HOUSING AND COMMUNITY PROGRAMS 

Mr. DAVIS. Thank you very much, Mr. Chairman and members 

of the subcommittee. I thank you for the opportunity to present 

this Administration’s initial comments on H.R. 5039, the Saving 

America’s Rural Housing Act of 2006. 

Let me begin by acknowledging and thanking the sponsors and 

co-sponsors of H.R. 5039 for their leadership on this important 

issue. Mr. Chairman, we appreciate the fact that you personally 

have been interested in this bill, as well as Chairman Ney, and 

Ranking Member Frank. The quality of thought and effort are evident throughout. We also thank everyone involved with this legislation for their work and the experience they have brought to this 

process. 

There is an urgent need to address long-term physical and economic needs in the rural rental housing portfolio. There are over 

17,000 properties in this portfolio. Our studies have shown that the 

two biggest threats to it are prepayment, expected to affect 10 percent of the portfolio, and more importantly, the potential loss of 

properties due to physical deterioration and economic obsolescence. 

This bill will address both problems. I’m grateful that we are stepping up to that challenge. 

The Administration supports the basic strategy outlined by this 

legislation and believes it will work. In fact, I’m pleased to report 

to the committee that the two new housing mechanisms in this bill, 

rural vouchers and debt restructuring, are already being tested on 

a demonstration basis with promising results. 

First, and thanks to your assistance, Mr. Chairman, USDA 

issued its first rural housing vouchers last month. A property in 

southern Georgia had left the program after meeting all of the prepayment requirements. The residents would have faced eviction 

within 30 days, but Under Secretary Thomas C. Dorr, of the USDA, 

personally went to Georgia to give the affected families housing 

vouchers that allowed them to remain in their homes. 

On the debt restructuring side, and also thanks to your assistance, Mr. Chairman, USDA has begun a test demonstration of the 

types of multi-family restructurings envisioned in H.R. 5039. Within the last 30 days, owners of approximately 4,000 properties have 

applied to undergo debt restructuring. This shows that there is demand for the transactions authorized by H.R. 5039. The 4,000 apVerDate 0ct 09 2002 18:14 Nov 17, 2006 Jkt 003537 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\DOCS\HBA115.040 HFIN PsN: TERRIE
4

plications total almost 25 percent of the entire Section 515 portfolio. But without the authorization provided by H.R. 5039, only a 

handful of these can undergo a restructuring that will keep them 

affordable. 

The Administration’s own revitalization proposal was circulated 

on the Hill in August of 2005. The President’s fiscal year 2007 

budget supports this proposal by requesting $74 million for vouchers and debt restructuring. The Administration’s proposal and H.R. 

5039 are generally quite similar. We support the bill, with certain 

clarifications, and look forward to working with the subcommittee 

to address these issues. 

One item of concern is that H.R. 5039 would set a maximum tenant contribution of 30 percent for restructured properties. This has 

been called the overburden provision, as it aims to protect tenants 

who pay over 30 percent of their incomes toward rent. 

Our concern with this provision in H.R. 5039, as written, is that 

it may have unintended consequences. If the maximum rent provisions remain in H.R. 5039, at a minimum, we strongly recommend 

that certain controls be put in place that would still protect the 

currently overburdened. Such provisions could include: 

First, allowing restructurings where additional rental assistance 

funds are required only for residents in units who are overburdened at the time of restructuring, in other words, taking a snapshot of the property at that time. This would protect the currently 

overburdened, yet not expose the properties in the program to high, 

open-ended costs if the overburdened leave the properties. 

Second, we would suggest limiting the potential beneficiaries to 

tenants or applicants who don’t already have HUD assistance. 

About a fifth of our units already have Section 8 tenant assistance. 

We believe that the Section 515 program will, in the long run, be 

on a stronger footing by preserving multiple sources of tenant assistance. 

The Administration applauds Members of Congress for taking 

this very important first step. We remain committed to protecting 

tenants and retaining as many properties as we can in the Section 

515 program. USDA Rural Development looks forward to working 

expeditiously with Congress on this important legislation. 

Thank you very much. 

[The prepared statement of Mr. Davis can be found on page 73 

of the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Davis. This is an issue 

in the rural counties and transitional counties in my home district. 

We have great personal interest in creating longer-term, affordable 

housing opportunities increasing that outreach, but also making 

sure that we have good stewardship of the process. 

So one question I’d like to start with is, do you feel that the program that we presented in this legislation gives you all the restructuring tools that you need? 

Mr. DAVIS. Yes, Mr. Chairman. We believe that this is an adequate set. There are approximately 10 different tools enumerated 

in the legislation, and this gives us what we call a tool box that 

we can choose the least expensive and most effective financial tool 

in any given situation. 

5

Mr. DAVIS OF KENTUCKY. One related thing which is of some concern to me, just in general, dealing with many Federal agencies, 

some of the process tools or systemic tools, software in particular, 

methods of processing information and maintaining accountability 

are, let’s say, somewhat less efficient than we find in the commercial sector, because of the goal to keep costs under control and 

more money adding value directly. 

Could you comment a little bit on the steps that you’re going to 

take to make sure that taxpayer dollars are not paid away in overhead in this program but that we can direct more to the front 

lines? 

Mr. DAVIS. Yes, Mr. Chairman, that’s a very good issue. We have 

been looking very closely at the logistics of what it will take to 

process up to 10,000 properties for restructuring, and what it really 

comes down to is that we have to use automation and standardization to get large numbers through on time. 

We have prepared standard documents over the past year, and 

in fact we’ve closed a number of properties already under our current authorities, so that we have standard documents and we are 

not handcrafting property by property. We’re going to have to do 

these wholesale, not retail. 

The second thing we are doing is automating the process. We’re 

linking the documents together so that, again, we are not reinventing the wheel on every property. I would point out that we 

took in 4,000 property applications for the restructuring in 30 days, 

and we did it all on the Web in an automated fashion, and are scoring them automatically. So automation and standardization are 

really going to be critical to keeping the cost of these transactions 

down. 

Mr. DAVIS OF KENTUCKY. As the legislation moves forward, I’d 

personally like to see some of the tools that you’re using. Hopefully 

they can be adopted in some of our other agencies, as well, to speed 

processing and to reduce cost. 

Before deferring to other members for some questions, I do want 

to have you discuss one practical application, a pilot project you alluded to in your testimony in Hinesville, Georgia. There was a pilot 

program with the use of vouchers for folks who were caught in the 

prepayment situation. 

And one of the, I guess, some would call it six degrees of separation, but it’s apparently a very small world circumstance. Many of 

the soldiers that you mentioned in that, whether you realize it or 

not, were from the 2nd Brigade Combat Team, the 3rd Infantry Division, who had just come back from Iraq at the first of the year, 

and they were commanded by a close friend of mine from college. 

So, I’d like you to maybe bring the human side of this and how 

this—the pilot process steps were implemented by the Secretary 

down there personally, but also if you might comment as well on 

maybe some things that you saw in the process that could be improved or changed to make it even more effective when we get to 

an actual rollout. 

Mr. DAVIS. Sure, and I thank you for the opportunity, Mr. Chairman. The voucher program is designed to protect tenants when 

there is a prepayment of the loan. When the loan is prepaid, the 

rental assistance terminates, the property leaves the program, and 

6

the tenants are effectively on their own. We do not have a conversion voucher program like HUD does, and that is one of the things 

that H.R. 5039 is addressing. 

On a pilot basis, we were given a small amount of money this 

year to experiment with a voucher program. In order to implement 

it quickly, without going through the entire regulation process, we 

worked with HUD on an interagency agreement to essentially use 

their regulations. In the second week of February, we received notice that a property in Hinesville, Georgia—which is, I believe, 

where Fort Stewart is—had given notice that they would be prepaying in about 10 days. And in fact, they did prepay their loan. 

And the residents had 30 days to leave the property or face a doubling of their rents. The area is growing very quickly, and the 

housing markets are very, very tight. And we have heard that 

housing markets were affected up to 100 miles in each direction. 

So the tenants did not have very many options. 

The Under Secretary was able to go down there and was able to 

hand out vouchers to the tenants. They had gotten notice within 

2 weeks of their rent increase notices, so they were allowed—they 

were permitted to stay in their properties, and the rent increase 

was effectively picked up by the vouchers. This actually was a costeffective way for us to protect the tenants, so we are pleased with 

the low cost of it, but also the flexibility. Normally, we would only 

use vouchers if there were no other way to protect the tenants, 

such as finding vacant units in other properties of ours or finding 

other housing subsidies. This is one of those cases where all of the 

other possibilities we had were not available, and so the vouchers 

were available just in time. And we thank the committee for their 

help on this. 

The woman who received voucher number one was a servicewoman, and there were quite a few servicepeople in this apartment 

complex. 

Mr. DAVIS OF KENTUCKY. One more question that comes to mind 

just listening to you describe that story, particularly as we’re dealing with prepayment situations, one thing that I would not want 

to see happen, and that I know many of the panel members would 

feel the same way, is that there be no means for a precipitous eviction, particularly in a situation like that. 

Do you foresee any controls from a regulatory perspective? You 

know, I’m very troubled hearing that soldiers coming back from 

serving their country would be faced with what might be greed-motivated eviction on the part of a civilian property owner there. But 

what can—what would you recommend or see as steps to take to 

prevent such a thing from happening in the future? 

Mr. DAVIS. Well, we believe that the more notice, the better. And 

there is some discussion, and you will hear from the panel coming 

later; there is some discussion about the timing of the notice period, and this is something we’d like to work with the committee 

on. 

There are two competing forces. The owners, the financiers, and 

the government want as much notice as possible, because they 

need to get other financing lined up or buyers, etc. Whereas the 

longer the tenant notice you have, the tenants live under a cloud 

7

longer, and they become understandably concerned. There can be 

a lot of anxiety. 

I see what happens when these notices go up in the washroom, 

and we want to minimize any period of anxiety. That’s why we 

really like having the voucher option so that we can say, don’t 

worry about this. You will be taken care of. And that’s the most 

important thing. So having a voucher is number one. 

And number two is having a good marketing effort around a reasonable notice period so that the tenant anxiety is minimized. 

Mr. DAVIS OF KENTUCKY. Okay. Thank you. The gentleman from 

Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman and Mr. Davis, thank 

you for being here today. With what we have all seen in the Gulf 

Coast region, I’m wondering what the demand is in that area. 

We’re talking about properties before 1995. How many properties 

were damaged or destroyed in Hurricanes Katrina and Rita? Do 

you have any idea? 

Mr. DAVIS. The numbers I have seen from FEMA, the single family homes, about 120,000 or so in Louisiana, and I believe 80,000 

in Mississippi. That’s my recollection from their documents, and I’ll 

get you the right number. 

Mr. CLEAVER. No, I’m talking about the 515 program. 

Mr. DAVIS. Oh, in the 515 program. We have 13 properties that 

had significant to total damage. One property was just absolutely 

destroyed, and we have provided rehabilitation funds for those, and 

the people who were living in those were able to take their subsidies to other properties. 

