I

103D CONGRESS

2D SESSION H. R. 5115

To improve the management of the project-based rental assistance program

under section 8 of the United States Housing Act of 1937.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 28, 1994

Mr. PETERSON of Minnesota introduced the following bill; which was referred

to the Committee on Banking, Finance and Urban Affairs

A BILL

To improve the management of the project-based rental assistance program under section 8 of the United States

Housing Act of 1937.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Section 8 Project5 Based Program Management Improvement Act of 1994’’.

6 SEC. 2. CONGRESSIONAL FINDINGS.

7 The Congress finds that—

8 (1) approximately 30 percent of the multifamily

9 housing projects provided project-based assistance

10 under section 8 of the United States Housing Act of
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1 1937 (in this section referred to as ‘‘assisted

2 projects’’) do not meet the housing quality standards

3 established by the Department of Housing and

4 Urban Development (in this section referred to as

5 the ‘‘Department’’), but do meet the standards for

6 classification as ‘‘troubled projects’’;

7 (2) of the current total of more than 20,000 as8 sisted projects, 10,000 are subject to mortgages in9 sured by the Department;

10 (3) the Department cannot identify which as11 sisted projects are troubled projects;

12 (4) the Department is not adequately inspecting

13 assisted projects nor ensuring that necessary repairs

14 are made to assisted projects;

15 (5) the Department is not taking aggressive en16 forcement action against the owners of such troubled

17 assisted projects;

18 (6) the Inspector General of the Department

19 has indicated that aggressive enforcement action is

20 not routinely taken against owners of such troubled

21 assisted projects but is taken only in rare cir22 cumstances;

23 (7) many of the administrative sanctions avail24 able to improve the conditions and operation of as-
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1 sisted projects would not detrimentally affect the

2 tenants of the projects;

3 (8) the inability of the Department to remedy

4 the problems of troubled assisted projects results

5 from a variety of factors, including poor manage6 ment, inadequate data systems, staff shortages, and

7 a lack of program accountability;

8 (9) the Department has not conducted a com9 plete assessment of troubled assisted projects, but

10 should conduct such an assessment, which should in11 clude—

12 (A) conducting a financial and cost-benefit

13 analysis of each troubled assisted project to de14 termine proper remedial actions; and

15 (B) examining the social impact the

16 projects have on the tenants, owners, and com17 munities of the projects.

18 (10) the rents charged for many of the dwelling

19 units in assisted projects are excessive in comparison

20 to comparable unassisted dwelling units located in

21 the same area;

22 (11) a report issued by the Department in 1993

23 which analyzed 4,125 assisted projects determined

24 that, for 42 percent of such projects, the rents

25 charged for dwelling units in the project were equal
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1 to or exceeded 140 percent of the market rents for

2 dwelling units in the area of the project;

3 (12) in 1989 the Congress directed the Depart4 ment to issue regulations for conducting rent com5 parability reviews, which examine the difference be6 tween the rents charged for dwelling units assisted

7 by the Department and similar unassisted dwelling

8 units in the same neighborhood;

9 (13) although the Department issued a pro10 posed rule regarding rent comparability reviews in

11 1992, a final rule has not been issued before the

12 date of the enactment of this Act; and

13 (14) the Department has placed a moratorium

14 on conducting rent comparability reviews until the

15 publication of the final rule and, therefore, owners

16 of dwelling units assisted by the Department are

17 currently receiving automatic rent adjustments with18 out scrutiny by the Department and will continue to

19 receive such automatic adjustments until publication

20 of the final rule.

21 SEC. 3. IDENTIFICATION AND IMPROVEMENT OF TROU22 BLED PROJECTS.

23 (a) IN GENERAL.—Title IV of the Housing and Com24 munity Development Act of 1992 (42 U.S.C. 1715z–1a
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1 note) is amended by adding at the end the following new

2 subtitle:

3 ‘‘Subtitle B—Identification and Im4 provement of Troubled Projects

5 Receiving Project-Based Section

6 8 Assistance

7 ‘‘SEC. 421. IDENTIFICATION.

8 ‘‘Not later than 30 days after the commencement of

9 the analysis period (as such term is defined in section

10 426), the Secretary shall—

11 ‘‘(1) review all housing projects (as such term

12 is defined in section 426) to determine which

13 projects meet the criteria established under section

14 422 for classification as troubled and severely trou15 bled housing projects;

16 ‘‘(2) classify the housing projects meeting such

17 criteria as troubled and severely troubled, as appro18 priate; and

19 ‘‘(3) submit to the Congress a list of the

20 projects classified as troubled and severely troubled.