So, because they were located in rural areas, we were set back 

farther from the urban areas on the coast. And so our multi-family 

properties did not bear the brunt of it. 

Mr. CLEAVER. That’s good. However, I understand that this pro- gram was $20 million or the money that—there’s no money in this 

proposed budget for 515? 

Mr. DAVIS. The 515 budget money is spread over a number of accounts. We have $74 million for Section 515 properties. It’s a new 

budget item so it doesn’t often get noticed, but it’s called revitalization. It is to cover this bill, and it’s $74 million for repair, rehabilitation, and vouchers. 

We get more leverage off of that $74 million because of the credit 

and loan provisions in this bill, which allows that funding to go a 

lot farther. We are essentially using this function for rehabilitation 

and reconstruction, rather than new construction at the moment. 

Mr. CLEAVER. Okay. Thank you. You’re right. It doesn’t get noticed. The final question, Mr. Chairman, which do you prefer, the 

30- or the 90-day notice? Can you say? 

Mr. DAVIS. Personally, I would rather address this in the discussion with the committee and the industry groups and the public. 

I’m not saying that there’s anything secret here, but I’d prefer a 

longer notice period for the owners but a shorter one for the tenants. And somewhere, and I don’t mean to evade the issue, we believe that 90 days is a sufficient period to find buyers or financing 

when that’s necessary. 

Mr. CLEAVER. Why? 

Mr. DAVIS. I’m sorry. I don’t understand. Your question is— 

8

Mr. DAVIS OF KENTUCKY. Would the gentleman yield for just 1 

second? 

Mr. CLEAVER. Yes. 

Mr. DAVIS OF KENTUCKY. I think that what Congressman Cleaver is asking, probably the same question that I’m asking, if I might 

clarify it. It seems a little paradoxical—would you explain why we 

want the longer notice for the property owner and a shorter notice 

for the tenants. If you could clarify what that means in the practical application. 

Mr. DAVIS. Oh, I’m sorry. I did not mean a shorter notice period 

for tenants. Everybody would get the same notice period, but we 

want to inform the tenants almost immediately to make clear to 

the tenants that a lot of what is going on will not affect them. They 

will have vouchers or we will have some way to protect their rent. 

It’s a matter of keeping the anxiety level down. 

Mr. CLEAVER. I understand the answer. I disagree with it, but 

I understand your answer. 

Mr. DAVIS. Okay. 

Mr. DAVIS OF KENTUCKY. The gentleman from Texas is recognized for 5 minutes. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. I want to start a 

little bit different line of questioning. Mr. Davis, talk to me a little 

bit about the voucher program. Is that a temporary voucher until 

they can make transition housing, or if that goes to a market-based 

project they can stay there and continue to get voucher rental assistance for what period of time? 

Mr. DAVIS. Sure. The voucher program that the Administration 

had proposed, and is mirrored here, is a tenant-based portable 

voucher, meaning that they can use it in the property they are 

originally in, or they can take it to another property, theoretically 

anywhere in the country, but the rent is limited to where they 

started out. 

It is a 1-year term currently in our demonstration program, but 

it has a renewal that would be subject to appropriations. This 

would be like our rental assistance currently when the term ends; 

it is subject to appropriations to renew that rental assistance, and 

we would be renewing these vouchers under this bill the same way. 

Mr. NEUGEBAUER. Because Secretary Jackson comes over a number of times a month, and he says over and over and over again, 

that this voucher program is squeezing the life out of the housing 

program in this country. What kind of things do we look for—in 

other words, if you go—let’s say that you go to a voucher program, 

how are you going to handle the competition between the funds for 

building new housing in rural America and offering the voucher assistance at the same time out of the same budget? 

Mr. DAVIS. Well, that’s a good question. It is obviously subject to 

appropriations as is new construction, and there is always tension 

in a tight budget atmosphere. We have always placed the highest 

priority on renewing current assistance and protecting tenants who 

are currently there. That is throughout this bill our number one 

principle—protecting the current tenants in their markets or in 

their properties. 

The prepayment vouchers in this proposal are to cover a portion 

of the portfolio that is expected to prepay, which is about 10 perVerDate 0ct 09 2002 18:14 Nov 17, 2006 Jkt 003537 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\DOCS\HBA115.040 HFIN PsN: TERRIE
9

cent of the portfolio. It is a small part of a much larger problem, 

which is keeping as many properties in the program as possible. 

We are not looking to voucher out the 515 program at all. This is 

just a small component. 

Mr. NEUGEBAUER. And talk to me a little bit about—I think you 

said you expect about 10 percent prepayment if this legislation is 

passed. How will that impact the program? I mean— 

Mr. DAVIS. The total portfolio is about 17,000 properties, so 10 

percent is around 1,700 properties, and that’s about 50,000 units. 

This group is mostly in high cost areas, although they can appear 

anywhere, but we have a lot of properties that were in rural areas 

30 years ago, and the cities grew. They are now in high-cost suburbs. We have properties that are now in resort areas or just very 

nice areas that people are moving to and have become high-cost 

areas. These properties are drawing a lot of the resources out of 

the rest of the portfolio. 

We see the voucher program as solving one part of the portfolio’s 

problems. 

Mr. NEUGEBAUER. One of the things—I have a very rural district 

also—and one of the things that mayors and county judges call me 

all the time about is, you know, what can we do to get more affordable housing? And I want to compliment—some of your folks in 

Texas have always agreed to go and meet with the community 

leaders on some of the options that are available to them. 

As you move forward, do you see this program threatening any 

new build opportunities for the future? Because some communities 

are currently underserved and don’t have existing housing stock in 

their community, and so obviously we need to make sure we have 

funds for new program opportunities that would be needed. 

Mr. DAVIS. I thank you for asking about that. We have two loan 

programs for new construction, Section 515 and Section 538, which 

is a guaranteed loan program. I’m very reluctant to pit them 

against each other because it does neither program any good to 

have them fighting against each other. I’d prefer to view them separately. 

For the 515 portfolio, the best advantage we get for the dollar is 

repair and rehabilitation right now. We can repair a unit for, on 

average, $20,000 a unit, whereas a new unit would cost $85,000 

and up. So, we see the current role for 515 right now as a repair 

and replacement program. The Section 538 program has advantages of very high leverage and the ability to draw a lot of outside 

money. We are building 10 times the units in the Section 538 program per budget authority dollar as we are in 515. They serve the 

same constituencies in different ways. We are interested in looking 

at the 538 program to see how that might be more useful for particularly very, very low income people. But we want to build two 

strong programs. We don’t want to get the two competing against 

each other. 

Mr. NEUGEBAUER. My time has expired, Mr. Chairman. Thank 

you. 

Mr. DAVIS OF KENTUCKY. The gentleman’s time has expired. Before moving on, I’d like to return to the tenant-property owner 

question here. The economics are, I think, very straightforward on 

using market-based principles to leverage the value of the property 

10

and maintain a quality living environment. And I appreciate those 

very much. I think it’s going to be good for the American taxpayer, 

good for the enhancement of our affordable housing program. 

But coming back to the timeframes of notification both of prepayment and also tenant notification, what I was wondering if you 

could take a couple of minutes and do before the ranking member 

speaks, is walk through that process from the time a decision to 

prepay under the proposed legislation would work, and those notifications, so that we can understand clearly how the tenants’ rights, 

if you will, are protected; that they have a fair and reasonable time 

of notification while the owner is preparing for his business transaction. 

Mr. DAVIS. If I could ask just one moment while I turn to the 

right pages here. 

Mr. DAVIS OF KENTUCKY. That’s without objection. 

Mr. DAVIS. There are several different notice periods, and I just 

want to keep them straight. There is notice to the tenants to inform them that a prepayment is occurring. And we currently have 

a process whereby the property owners must notify us, but they 

also notify the tenants, and this is where they post the notices in 

the buildings. 

There is a separate track which is a notice that the owner is giving for a possible sale of the property. This is in the ‘‘Prepayment 

of Section 515, Multi-Family, Housing Loans Notice of Prepayment 

and Sale’’ section of the bill. 

Let me deal with the sale issue first. The owner is not permitted 

to simply prepay. We see here a notification period that gives potential buyers of that property who would be buying for affordable 

housing purposes the time to put in a bid to buy that property and 

keep it affordable. Obviously, it takes a certain amount of time to 

find a buyer, and for those buyers to make sure they have their financing lined up and so forth. And so the 90 days that I have been 

talking about beforehand was this 90 days to provide for a sale. 

There is a second notice, on the next page, the small paragraph 

(i), which is a notification at the same time to the tenants that 

vouchers will be available. What we have found in our pilot program so far is that the notifications that had been used—I don’t 

want to say they were overly legalistic, but they used language 

that was correct, but had the tendency to scare people, frankly. 

We have prepared a series of brochures and essentially a marketing program whereby every time we get one of these notices, we 

immediately send our field office staff out to the property. They 

meet with the tenants and take their questions, provide answers, 

and talk them through the process. 

Our concern is not that there be just a legalistic trading of notices by certified mail, but that human beings meet and sit down 

in the property and work everybody through the process. That is 

a separate issue from how long should the period be. Some people 

feel that once owners have prepaid, they should be able to take 

their money and go. We think that—I think it’s either 75 days or 

90 days that’s in here, is a reasonable accommodation for affordability, and we have no objection to that time period either. 

Mr. DAVIS. Okay. I appreciate the clarification. The thing I was 

particularly interested in was the human factor on this to make 

11

sure that the tenants are treated in a fair and just way. You know, 

in a private commercial setting, the owner would have certainly a 

great freedom contractually to use his property as he saw fit. However, the key in respect of property rights is the relationship of our 

taxpayer dollars being invested in that, and I want to make sure 

that they are well cared for and taken care of. 

The Ranking Member, Ms. Waters from California, has joined us, 

and without objection, I would like to recognize her to make her 

opening statement. 

Ms. WATERS. Thank you very much, Mr. Chairman. I appreciate 

the fact that Chairman Ney and others worked to make sure we 

are holding this hearing so that we could address the problems of 

our rural areas. I’d like to thank all who are here today. 

As many of you know, Mr. Ney and I participated in a hearing 

in my district that focused on the impact of the Community Development Block Grant on communities such as the ones that I represent in Los Angeles. The reason I’m talking about that particular 

hearing is because we mentioned that just as we have problems in 

urban areas, there are problems in our rural communities that are 

not being addressed. The people who live in the rural communities 

are situated different geographically, but they have housing and 

community development problems that must be confronted just like 

the rest of the country. 

One of the most pressing needs recognized by the sponsors of the 

bill is a shortage of quality affordable housing in the Nation’s rural 

areas. In many parts of the country, not only is there an inadequate supply of affordable housing, but the housing is aging. The 

average age of the Section 515 units is, I’m told, 28 years old. In 

many rural communities, grants are known to have traditionally 

been used to finance single and multi-family housing. The Section 

515 program has assisted approximately 250,000 people, most of 

whom are poor. What other criteria do we need to support a housing program? I believe that it is enough that there be just one family, one person in need of housing in rural America, there’s a real 

need for housing, one that mirrors the housing needs in non-rural 

areas. However, without the reform and revitalization measures 

contained in H.R. 5039, we will not be able to deal with the needs 

of this community. They need repairs. The properties are old. Many 

of the owners are paying off thir properties. Where will the tenants 

go? All of these questions are questions and concerns that we all 

must share. 

Today we have an opportunity to send a message of hope to rural 

America by hearing testimony that will enable us to consider the 

appropriate measures to address the Nation’s rural housing needs. 

I am sure that no one thought that we would see a proposal that 

would eliminate Section 515 altogether. If we really want to address the housing needs of our rural citizens, many of whom again, 

are poor, disabled, and elderly, we can start today by considering 

how to improve existing program efforts to assist them. 

I thank you for the opportunity to share this statement with you. 

It will be submitted for the record. And I look forward to hearing 

the rest of the testimony here today. 

Thank you. 

Mr. DAVIS OF KENTUCKY. The gentleman from Missouri. 

12

Mr. CLEAVER. Thank you, Mr. Chairman. I’ve been put back in 

my place since the ranking member has come, so I’m just a regular 

person. I was a big shot for about 30 minutes, and I appreciate 

Ranking Member Waters coming in late. That is my first time actually sitting at the big table, and I just thought I’d share. 

Let me go a little further, though. I want to revisit the question 

I asked you earlier is that, you know, your answer—what is the 

amount of funding in the proposed budget from the President this 

year? 

Mr. DAVIS. The President has proposed $74 million for the Section 515 revitalization program— 

Mr. CLEAVER. Okay. 

Mr. DAVIS. In addition to rental assistance and the 538 program. 

Mr. CLEAVER. Okay. Last year it was $100 million. 

Mr. DAVIS. Correct. 

Mr. CLEAVER. So we’ve got a 26 percent reduction. 

Mr. DAVIS. We have a reduction in budget authority but an increase in loan authority. 

Mr. CLEAVER. You said it’s a loan fund? 

Mr. DAVIS. If I could just expand on budget authority versus loan 

authority. Budget authority supports a certain amount of leverage 

to get a higher amount of loans. For example, in the 515 loan program, each budget authority dollar can be leveraged basically two 

to one to get new construction loans. So, $50 million of budget authority would produce $100 million worth of loans. We have a better, much more advantageous leverage rate for repairs and revitalization, so that $74 million will go much, much farther, into the 

hundreds of millions of dollars in loan authority. 

Mr. CLEAVER. Okay. Thank you. I understand. You said the $74 

million is going to be spread over a number of other line items. 

Mr. DAVIS. It will cover both vouchers and restructurings, and 

those restructurings could take different forms under this bill. If 

this bill is passed, we will have authority to do more types of recapitalizations of properties. 

Mr. CLEAVER. So let me repeat what I—so the President did not 

zero out the 515 program? 

Mr. DAVIS. The President has proposed using the money for 515 

revitalization repairs, not direct 515 new construction. For new 

construction, we have increased, and even doubled, our request for 

538 new construction. Section 538 is multi-family guaranteed 

loans. 

Mr. CLEAVER. Okay. You turned a little—you painted in a little 

tiny spot. The President, is the question. 

Mr. DAVIS. Yes. 

Mr. CLEAVER. The President did not zero out new construction in 

the 515 program? It’s a question. 

Mr. DAVIS. There is no request for 515 new construction loan 

money. There is a request for the 515 program. The question is 

often broader than new construction. But, no, there is no new construction for the 515 program. That has been moved into 538 and 

with repair of the 515 program. 

Mr. CLEAVER. Are you all right with that? 

Mr. DAVIS. I believe that this is the best use of our tight budget 

resources right now and that this gives us more leverage and more 

13

outside money. We will produce more housing and protect and preserve more housing under this approach. I really believe that. 

Mr. CLEAVER. I can tell. 

Mr. DAVIS OF KENTUCKY. The gentlewoman from California. 

Ms. WATERS. Yes. I guess there is some confusion about income 

limit. H.R. 5039 and the Administration’s proposal related to income limits for rural housing tenants are inconsistent. 

The bill sets the income limit at 30 percent for both the revitalization and the tenant protection voucher programs. The Administration does not spell out what it supports with regard to income 

limits, but rather suggests that H.R. 5039 is likely to greatly expand the cost of preserving these properties. 

What does this mean? How does it tie to the 30 percent income 

limit in the bill? Are you suggesting that the 30 percent income 

limit would prevent preservation of the rural housing start? And 

how did you arrive at this conclusion? 

Mr. DAVIS. Yes. And thank you, that is an issue that we want 

to make sure is handled correctly, because we are afraid that there 

might be unintended consequences. I’ll describe an example. 

H.R. 5039 proposes covering what are called the overburdened 

tenants, those paying more than 30 percent of their income. And 

we believe that protecting the overburdened tenants is something 

that is a worthy objective and is something that we had proposed 

in our voucher and prepayment policy for last year. 

In fact, the voucher program that we’re doing now is essentially 

holding harmless the overburdened in the property. So for the first 

time, they are getting protected against rent increases. 

What this bill does is extend that in an open-ended way to 

restructurings also. Our concern is probably best given by an example. Say you have an overburdened tenant who is making about 

$10,000 a year. It’s not a lot of money, but they will be held at 30 

percent of their income. 

If that person were to move out and were replaced with a person 

making zero income, then the property would be burdened with 

having to cover not just an overburdened person, but a person with 

no income. That extra cost would either be put on the rest of the 

tenants or put onto the property. It would create a burden that 

wasn’t intended when the original plan was done. 

We want to be able to work with the committee on language to 

make sure that planning could be done at the beginning, but also 

making sure that we aren’t creating a new entitlement program, 

beyond what is just protecting the current overburdened. This is 

something that we think that we can work with the committee on 

language to cover. 

Ms. WATERS. Your example is one that helps me to understand 

what you are trying to do. But if someone moves into a unit with 

no income, you’re saying there’s a need to spread that cost in some 

way among the other tenants. Is there another way of dealing with 

that? 

Mr. DAVIS. Well, there are generically I guess three ways of handling it. Either we could put a new rental assistance unit on the 

property, but that would mean that we would have to commit to 

future years appropriation, which we can’t do. Or we would have 

to spread it across the rest of the property and raise everybody 

14

else’s rents to hold that one unit harmless, or somehow take it out 

of the property’s financials, which may not be available. 

Ms. WATERS. Are any of these units marketable? 

Mr. DAVIS. These are all Section 515 units, so they are covered 

by the 515 basic rent levels. But these are units that don’t have 

rental assistance or Section 8 on them. We would essentially be 

creating a new class of subsidy which would cover overburdened 

people. But if that status changes, then it changes the financial 

status of the transaction. 

Mr. DAVIS OF KENTUCKY. All right. Let me just say that perhaps 

one of the co-authors of H.R. 5039 can talk about what their preference is in dealing with this kind of problem. But of course, if 

there are people with no income, we would certainly want them to 

be covered, and we certainly don’t want existing tenants to be burdened with the cost of covering those who have no income. 

Mr. DAVIS. Yes. 

Ms. WATERS. So I don’t know whether you work out something 

new, or how you do it. The fact of the matter is that would have 

to be dealt with. 

Mr. DAVIS. We understand this, and we welcome working with 

the committee on how this can be set up. 

Ms. WATERS. Thank you. 

Mr. DAVIS OF KENTUCKY. I thank the gentlewoman. I appreciate 

you coming, Mr. Davis, to share today. I’m sure there will be many 

other questions that will come up, but in the interest of time and 

in deference to the people who have come from rural housing authorities and the operators to share. 

The Chair notes that some members may have additional questions for the panel which they may submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place 

their responses in the record. 

Without any objection, thank you for your time. You’re dismissed, 

and we’d like to ask the second panel—our second panel this afternoon includes Mr. Gideon Anders, executive director of the National Housing Law Project; Mr. James N. Arbury, senior vice 

president of government affairs, the National Multi Housing Council, also testifying on behalf of the National Apartment Association; 

Mr. Thomas Carew, Red River director of Frontier Housing from 

Kentucky; Mr. Moises Loza, executive director of the Housing Assistance Council; Mr. Robert Rapoza, executive secretary of the National Rural Housing Coalition; Mr. Robert Rice, Jr., president of 

the Council for Affordable and Rural Housing; and Mr. Charles 

Wehrwein, senior vice president of Mercy Housing, Inc. 

Without objection, your written statements will be made part of 

the record. And you will each be recognized for a 5-minute summary of your testimony. 

Gideon Anders is the executive director of the National Housing 

Law Project in Oakland, California, and this organization engages 

in public policy advocacy and researches the impact of housing policy on the poor. 

You are recognized for 5 minutes, Mr. Anders. 

15

STATEMENT OF GIDEON ANDERS, EXECUTIVE DIRECTOR, 

NATIONAL HOUSING LAW PROJECT 

Mr. ANDERS. Thank you, Mr. Davis. I just want to point out that 

I have worked on rural housing preservation issues for 28 years, 

and that the primary principle that guides our preservation work 

is the need to protect federally assisted residents against displacement from their homes. 

I would like to quickly and straightforwardly address one of the 

questions you have had about the displacement of residents. 

Our primary concern with H.R. 5039, Mr. Chairman, is the fact 

that it, in fact, would potentially displace 110,000 people, of which 

50 percent are elderly and 10 percent are people with disabilities. 

We are extremely concerned about that. It puts the residents at the 

pleasure of the Congressional budget process, and at the pleasure 

of the Administration not potentially asking for sufficient funds to 

protect against displacement. We do not believe that should be happening. 

In 2003, Chairman Ney introduced a bill that made the existence 

of the vouchers conditioned upon the availability of funding and essentially conditioned the right to prepay upon the availability of 

funding for the voucher program. We think that is a critical element. 

If that does not happen in this bill, we are going to have a situation where legislation allows owners to prepay their loans, and displace potentially up to 110,000 people because we did not have a 

voucher program in place, or because the Administration misconstrued or miscalculated the number of units that owners are actually going to be prepaying. 

We are also concerned, Mr. Chairman, that the 90-day period 

that is in the bill, which allows residents to move and, potentially, 

allows people to structure deals whereby the projects are sold to 

nonprofit and public institutions, is simply inadequate. 

Mr. Chuck Wehrwein will be talking about this later, but I do 

not know of a single institution that can take a multimillion dollar 

project and find the financing in 90 days to transfer that project 

from one entity to another and to retain the affordable nature of 

that project. It simply isn’t possible. We need a longer period of 

time to make those deals work. 

More specifically, Mr. Chairman, I’ve got issues with respect to 

the voucher program as it is being proposed. First of all, there is 

an intent in the program to create a right for the residents to remain in their units. Essentially the voucher is to cover the cost of 

the unit after it is converted to market rate. Unfortunately, the 

way the bill is drafted, that is not happening. The bill, as it is currently drafted, essentially precludes owners from discriminating 

against voucher holders, by virtue of the fact that they are voucher 

holders. It does not give residents a right to stay in the unit. 

So, that means that if a landlord doesn’t like the resident with 

a voucher, he or she can force the resident to move to another 

place, and they are going to have to move out of the unit in which 

they are currently residing. 

Again, 50 percent of the people who are living in these projects 

are elderly people. They are people over 62 years of age. Their income is somewhere between $8,000 and $10,000 a year. They are 

16

simply not going to have another place to which they can move 

very readily. 

The other problem with a voucher, as it is currently set up, is 

that it is based upon the market rate of the unit in which the current resident is living. Unfortunately, that may not work if there 

is no affordable, decent housing in that same community. If the 

voucher holder is required to move to another community where 

the rents are higher, they are not going to be able to move and use 

that voucher to move to other communities. And they are not going 

to be able to use that voucher to buy a home, as is contemplated 

in H.R. 5039. 

We are very concerned that many of the issues that this committee and Congress has previously dealt with, with respect to the 

HUD programs, are simply left out of H.R. 5039. Residents are not 

given the right to remain in the units. The vouchers are not set at 

the same income level. It does not protect residents against hardships. In the HUD Section 8 voucher program, if a family’s income 

is reduced by more than 15 percent, there is a possibility for the 

voucher subsidy to be increased. There is no comparable provision 

in the current bill. 

The bill does not address the need for subsidy increases in rent 

and utility cost increases as they come downline. In the HUD Section 8 program, when owners seek to opt out of the program, they 

have to give a 1-year notice. We are here offering a 90-day notice. 

The program does not have a viable mechanism for transferring 

any of the units to the nonprofit and public sector. There is a prohibition upon the owner from actually doing a deal within 75 days. 

There is no requirement that the owner negotiate with anyone in 

good faith or that, in fact, anybody be given priority. 

There is no funding for new construction. As I think has been 

pointed out by the Congressman from Missouri, the Administration 

is asking for zero money for section 515 housing. It is unfortunate; 

that means that there is not going to be any financing, in fact, to 

transfer these units within the 515 program. 

[The prepared statement of Mr. Anders can be found on page 45 

of the appendix.] 

Mr. DAVIS OF KENTUCKY. I appreciate your comments, Mr. 

Anders. Your time has expired. And I would like to come back and 

revisit that specifically when we get the questions and talk in a little bit more detail about this. 

Mr. ANDERS. Sure. 

Mr. DAVIS OF KENTUCKY. Thank you very much. Were we to have 

a smaller witness panel, we could continue indefinitely, but we 

don’t want the lateness of the hour to keep everybody. 

Next is Mr. Jim Arbury of the National Multi Housing Council. 

The members of the Washington, D.C.-based council are active in 

all aspects of the rental housing business and share an interest in 

legislative and regulatory issues affecting the apartment industry, 

as well as promoting apartment living. 

Mr. Arbury, you are recognized for 5 minutes. 

17

STATEMENT OF JAMES N. ARBURY, SENIOR VICE PRESIDENT 

OF GOVERNMENT AFFAIRS, NATIONAL MULTI HOUSING 

COUNCIL, AND NATIONAL APARTMENT ASSOCIATION 

Mr. ARBURY. Thank you, Congressman Davis, and Congressman 

Cleaver. 

I’m Jim Arbury and I am the senior vice president of government 

affairs for the National Multi Housing Council/ National Apartment Association Joint Legislative Committee. Our members own 

or manage more than 6 million apartments around the country and 

we have over 50,000 members. 

I am pleased to address the views and opinions of our membership on H.R. 5039. We have a variety of members who are involved 

in this program in one form or another. Apartment owners and 

managers are committed to providing safe, decent, affordable rental 

housing in both urban and rural areas. 

We advocate a stronger, more responsive rural housing service 

preservation program. But we must be fair to both residents and 

owners of this critical housing stock in order to preserve it. It has 

been mentioned that a lot of the stock is older and in need of repair. The committee is meeting today to see what kind of legislation is needed to preserve the nearly 15,000 properties and 460,000 

units in the Rural Housing Service program. 

In Missouri, there are 858 of these properties with over 19,000 

units. And in Kentucky, there are 456 properties with 12,280 units. 

If you look at this type of property, it’s 30 or 40 units on average. 

It’s not a big apartment property. These types of properties are 

very difficult to pencil out in terms of economic viability. And that’s 

why I think there is great stress in the program at the moment. 

H.R. 5039 can potentially help preserve as much of this housing 

as decent and affordable, but it is much easier to say the words 

‘‘decent, affordable housing’’ than it is to actually put it into practice, as we’ve seen, because of all the financial stress. 

And the other problem is that our national housing policy is far 

too unbalanced in favor of single family home ownership. The imbalance makes it very difficult to find the resources to build and 

maintain decent affordable rental housing for lower income Americans. 

Raising the home ownership rate through a variety of programs 

such as zero down and interest-only loans will not solve our Nation’s affordable housing problem, and the resulting foreclosures 

will make it worse. In fact, foreclosures this quarter versus the 

same quarter a year ago are up 77 percent. 

Tightening the screws on the Section 8 program and mismanaging the housing crisis caused by last year’s hurricanes will only 

make matters worse in the future with respect to the supply of affordable rental housing. For long term viability, the debt needs to 

be restructured in the 515 program and a dependable flow of income established. 

Since it appears that between 7,900 and maybe almost 12,000 of 

the properties need to be restructured, we have some question 

whether the Rural Housing Administration is equipped to do this. 

We urge you to carefully examine the large task at hand to make 

sure that any legislation can be implemented properly. 

18

On the income side, rental assistance continues to be a growing 

problem because of uncontrollable expenses, such as energy, utility 

costs, property taxes, other local taxes and fees, and insurance. It’s 

tough for a property owner to assume that there will be any type 

of viable subsidized voucher system in view of recent events with 

Section 8, and with the FEMA hurricane voucher system. 

So, it’s hard for a property owner to figure out what kind of 

vouchers will still be in place 5- 10 years from now. 

We do have concerns about the wording in the bill on the 90-day 

notification period. When an owner seeks to prepay a 515 loan or 

sell the property, we would urge that the notification period begin 

when the owner notifies residents and the RHS of its intent to prepay or sell. 

Finally, we are concerned about the sale restrictions and prohibitions on the sale of the property. These clearly need to be debated 

and resolved as you move forward with this legislation. 

We are here today as an advocate for a stronger, more responsive 

Rural Housing Service preservation assistance program that offers 

a balanced approach, and which is fair to the residents and ownermanagers of rural multifamily rental housing. 

I thank you, and I would be happy to answer any questions. 

[The prepared statement of Mr. Arbury can be found on page 55 

of the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Arbury. 

Mr. Tom Carew, director of the Red River, Kentucky Office of 

Frontier Housing. Frontier Housing focuses on expanding affordable housing opportunities for low-income rural families. And we 

are grateful to have someone from the great Commonwealth of 

Kentucky here. 

Mr. Carew, you are recognized for 5 minutes. 

STATEMENT OF THOMAS CAREW, RED RIVER DIRECTOR, 

FRONTIER HOUSING, INC. 

Mr. CAREW. Thank you, Mr. Chairman. Frontier Housing is a 

non-profit corporation providing housing solutions for low income 

Kentuckians since 1974. We serve an area of nine counties in 

northeastern, Appalachian Kentucky. Five of these counties, unfortunately, are listed in the top 100 poorest counties in the United 

States. This area includes two Congressional Districts, the fourth, 

Mr. Davis’, and the fifth. Poverty rates range from a high of 45.4 

percent to a low of 19.4 percent in the nine counties. 

House Resolution 5039 addresses certain issues affecting the 515 

Rural Rental Program of the United States Department of Agriculture’s Rural Housing Service, formerly known as the Farmer’s 

Home Administration. The 515 program has financed approximately 12,000 units in Kentucky and approximately 450 projects. 

Many of these units are in our service area, and they provide decent housing for the poorest of the poor. H.R. 5039 addresses the 

issue of an owner’s right to prepay the Rural Housing Service on 

developments financed prior to December 15th of 1989. 

Secondly, the bill puts forth a program that would enhance the 

revitalization of the majority of Section 515 developments on a voluntary basis. 

19

We applaud the provisions of the bill, which create financing 

mechanisms which will enable the revitalization of many units in 

the 515 stock. 

In my previous position at the Commonwealth of Kentucky’s 

Housing Finance Agency, Kentucky Housing Corporation, we found 

it very difficult to assist a developer wishing to revitalize a 515 

project. The existing RHS regulations essentially prohibited other 

financial partners from participating in a financial restructuring 

and an injection of new capital to rehabilitate an older project. 

This bill includes provisions for the following financial enhancements: reduction and elimination of interest on the loan; partial or 

full deferral of payments; forgiveness of loans; subordination of 

loans; reamortization; and grants. 

In return for the government’s new investment, the owners 

would agree to new property use restrictions for a period of not less 

than 20 years. These financial enhancements will enable other 

partners, such as housing finance agencies, to participate in the revitalization of a project, thus making better housing available for 

very low income Kentuckians. 

The bill also addresses the prepayment of projects financed prior 

to December 15, 1989. Recent settlements in the U.S. Court of 

Claims in favor of project owners have raised the concern of many 

as to the cost of keeping the pre-1989 units in the Section 515 program. 

As many of you know, the RHS, over the past 12 or so years, has 

drastically reduced the funds available to construct new 515 

projects to the point where there is little to no new construction. 

In fact, there haven’t been any new 515’s in Kentucky for several 

years now. 

This raises the concern that if we are to lose the thousands of 

affordable units across America, how will they be replaced? Does 

it make sense to give up the units we have now for an investment 

we made years ago, and pay today’s prices to replace the units? 

The cost to replace these units surely will cost more than to keep 

them in the program. What funding is on the horizon to replace 

these units at affordable rents? Generally speaking, the tools we 

have today, tax credits, HOME, the affordable housing program of 

the Federal Home Loan banks, State trust funds and other State 

funds, will not begin to be able to replace the affordable units we 

might lose in the 515 program. No other national program—not the 

538 program—can match the 50-year, 1 percent interest rate, the 

lowest rate the 515 program could go. We are not replacing this 

new construction program with anything that matches it. The 538 

is a rental guarantee program, so I can go to a bank and get a loan 

at market rate, but I can’t get it at 1 percent on a 50-year term. 

So, the two really are apples and oranges. 

The bill does provide a mechanism for housing vouchers for tenants who would be displaced. There are some technical corrections 

that should be made in the bill to clarify when a tenant is able to 

receive a voucher. Tenants should be eligible if they are residents 

on the date the owner notifies the tenant of their intention to prepay. 

20

There are some budgetary questions related to the vouchers. 

How long will the vouchers last? These questions should be addressed before the bill is finalized. 

I want to raise the issue of should the number of units coming 

offline, as a result of prepayment, be tied to the number of vouchers in the budget? If we lose 1,000 units due to prepayment, should 

we have 1,000 vouchers available? I think that is a real concern of 

many of us. 

Finally, I want to remind us why the 515 program was created. 

It was created to provide safe, decent housing for the poorest rural 

Americans. If we are unable to preserve the units we have, then 

we should look at a mechanism to replace the units we lose. This 

bill provides some excellent tools to revitalize those units which remain in the program, and provides a prepayment mechanism for 

those developers looking to leave the program. 

I would respectfully challenge the committee to create a new program or adequately fund the Section 515 program, to finance the 

construction of replacement units. 

Mr. Chairman, members of the committee, I thank you for this 

opportunity to be here. I applaud your work on behalf of the poorest of the poor, both in Kentucky and in America. 

[The prepared statement of Mr. Carew can be found on page 67 

of the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Carew. 

Moises Loza is the executive director of the Housing Assistance 

Council. The council is headquartered in Washington, D.C. It assists with the development of both single- and multi-family affordable housing rural communities. 

Mr. Loza, you are recognized for 5 minutes for your opening 

statement. 

STATEMENT OF MOISES LOZA, EXECUTIVE DIRECTOR, 

HOUSING ASSISTANCE COUNCIL 

Mr. LOZA. Thank you, Mr. Davis and Mr. Cleaver. 

The Housing Assistance Council is a national nonprofit corporation dedicated to improving housing conditions for rural, low income Americans. I would like to express our appreciation for all of 

the work that has gone into developing this particular bill. 

The Housing Assistance Council views the Saving America’s 

Rural Housing Act of 2006 as a step toward resolving serious 

issues regarding the availability of decent, affordable rental housing for low income rural Americans. 

The nearly 5 million rural households, about a quarter of the 

total, who rent their homes are some of the worst housing problems 

in the United States. Housing costs are their most significant problem. Rural renters are twice as likely as owners to live in physically substandard housing. Approximately 12 percent of non-metro 

renters live in either moderately or severely inadequate housing. 

For minorities, the rate rises to 18 percent. 

The Department of Agriculture’s rural development 515 Rural 

Rental Housing Program, particularly when coupled with the Section 521 Rental Assistance Program, provides decent, affordable 

homes for rural renters. 

21

The average income for a Section 515 household is $9,785. For 

those receiving Section 521, the average is $7,836. The majority of 

Section 515 tenants are elderly or disabled, and 94 percent of them 

have very low incomes. That is, they earn about half of the median 

income in their area. 

Our primary concern is ensuring the availability of decent, affordable rental homes for current and future tenants. If ELIPHA 

is to be repealed for pre-1989 properties, we believe that tenants 

will be best protected by permitting payment if vouchers are available or if sufficient, decent available rental housing in the market 

is affordable to Section 515 tenants. 

HAC supports the inclusion of vouchers in this bill. First, vouchers should be available to tenants who live in the property on the 

date the owners give notice to the tenants, not only to those who 

live there on the date of prepayment, as is proposed in the bill. 

This change would enable tenants to explore alternative housing, 

and to take advantage of available opportunities before prepayment 

occurs. 

The bill seems to require prepaying property owners to accept 

vouchers as they are under HUD’s market program. HAC supports 

this intent. Provisions that vouchers may be used, may be provided 

imply an option rather than a requirement. To indicate clearly that 

USDA tenants have the same rights as HUD tenants, this bill 

could use the same language as HUD’s Section 8. 

Because USDA vouchers could become costly if tenants move 

from relatively inexpensive small towns to pricey cities, unrestricted portability may not be the best choice for the USDA voucher program. 

We would like to suggest, however, that the bill make an exception to the value limit for elderly and disabled tenants, who move 

to expensive areas to be close to family members, essential services, or other support systems. 

The bill tries to create two rights of first refusal, an idea that we 

support. The language should be clarified and funding be provided 

to assist entities exercising these rights. 

The bill provides that for the first 75 days after notifying USDA 

that it wants to prepay, an owner could sell only to a purchaser 

who would accept 20-year use restrictions. The owner, however, is 

not required to bargain. We recommend revising the bill’s language 

to establish a clear right of first refusal for a purchaser that would 

accept a 20-year use restriction. 

The bill also attempts to provide a right of first refusal for tenants in the revitalization context. It would give an owner the option 

to offer the property to the tenants for purchase as a cooperative 

or condominium in conjunction with revitalization. Again, we recommend establishing a clear right of first refusal. 

Finally, Housing Assistance Council observes that rural America 

needs not only preservation of existing decent, affordable rental 

housing units, but also production of new units. 

USDA’s budget proposal for 2007 proposes to finance construction of new rural rental units through the Section 538 rental guaranteed loan program. Section 538, however, serves a higher income 

population than Section 515. 

22

Rent subsidies also cannot end rural America’s rental housing 

problems. Often rural areas do not have enough decent, affordable 

rental units available. HAC encourages the subcommittee to support increased annual appropriations for the Section 515 program 

and/or the creation of a new rural rental production program. 

Thank you. 

[The prepared statement of Mr. Loza can be found on page 81 of 

the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Loza. 

Bob Rapoza is president of Rapoza Associates, located in Washington, D.C. His firm specializes in providing legislative analysis 

related to the development of low income housing needs for rural 

areas, as well as other issues facing rural communities. 

Mr. Rapoza is testifying today on behalf of the National Rural 

Housing Coalition, and is recognized for 5 minutes for a summary 

of his opening statement. 

STATEMENT OF ROBERT A. RAPOZA, EXECUTIVE SECRETARY, 

NATIONAL RURAL HOUSING COALITION 

Mr. RAPOZA. Thank you, Mr. Chairman. I am Bob Rapoza, and 

I am representing the National Rural Housing Coalition, a national 

membership organization that advocates for improved Federal 

housing and community development policies. 

We would like to thank you and the committee today for sponsoring H.R. 5039, and for focusing attention on the importance of 

preserving Section 515 housing. 

We thank the Section 515 effort is a great success. Over 500,000 

families across the country with low incomes, most of whom are 

senior citizens or disabled, have decent, affordable housing because 

of Section 515. In most rural areas, the 515 development is the 

only affordable housing in town. 

As the chart included in our statement shows, there has been a 

substantial fall-off in Section 515 funding. This has had two regrettable results. The first result is that there’s very little new construction under 515. The second result is that the financing incentives for long term use for Section 515 has fallen from about 

$25,000,000 to less than $5,000,000 in fiscal year 2006. 

To be clear, as summarized here, the present budget does not request funding for Section 515. Not a penny. Yet 515, at the moment, is the only Federal authorized funding source to revitalize 

and to restructure 515 developments. 

Because of this funding shortfall, Section 515 developments have 

been under funded, and the project owners have had limited access 

to incentives for long term use and for subsequent financing to revitalize and restore their projects. These incentives were first authorized by the Congress in 1987, after a rash of prepayments and 

displacements of the families who were living in 515 developments 

who did not have access to help to gain affordable housing nor did 

they have access to subsidies for that housing. 

In 2004, the Agriculture Department released an important 

study of the 515 portfolio. They found that 10 percent of the portfolio was in so-called ‘‘hot markets’’ where the developments could 

be converted to some other use, including market-rate housing, but 

that the balance of the portfolios was located in communities where 

23

prepayment didn’t seem to be a very good option for the project, 

and the best use of the project was for low income housing. 

In these cases, there was a need for additional funding to ensure 

the adequate operation of the projects. The average age of a 515 

development is 26 years, and the report projected the cost to renovate and/or restore the 515 portfolio at $2.6 billion over a 20-year 

period. 

H.R. 5039 addresses these findings by permitting the prepayment of certain 515 developments by establishing a voucher program for those displaced and a restructuring fund to revitalize the 

developments. 

This legislation is a significant improvement over some of the 

drafts we have seen over the last 6 months. The legislation does 

limit the number of developments eligible for prepayment. It establishes a minimum use restriction for structured developments, such 

that a favorable rent structure for those developments with a stay 

in place voucher. 

In addition, we appreciate the provisions on the right of first refusal and tenant notification, and would like to work with the committee to improve these provisions. In addition to that, we also recommend that when the bill is marked up, that the committee include a dollar authorization for vouchers and restructuring aid. 

Our basic concern is with the overall framework of the legislation. If this bill becomes law, it is possible that low income families 

will be displaced without other affordable housing options and 

without vouchers. 

It is true that vouchers and affordable housing could be available 

in which a prepaid 515 is located, but it is also true that it could 

not be. 

In the 2006 appropriations bill, Congress provided $16 million for 

vouchers and $9 million for restructuring demonstration program. 

The Agriculture Department has already put some of those vouchers to use, and the NOFA on restructuring aid was issued last 

months. 

We urge the Congress to take a careful look at the experience in 

the field with these funds. We know a good deal about the Section 

515 portfolio, but what we don’t know is how the owners, the tenants, and the rural housing markets will react to these resources. 

It could be, as some have contended, that restructuring funding 

will reduce the incentive to prepay loans, and we can preserve 

more of the 515 portfolio. We think it would be useful to see how 

the demonstration works before final action on this legislation. 

[The prepared statement of Mr. Rapoza can be found on page 89 

of the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Rapoza. Your time has 

expired, and we will continue with this discussion in a moment. 

Next is Mr. Bob Rice, president of Crest Management Real Estate Company, based in Frankenmuth, Michigan, specializing in 

management of affordable multifamily housing. 

Mr. Rice is testifying today as the president of the Council for 

Affordable and Rural Housing, and is recognized for 5 minutes for 

a summary of his statement. 

24

STATEMENT OF ROBERT L. RICE, JR., PRESIDENT, COUNCIL 

FOR AFFORDABLE AND RURAL HOUSING 

Mr. RICE. Thank you. I am Robert Rice, president of Crest Realty, located in Frankenmuth, Michigan. I have been involved with 

the management of affordable rural housing for 30 years. I currently am a hands-on manager of 27 Section 515 properties, which 

amount to about 450 units. 

I am appearing here in my capacity as president of the Council 

for Affordable and Rural Housing. We call it ‘‘CARH.’’ 

CARH is a national organization based in Alexandria, Virginia. 

It’s comprised of for-profit and nonprofit developers, managers, 

owners, syndicators, public agencies, and others interested and involved in providing affordable housing to low income families in 

rural areas. 

On behalf of our members, I thank you, Mr. Chairman, for asking CARH to testify today on H.R. 5039, ‘‘Saving America’s Rural 

Housing Act of 2006.’’ 

The major Federal program to subsidize rental housing over the 

last 40 years has been the Section 515 program. Over the years, 

the Rental Housing Service has tried to balance the need for adequate rents to support a project with the reality that the 515 subsidy is too shallow to serve the lowest income ranges. 

Although rental assistance, where it is available, is very helpful, 

RHS has attempted to stretch limited budget resources for that 

program by keeping rents lower than prudent for the long term viability of the projects. Rents and rental assistance system-wide 

have been held down too far for too long, creating a crisis in resources. 

I have an example of two projects that I manage which are 30 

miles apart from each other. Project A is a 515 loan with Section 

8 subsidy. Project B has a 515 loan with Rural Housing Service 

rental assistance. The rents for the two projects—Project A’s rent 

is $100 a month more because when I go in for my budgets, I am 

not held down on the HUD ones, because they are not spending 

their own subsidy. 

We think that has caused a problem and it makes it so there is 

not enough money to do a lot of the things that we would like to 

do with the project, maintenance-wise. 

Coupled with the fact that owners, by and large, have not been 

allowed out of the program to recapitalize, a situation has been created that we refer to as a ‘‘toll road with no exit.’’ 

Two years ago, RHS conducted a comprehensive review of the 

condition of the 515 housing stock, and found that to correct the 

imbalance between income and expenses for many projects, there 

is a need to reduce debt service and to facilitate the injection of 

new capital equity into the projects. Such a revitalization of the 

portfolio will involve budget authority for the reduction, elimination or deferral of debt service on a 515 loan and for grants in 

some cases. To process efficiently a large volume of projects, I 

strongly believe that RHS should use the services of private entities and State and local agencies to develop project financial plans, 

particularly those entities that gained experience by participating 

in HUD’s mark-to-market restructuring program, and we are 

pleased that H.R. 5039 authorizes the use of outside contractors. 

25

As within the legislation, there are provisions in the bill which 

raise some concerns within the industries. The bill proposes a maximum rent for all tenants in revitalized projects of 30 percent of adjusted income. We don’t believe that this would work unless there 

is a subsidy involved as well, for the reasons that have pretty much 

already been raised here. 

We are pleased that the committee is receptive to ending prepayment restrictions for owners; however, the new statutory prepayment framework in H.R. 5039 raises some concerns, which we discussed in our written testimony. 

We would appreciate the opportunity to work with the committee 

to resolve any of the issues we have placed in our written testimony so that new uncertainties and legal disputes are not created, 

and that the bill carries out the stated purpose of H.R. 5039, which 

is ‘‘to avoid further costly litigation.’’ 

With respect to tenant protection, we would only note that the 

legislation should be clearer as to whether the amount of assistance remains fixed at the year one level or rises as comparable 

market and project rents rise. We support the latter as providing 

a better measure of protection. 

Overall, we feel H.R. 5039 is promising legislation, and we thank 

the Administration, the bill sponsors and this subcommittee for 

moving forward the important rural housing issue. Thank you 

again for this opportunity to testify and I will be happy to answer 

any questions. 

[The prepared statement of Mr. Rice can be found on page 98 of 

the appendix.] 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Rice. 

Chuck Wehrwein is senior vice president of strategic development of relationships for Mercy Housing. This organization is 

headquartered in Denver, Colorado. It uses public/private partnerships to develop housing in communities for low income and underserved families. 

You are recognized for 5 minutes for a summary of your opening 

statement. 

STATEMENT OF CHARLES WEHRWEIN, SENIOR VICE 

PRESIDENT, MERCY HOUSING, INC. 

Mr. WEHRWEIN. Thank you, Mr. Chairman. As you indicated, I 

am a senior vice president of Mercy Housing and also have held 

posts overseeing multifamily housing at USDA Rural Development 

and at HUD. 

Mercy Housing has direct and significant experience with owning, acquiring, and restructuring federally assisted properties, 

working within and using the Mark-to-Market program at HUD, 

using State and market rate tools, and we led one of the largest 

rural portfolio acquisitions by a non-profit. 

I appreciate the opportunity to offer comments today on H.R. 

5039. Mercy Housing is a non-profit affordable housing developer, 

owner, and manager headquartered in Denver, with real estate interests in many other regions throughout the Nation. In our 25 

year history, we have developed or preserved over 18,500 units of 

affordable housing serving more than 55,000 low income Americans 

on any given day. 

26

We would like to extend our appreciation to the bill’s sponsors 

on recognizing the need to respond to the desperate preservation 

needs of the rural portfolio. We would like to offer some suggestions based on our experiences in rural and urban preservation, 

about how the existing bill can be improved to respond to the existing situation. 

Mercy Housing has recently completed the purchase, and is finalizing the rehabilitation of a 30-property, 926 unit rural portfolio located throughout Washington State, known as Cobble Knoll. The 

total development cost for the 30 properties will be about $42 million, including about $8,000 per unit in initial rehab, and $31,000 

per unit in acquisition costs. 

Our experiences, in summary, are: a high capacity, not-for-profit 

can bring significant benefits to a large scale transaction; that restructuring tools made available to the Department, such as subordination, new debt, debt restructuring and, in limited cases, debt 

forgiveness, are key to creating extended affordable use, as is the 

ability to reallocate rental assistance resources to raise some partially assisted properties to fully assisted. 

We have learned that projects with 100 percent rental assistance, 

under either Section 8 or Section 521, are much more likely to be 

successfully preserved and to be economically viable going forward. 

We have learned that project based rental assistance is critical 

to achieve effective underwriting from market sector lenders, with 

longer terms providing more comfort and therefore more private 

sector resources to help preserve these valuable assets. 

We have learned that partial or no rental assistance, especially 

those in remote or low cost areas, are extremely difficult to restructure using housing finance tools available today and will likely 

need debt forgiveness, new or transferred rental assistance and/or 

grants to be viable. 

We have learned that the Rural Development field staff is made 

up of well trained generalists with a strong commitment to this 

housing and to rural communities in general. However, they have 

little experience with modern housing finance tools and strategies 

being used outside of the USDA today. Furthermore, the Department lacks expert restructuring agents. And USDA’s structure and 

culture is very decentralized, resulting in poor sharing of best practices, little capability or willingness of the national office to direct 

strategies based on best practices to the entire field, and a maddeningly variable application of rules from State to State, and even 

county to county. 

As I noted earlier, Mercy Housing has preserved many other affordable homes in addition to the rural acquisition I noted earlier. 

This experience is entirely relevant to the discussion today. and I 

would offer a few comments based on our experience. 

One, creating and empowering a central unit to direct the implementation of preservation policy at HUD has been a model of efficiency and good government that should be copied. These tools and 

their implementation have preserved scores of affordable homes 

and saved the taxpayers money—$1.9 billion at least count. 

A final point I would make about the lessons learned from other 

preservation experiences is that not all owners share the same 

goals of meeting property needs, assuring renewed and extended 

27

affordability and engaging in long term ownership. MAHRA specifically recognized the unique role of high capacity non-profit owners. 

Mercy Housing and others like us are in this for the long haul and 

our missions are congruent with the government’s. 

With the foregoing experience in mind, we offer the following 

suggestions for improving this bill, so that this rare opportunity to 

change rural housing policy is maximized. 

We suggest that we create or contract with a unit of expert housing restructuring staff such as exists in HUD’s Office of Multifamily Housing. 

We suggest that we empower this expert unit to promulgate policy, tools and best practices that will be used consistently across 

the country. Furthermore, we ask that for any owner or purchaser 

seeking it, we would require the Secretary to provide a formal commitment as part of the long term viability plan. Failure to do so 

would make the current or future owner uncertain of the Department’s ability and commitment to carry through on these commitments and will chill their interest in engaging with the Department. 

We suggest that we provide for the ability to accelerate the replacement of systems that are due to be exhausted or obsolete 

within the coming years. 

We suggest that the legislation provide the Secretary with the 

authority to split current USDA loans into multiple loans, some 

with fully amortizing terms, others with cash flow only terms, so 

that this debt might be preserved and used for low income housing 

tax credits basis. 

We propose eliminating the 75 percent rule, clarifying the 30 percent rent rule, and providing that the notice of prepayment and 

sale is certainly way too short at 90 days, and should be extended 

at least to 6 months, both to help the tenants in finding replacement housing if needed, and to provide more time for interested 

preservation buyers to become aware of and enter into negotiations 

with the seller. 

We would like to encourage transfers of high capacity not-forprofits. 

Mr. Chairman, this concludes my testimony. We have more detailed information in the written testimony. We stand ready to assist the committee and the Administration in any way possible. 

[The prepared statement of Mr. Wehrwein can be found on page 

106 of the appendix.] 

Mr. DAVIS OF KENTUCKY. Very efficient cue that you picked up 

on there. Thank you very much. 

Just—as we move forward here, without objection, the following 

written statements are going to be admitted for the record: statement of the National Association of Home Builders, and the letter 

from the National Association of Realtors. 

I appreciate your comments on best practices. I think there is 

much that we can learn by copying the efficiencies, the successes 

from one another relevant to the different parts of the country and 

our communities uniquely. 

As I listen to your opening statements, and read your opening 

comments for the record, one thing that I noted is that there is a 

wide variety of issues. Very well intended, important focus. 

28

We have the potential on this bill to get very global, very quickly, 

as with all legislation. And one of the things that I am reminded 

of, the old proverb that says, the main thing is to keep the main 

thing the main thing. 

And the one thing I want to clarify, our heart of the committee 

is to work with you closely, in a very focused bill. The purpose of 

the bill is about restructuring and prepayment, and not about new 

construction. I am very sensitive to the concerns over this, and our 

need for expanding housing. Our intent is to preserve and expand 

quality affordable housing in the context of this legislation. 

So, with that, I would like to direct my first question to Mr. 

Carew. And you have a unique perspective. In Kentucky, in the 

communities where you are dealing in both my district and Congressman Rogers’ district, you have seen from your perspective the 

State as well, dealing with urban housing issues. 

And one thing I would like to comment on briefly, for the record, 

is how you see affordable housing needs in rural areas, different 

from the urban areas, and why do the rural residents who are now 

ready for home ownership find it more difficult to find safe and decent apartment housing in their communities? 

Mr. CAREW. Thank you, Congressman. That’s a global question. 

Mr. DAVIS OF KENTUCKY. I’m not meaning to engage in political 

hypocrisy, although I am sure that has happened in this chamber 

before. Just from a practical perspective. 

Mr. CAREW. From a practical perspective, the main differences 

between rural and urban—and one of them is, to this day, in rural 

Kentucky, we have no enforcement of the building code. So, the 

housing stock that we have was never built to a code. So that it’s 

very difficult to find quality housing at an affordable in rate. 

I think the other thing we should keep in mind is that in eastern 

Kentucky, Appalachian Kentucky, we have some of the poorest 

counties in America. And we are always limited by Federal statutes 

to serve those below 60 percent of median in a rental project. 

So, when I go to Owsley County, the second or third poorest 

county in America, to Booneville, the county seat which is in the 

Fifth District, and I try and make a project work for families who 

are below 60 percent of median in that county, the window of opportunity to make that project financially successful is very, very 

small. 

So, it’s almost unheard of, although we have one tax credit 

project in Housley County. But tax credits alone don’t do the trick. 

And that’s where 515 projects, when you go around all Kentucky, 

every small, rural community has a 515 project. 

And so I think it’s difficult to do deals in rural America, in rural 

Kentucky, without bring in subsidies to the table. If you looked at 

a line east of I–75 in Kentucky, and counted up the tax credit 

projects, it would be a very small number of projects. But if you 

counted up the 515 projects, basically every community has got 

one. 

I am not sure I am addressing your question. Those are some 

general answers. 

Mr. DAVIS OF KENTUCKY. I appreciate the perspective. I was actually out in Owingsville last night, and talking to a fairly large 

group of folks out there. I mentioned this issue, and the interesting 

29

thing from the grassroots, getting into all the technicalities of the 

bill. There seemed to be a very positive response from folks, this 

idea of being able to preserve and improve the quality of the process. Prepayment is much less an issue down there, but preservation is a very critical issue from the standpoint of leveraging resources long term. 

Mr. Anders, in your opening statement, and I apologize again for 

us having to move down the line, but to get back to your concerns. 

We take those very seriously. 

You mentioned your opinion that there should be changes to the 

way H.R. 5039 allows tenants to be free from discrimination simply 

because they hold a voucher. Could you please explain what recommendations that you would make, or you would have for this 

specific provision? 

Mr. ANDERS. I think the simplest way is to state, as it does in 

the HUD Section 8 program, that the residents have a right to remain in their present home. That right should only be subject to 

good cause eviction. 

Currently, you simply have a provision that states that the landlord may not discriminate against voucher holders. If the landlord 

does not like them for any other reason, he or she can decide not 

to rent to a particular household. There is nothing that prevents 

them from otherwise refusing to rent to voucher holders, as long 

as they do not discriminate under the Fair Housing Act, and as 

long as they don’t say that I’m not going to have any voucher holders in this building. Those are two prohibited provisions. The right 

to remain is in the HUD Section 8 program. It’s in the enhanced 

voucher program. It gives the residents the right to remain in their 

homes. 

Mr. DAVIS OF KENTUCKY. Mr. Rice, would you like to share your 

perspective, maybe, on Mr. Anders’ comments? 

Mr. RICE. Sure. The 515 program, as well as HUD programs, require us to develop tenant selection criteria that the agencies look 

at, that meets their requirements. 

And we have to stick to those very strictly. I don’t see where 

some—certainly, we are not going to have something in our policy 

that says we are not going to rent to somebody because they have 

a voucher. So, I don’t believe it would be a problem because they 

wouldn’t approve a policy that would allow us not to rent to someone for that kind of reason. We have to have very good reasons not 

to rent to tenants, the same way we have to have very good reasons to evict a tenant. 

Mr. DAVIS OF KENTUCKY. I appreciate your perspective. My concern is maintaining balance between the right to remain and the 

property rights of the owners, from the perspective of this legislation. 

Going back to Mr. Anders, a follow-up. In your testimony, you 

also expressed concern over the fact that tenants will be provided 

a voucher that will assume that a tenant will take that voucher to 

a unit renting roughly the same price as the unit that had been 

prepaid. In essence, the voucher program will ensure that tenants 

are not made worse off by prepayment. 

You suggested that tenants should not necessarily be bound by 

the same formula. Could you comment on the voucher formula, 

30

keeping in mind that the goal of the voucher program is to protect 

tenants from being disadvantaged by prepayment. 

I would appreciate your insights. 

Mr. ANDERS. There are three problems. The first problem is that 

the top end of the formula in the voucher program that is in H.R. 

5039 essentially restricts the rent to fair market values of the unit 

on the date of prepayment. 

If, as is the case that Tom just pointed out in Kentucky, you 

have a tenant who has to move to another community because 

there is no decent, safe, and sanitary housing in the community in 

which the 515 project is located, there is quite a strong likelihood 

that the neighboring community, which does have the decent and 

affordable housing, will have higher rents. 

The voucher program, as it is currently set up, does not allow the 

agency to pay for the higher rent. That means that the rent which 

the tenant is going to be paying is more than the tenant can afford 

and he or she will be overburdened. 

The second problem is at the low end of the voucher formula. 

Here we have a two-fold problem. One arises when you have a resident who is already overburdened. If you force that resident to another locality you are likely to increase that burden if rents are 

higher in that community. Second, if their income goes down, they 

are going to be evicted, because there is no mechanism in the 

voucher program, as it is presently structured, to reduce their rent. 

So, there is a limitation there. 

The third problem is simply affordability. When somebody is 

going to move, particularly an elderly person, the likelihood is that 

they are going to move to a locality where their family is already 

located. That may mean that they are going to move across the Nation. They are not simply going to move into the next town. 

Elderly people, when they are forced to move, and they see it as 

the last move, want to move to where their family is located. And 

the restrictions on the voucher subsidy in H.R. 5039 may simply 

not work in the new community. It’s as simple as that. 

Mr. DAVIS OF KENTUCKY. Thank you very much. Would any of 

the other panelists like to comment on the statement? Mr. Loza? 

Mr. LOZA. We had noted the problem of the portability of the 

vouchers and we understand the need to keep costs down. However, we would agree with Mr. Anders that particularly for our elderly or disabled persons, who happen to be displaced from 515 

projects, we would—we don’t know what would happen, but we 

would expect that they would want to go to a place where there are 

support systems, nursing homes, close to family. 

So, at a minimum, we were suggesting that maybe we can make 

an exception for those particular populations. 

Mr. DAVIS OF KENTUCKY. That is a very good point, especially 

dealing with long term care issues for the elderly. 

Mr. Arbury? 

Mr. ARBURY. As I listen, I think we are talking about two separate issues. We are talking about elderly people who might move 

out of—as Gideon was talking about, Kentucky, but as I understand it, the areas that Mr. Carew was talking about in Kentucky 

are very depressed, and so I can’t see where a number of those 

31

properties are going to be prepaid and somehow, some higher market rent is going to occur in those areas. 

Whereas if an elderly person moves across country, that is a 

whole different problem, in terms of where they are going to locate, 

and I thought the whole issue was to preserve, as much as possible, 

the 515 housing that we have today. 

Mr. DAVIS OF KENTUCKY. I appreciate the insight. And you are 

right. They are two different issues. Mr. Carew and I see firsthand 

the overwhelming number of counties in our district are really 

preservation issues. I have probably three, maybe four, counties 

that are exurbs or maybe becoming exurb areas, since a large metropolitan area—northern Kentucky metropolitan area, where that 

growth is taking place, and prepayment could potentially become 

an issue. 

It’s a small part of the unit population, but still it’s an important 

question to ask, on balancing that out but maintaining the focus 

on presentation. 

And I appreciate what everybody shared. I would like to recognize the gentleman from Missouri. 

Mr. CLEAVER. Thank you, Chairman Davis. I intend to support 

this bill during the write-up and when it goes to the Floor. I think 

some of you have made some interesting suggestions about improvements. 

My concern is still that, the answer of which may have gone out 

of the door a few moments ago, and I’m not sophisticated enough 

to leave it alone. No matter how I look at this, the 515 program 

has been zeroed out, and at first I thought, you know, it’s got to 

be me, because I asked the question three different ways, and I 

never could get the answer. 

You are involved in these programs every day. I’m just curious, 

before I go any further. Do any of you see that the 515 program 

has been zeroed out? 

Mr. RAPOZA. Yes. 

Mr. DAVIS OF KENTUCKY. The Chair recognizes a show of hands. 

That would be— 

[Laughter] 

Mr. RAPOZA. Congressman, the budget, if you turn to the budget 

and you turn to the Section 515 line, there’s zero there. 

Mr. CLEAVER. Yes. Yes. And zero means naught? 

Mr. RAPOZA. That’s right. That’s right. 

Mr. CLEAVER. Okay. I think we can communicate. I think this is 

going to be good from now on. 

[Laughter] 

Mr. CLEAVER. The 515 program is zeroed out, and if we are now 

going to place emphasis on the 538 program, are we making a 

move away from the poorest of the poor? 

Mr. RAPOZA. Yes. 

Mr. CLEAVER. And accommodating those whose means are much 

greater? 

Mr. RAPOZA. Very simply, yes, sir. That’s exactly right. Yes. The 

538, a guarantee is just that. It doesn’t provide any subsidy at all. 

To make 538 work for the most part, the projects have to be geared 

toward larger cities, and they have to serve families who are 

32

wealthier. 515 for the most part serves poor communities and poor 

families. 538 doesn’t work for poor communities and poor families. 

Mr. LOZA. Mr. Cleaver, the markets will vary, depending on different parts of the country. And we’ve asked the Department of Agriculture to provide us with the data that allow us to see from area 

to area who is being served. The data is not as good as we’d like 

it. However, from what we have seen, there are clearly two different markets. 531 serves a higher income market, and 515 serves 

a lower income market. There’s no doubt about the data that is 

available. 

Mr. CLEAVER. Mr. Carew? 

Mr. CAREW. Mr. Cleaver, we are in the process of developing a 

538 in Moorehead, Kentucky. But essentially what it means is that 

we have to bring other subsidies to the table, such as HOME 

money, such as State trust fund money, such as the affordable 

housing program of the Federal Home Loan Bank, such as tax 

credits, so that we’ve got to make up the difference between a 1 

percent 50-year loan and a 30-year market rate loan. That’s the 

simple analysis. 

Mr. CLEAVER. Okay. But here’s my concern. First of all, I think 

without any new construction, the program is essentially dead on 

the vine, and I’m not sure if there is a suggestion here, a subtle 

suggestion that is not even subtle, that there’s no need for new construction, which would attract primarily the poor. And so we’re 

going to deal with rehabbing, you know, existing units, and we’re 

not going to do anything in terms of expanding housing opportunities for the poor and rural areas. 

And to go back to Mr. Rapoza, your question—I mean, your 

statement, if you are supporting prepayment, and you are— 

Mr. RAPOZA. We don’t, actually. 

Mr. CLEAVER. So nobody up here is supporting— 

Mr. RAPOZA. Well, I think some people do. We don’t support prepayment without having housing options and subsidies for families 

tied to that prepayment. 

Mr. CLEAVER. Okay. Who is supporting prepayment? 

Mr. ARBURY. We’re not against prepayment as long as you have 

certain restrictions that are put in this bill in terms of notification 

and/or long-term viability plans and other things to try to preserve 

the housing, but we’re not against prepayment per se. 

Mr. CLEAVER. So your support is contingent on the notification 

period? 

Mr. ARBURY. Notification, restrictions on the sale, you know, if 

other parties are willing to come forward and finance this housing 

and keep it under a long-term viability plan, I think it’s 20 years 

in here, to make sure that it stays as rural 515 housing, we’re not 

opposed to that. But we’re saying if an owner wants to get out and 

fresh money needs to come into the property, why not? 

Mr. CLEAVER. Yes, sir. 

Mr. WEHRWEIN. Congressman, we recognize that there—litigation that’s taken place over many years has not played out well in 

terms of maintaining the inability—or the limitations on prepayment. We would, like many of the other panelists here, recommend 

that many of the issues in H.R. 59 be addressed in terms of protection of residents, and that resources and timeframes and structures 

33

be made such that these assets have a good chance of being preserved as affordable, as opposed to just simply being lost to the affordable housing inventory. 

There are many, many buyers who might be interested in maintaining these as affordable homes, maybe even within the 515 program. We would encourage the committee to make changes that 

would encourage owners to sell to those folks and folks to buy those 

units and keep them in the inventory. 

Mr. ANDERS. Congressman? 

Mr. CLEAVER. Yes, sir? 

Mr. ANDERS. I know that in Kentucky the prepayment issues 

may not be as significant as it is in California. My colleagues in 

California estimate that practically every 515 project in that 

State—and that State is not fully urbanized yet—will be lost 

through prepayment because property values in the State have increased. We’re effectively going to lose the 515 program in the 

State. 

Let me raise another issue. And I think some of the numbers 

that were bandied around today are interesting. The Administration’s proposal to revitalize the 515 stock cost of about $20,000 a 

unit. They’re saying that it’s going to cost $80,000 a unit to build 

a new unit under the section 515 program. 

If I’m not mistaken, the numbers that Chuck was putting out say that it cost them about $40,000 a unit to preserve about 1,000 

units in Washington State, which is not an inexpensive State. It 

seems to me that that’s a reasonable and rational way of approaching this prepayment problem rather than simply taking, you know, 

approximately 50,000 to 70,000 units of 515 housing and simply 

converting them into other uses. 

Mr. CLEAVER. Let me share with you my take on this. You do it 

every day. That if we leave 515 essentially and go to 538, we are 

abandoning the rural poor. That’s how I see it. And on top of that, 

my concern is that if we allow for repayment—prepayment, I’m 

sorry—you’re going to end up selling the property and making a—

you don’t want to sell it to lose money. I mean, anybody who wants 

to lose money, raise your hand. 

And so you’re going to sell it to make money. Do you believe that 

you owe something because you were able to get this at 1 percent, 

which—1 percent is free? I mean, you did 1 percent, and then 

you’re going to sell it and make a profit. We eliminate housing for 

the poor. People who are in 538 will get a guaranteed loan, but 

you’re not going to get a guaranteed loan for property if you are 

poor, whether you live in a rural area or if live in the middle of 

New York City. 

Yes, sir? 

Mr. RICE. If I could address that, the 1 percent interest rate is 

a benefit to the resident, not to the owner. The 1 percent interest 

rate—my rents are based on my costs and my loan repayment at 

1 percent, and all of my costs and a very small return to the owner, 

which hardly any owners get any more. And to say that the 1 percent benefits the owner is not true. 

The 1 percent benefits the tenant, because it lowers their rent. 

The market rent rate for a project is based on the note rate. The 

basic rent is based on the payment at 1 percent. And so the difVerDate 0ct 09 2002 18:14 Nov 17, 2006 Jkt 003537 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 F:\DOCS\HBA115.040 HFIN PsN: TERRIE
34

ference between those two, the interest credit, lowers the rent to 

the tenant. It does not benefit the owner. 

Mr. CLEAVER. Yes, but the program was designed to help the 

renter. 

Mr. RICE. Correct. 

Mr. CLEAVER. It wasn’t designed for the owner. 

Mr. RICE. Okay. 

Mr. CLEAVER. The prepayment you are saying is now the time 

for the owner to get his or her due. 

Mr. RICE. It’s time for the owner to do what he was contractually 

told he could do— 

Mr. CLEAVER. Which was? 

Mr. RICE. The loan agreement states that at any time that the 

owner could obtain sufficient financing outside of the government 

that they were required to prepay, not only that they could, but it 

was a requirement. When we built these apartments in the beginning, the first thing they had to do is go to a bank and get a letter 

of denial saying that they would not loan us the money to build a 

project here at these rental rates. 

Mr. CLEAVER. I can get a letter of denial. That’s not— 

Mr. RICE. I didn’t say it was hard, okay. So, but it was an apartment project that nobody else wanted to build because it was an 

area that couldn’t meet market rents. So we went to the Rural Development, and we said, we want to use this—take your money at 

1 percent. And they said, okay, but as soon as you could get a bank 

loan, if your equity was down or your rents were high enough you 

could get a bank loan, you’re supposed to come in and pay us off. 

None of our owners thought they would be in these projects over 

7 years. Now, my newest project was built in 1991, and none of my 

owners have gotten out, other than the ones who passed away. 

Now I think they have a right to, if they sell to a nonprofit, whatever, they have a right to get out of these projects and move on. 

And I don’t think—I don’t think it’s a gift they’re getting, this 1 

percent and that they owe something, no I don’t. 

Mr. CLEAVER. We disagree. And we probably—there’s nothing 

that’s going to stop me from disagreeing with you. But if you get 

a 1 percent loan you didn’t benefit, I mean, I—you know, I just—

I cannot accept that. But that’s okay. 

Are you familiar with Washington, D.C., property at all? 

Mr. RICE. A little. You mean like rental rates and stuff? 

Mr. CLEAVER. Yeah. I mean, you know, if you go not far from the 

Capitol, you’ll find properties that were almost falling apart—that 

a few years ago you could have purchased for $25,000—are now 

being sold at $400,000. It’s happening all around Washington. Are 

you familiar with the term ‘‘gentrification?’’ Can that happen in a 

rural area? 

Mr. RICE. Sure. 

Mr. CLEAVER. Okay. 

Mr. RICE. I mean, I’m in a number of towns that were rural a 

long time ago that aren’t anymore. But I’m in a lot of towns that 

are rural and are going to be rural forever, if they stay alive at all. 

Mr. CLEAVER. And if—and that will remain rural if people can 

still afford to live there. But if all of these properties are sold and 

35

we end up with new rural condos, we have gentrified even rural 

areas. 

I guess I’m not comfortable— 

Mr. DAVIS OF KENTUCKY. If the gentleman would yield for one 

second. 

Mr. CLEAVER. Yes, Mr. Chairman. 

Mr. DAVIS OF KENTUCKY. We’re just talking about 10 percent of 

the properties are in question on being sold right now, just for 

my—I do share your concern on this, but just to bring the number 

down to a more practical level. I yield back. 

Mr. CLEAVER. Mr. Chairman, thank you for bringing that—I 

think I made my point. I’m very concerned about what’s going to 

happen to people who are poor, who cannot get guarantees. And I 

don’t know how we address it. It is a concern. 

Mr. DAVIS OF KENTUCKY. My commitment—I empathize very 

much with those concerns and would like to work with you on ways 

to fund Section 515. It’s probably going to need to be in a different 

piece of legislation. Perhaps what Chairman Ney has proposed with 

the affordable housing fund and the GSE reform bill, you know, 

may be one path to address this separate from our preservation efforts here, prepayment efforts. 

One thing that I would like to direct a question to Mr. Wehrwein 

from his perspective and the other members of the panel join in. 

And one thing I would like to clarify as well, is when we speak of 

prepayment in our estimation, for example, the majority of my district overwhelmingly, the question is preservation and not prepayment. And what we want to do is improve the quality and hopefully 

expand that base of affordable housing that’s out there, and that 

nobody can prepay unless they have fulfilled their 20-year use restriction commitments. So there’s got to be contractual fulfillment 

before prepayment even becomes an option under any circumstance. 

But to Mr. Wehrwein first, how many—approximately how many 

Section 515 developments has your organization or members of 

your organization helped to finance or develop? And out of those, 

if we can just put the follow-on there together, how many are at 

risk of becoming unsuitable for housing and for revitalization programs such as the one that we’re attempting to craft if H.R. 5039 

is not enacted? 

Mr. WEHRWEIN. Mr. Chairman, thank you. We have acquired or 

built about 45 Section 515 deals in our history. I would say that 

most of those are in pretty good shape, mostly because we’ve—30 

of them we’ve recently acquired through this transaction that I 

spoke of in my testimony, and we’ve brought some new resources 

to bear almost on an exceptional basis to try to make those units 

modern and to sustain their quality. 

And as I indicated, you know, that took about eight to ten thousand bucks a unit to accomplish. In some of our other projects, 

we’ve built new and we’ve been able to maintain some reserves. I 

would suggest, however, that we have looked at and passed on 

probably another three to four thousand units of affordable housing 

because these tools that are described in H.R. 5039 are not in 

place, and it’s not a smooth track to go through Rural Development 

to try to close on these. Again, we did this in a rather exceptional 

36

way and found that it was quite challenging. And there are also 

specific resources available in the State of Washington that happen 

to make this work. We actually—we’ve looked at Section 538 as a 

vehicle to help acquire and use other soft resources, and it just 

tends not to work and not to be efficient. 

So, if anything, Mr. Chairman, I might suggest that we have 

passed on a number of units because we couldn’t make it work. 

Mr. DAVIS OF KENTUCKY. Okay. Thank you. Would anyone else 

like to make a comment on that from your experience? Yes? 

Mr. ANDERS. I just want to point out that not all owners of 515 

projects which are in markets that have not appreciated are going 

to stay in and preserve their units. 

I think what we’re going to see, and what we have seen in the 

HUD program, is that certain owners who are sitting with projects 

that clearly need revitalization are going to opt for revitalization. 

You’re going to see owners of projects who sit in markets that have 

appreciated which are going to prepay, and current estimate in 

2004 was that 10 percent of stock will prepay. 

You’re going to find that probably somewhere between 5 to 15 

percent of the other owners are going to sit. They’re going to sit 

and look at what happens to market conditions in their area in the 

next 5, 10, or maybe even 15 years, and then decide which way 

they’re going to go. 

So, potentially, even though the estimate in 2004 was that only 

10 percent of the units would prepay, I think the number eventually will be substantially higher because certain owners are simply 

going to sit, as they have done in the HUD mark-to-market program, because they don’t know what’s going to happen in their 

market. If and when the market improves, they will opt out. 

And the translation is that—and the RHS just recently released 

a study that shows that approximately 1.6 persons live in a Section 

515 household, if we take the conservative estimate that 50,000 

units are going to be prepayed, which is 10 percent of the stock, 

we’re talking about 80,000 people subject to displacement. And 

that’s not an insignificant number. 

Mr. DAVIS OF KENTUCKY. Anybody else have something they’d 

like to share? 

[No response] 

Mr. DAVIS OF KENTUCKY. Just as we wrap up, I’d share a personal perspective in my interest in working on this bill that indirectly brought me into contact with the 515 program. We have a 

rapidly—in fact, one of the fastest growing counties in the entire 

Commonwealth where I live in Boone County, Kentucky, but in 

Covington, Kentucky, Newport, Kentucky or urban areas with 

rapid economic growth, we’re seeing a similar thing that has happened with Section 8 housing programs and with the low income, 

working class families being driven out of the area potentially and 

having to move down into areas where in fact other rapid economic 

growth is taking place in the next few years has a potential to displace them again. 

And what we want to strive for ultimately is a fair and compassionate means of providing that affordable housing, but at the 

same time allow the market to work in such a way that there’s a 

37

balance so the property owners have their rights protected, that all 

parties maintain their contractual and personal obligations to this. 

I appreciate very much your coming here today. Your written testimony is of great value to us. We’d like to continue to work closely 

with you as this bill moves to markup in May. If there are places 

where we can make appropriate adjustments dealing with both the 

prepayment question and dealing with the preservation issue, the 

voucher issue, we consider your expertise in the field to be most 

valuable to us and look forward to working with you. 

It’s been a pleasure, and I personally want to thank you very 

much. The Chair notes that some of the members of the committee 

may have additional questions for the panel, which they may wish 

to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to 

these witnesses and to place their responses in the record. 

With that, this hearing is adjourned. 

[Whereupon, at 4:07 p.m., the subcommittee was adjourned.] 

(39)

A P P E N D I X

April 25, 2006

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