21 ‘‘SEC. 422. CRITERIA FOR CLASSIFICATION AS TROUBLED

22 AND SEVERELY TROUBLED HOUSING

23 PROJECTS.

24 ‘‘(a) TROUBLED HOUSING PROJECTS.—A housing

25 project shall be classified as troubled if—
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1 ‘‘(1) the Secretary determines that financial as2 sistance for the project is necessary, in addition to

3 the assistance provided under the contract for

4 project-based assistance for the project, to enable

5 the project—

6 ‘‘(A) to meet the financial obligations se7 cured by or relating to the project; or

8 ‘‘(B) to provide the quality of housing and

9 services required under the contract for project10 based assistance for the project or the regu11 latory agreements relating to the project; and

12 ‘‘(2) the project does not meet the criteria es13 tablished under subsection (b)(2).

14 ‘‘(b) SEVERELY TROUBLED HOUSING PROJECT.—A

15 housing project shall be classified as severely troubled if

16 the Secretary determines that the project—

17 ‘‘(1) meets the criteria for classification as a

18 troubled housing project; and

19 ‘‘(2) meets such additional criteria, as the Sec20 retary shall establish, indicating severe financial or

21 physical problems with the project.

22 ‘‘SEC. 423. FINANCIAL AND SOCIAL IMPACT ANALYSIS.

23 ‘‘(a) SEVERELY TROUBLED PROJECTS.—Not later

24 than the conclusion of the 6th month of the analysis pe25 riod, the Secretary shall conduct a financial and social im-
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1 pact analysis under this section for each severely troubled

2 housing project. During such 6-month period, the Sec3 retary shall complete such analyses for severely troubled

housing projects at a rate of not less than 1 4 ⁄6 of the total

5 number of severely troubled housing projects per month.

6 ‘‘(b) TROUBLED PROJECTS.—Not later than the ex7 piration of the analysis period, the Secretary shall conduct

8 a financial and social impact analysis under this section

9 for each troubled housing project. During the 12-month

10 period beginning 6 months after the commencement of the

11 analysis period, the Secretary shall complete such analyses

12 for troubled housing projects at a rate of not less than

1 13 ⁄12 of the total number of troubled housing projects per

14 month.

15 ‘‘(c) CONTENTS OF ANALYSIS.—Each financial and

16 social impact analysis conducted under this section for a

17 troubled or severely troubled housing project shall include

18 the following information regarding the project:

19 ‘‘(1) BACKGROUND INFORMATION.—

20 ‘‘(A) The number of units in the project,

21 the number of units in the project of each bed22 room size, the number of units in the project

23 assisted under the contract for project-based as24 sistance for the project, the amount of rent

25 charged for each dwelling unit in the project,
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1 and the vacancy rate for dwelling units in the

2 project.

3 ‘‘(B) The type and amount of assistance

4 provided monthly and annually for the project

5 under the contract for project-based assistance,

6 the original term of the contract, and the re7 maining term of the contract.

8 ‘‘(C) Any actions previously taken or as9 sistance previously provided (in addition to as10 sistance under the contract for project-based

11 assistance) to assist the project.

12 ‘‘(D) The rents for comparable unassisted

13 dwelling units in the area in which the project

14 is located.

15 ‘‘(2) FINANCIAL INFORMATION.—

16 ‘‘(A) If the project is subject to a mortgage

17 insured under the National Housing Act, the

18 program under which such insurance is pro19 vided, whether the loan secured by the mort20 gage is delinquent, in default, or current, and

21 if delinquent or in default, the amount of ar22 rears, outstanding balance, interest rate, and

23 remaining term of the delinquent or defaulted

24 loan.
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1 ‘‘(B) The most recent statement of project

2 income and expenses, which shall be an audited

3 financial statement, if practicable.

4 ‘‘(C) The amount of the balance in any re5 serve accounts for the project.

6 ‘‘(D) The estimated cost of any rehabilita7 tion necessary to maintain the project in ac8 cordance with applicable building and safety

9 standards and codes or to bring the project into

10 compliance with such standards and codes.

11 ‘‘(E) Any Federal, State, local, or private

12 programs or other sources of financing for re13 habilitation expenses for the project for which

14 the project is eligible.

15 ‘‘(F) The amount of monthly rental reve16 nue necessary per dwelling unit to fully support

17 the sum of rehabilitation costs under subpara18 graph (D) for the project, the costs of operating

19 the project, and the costs of maintaining the

20 project in accordance with applicable building

21 and safety standards.

22 ‘‘(G) The estimated revenue losses result23 ing from vacancies in dwelling units in the

24 project.
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1 ‘‘(3) COMPARISON OF AVAILABLE OPTIONS.—A

2 description, analysis, and comparison of the feasibil3 ity, effectiveness, and costs of various actions that

4 may be taken to resolve or remedy the factors result5 ing in the project being classified as troubled or se6 verely troubled, as the case may be, which actions

7 shall include—

8 ‘‘(A) continuing or increasing the amount

9 of assistance provided for the project under the

10 contract for project-based assistance;

11 ‘‘(B) imposing or enforcing sanctions

12 against the owner of the project for failure to

13 comply with conditions of the contract for

14 project-based assistance or regulatory agree15 ments relating to the project;

16 ‘‘(C) providing assistance to rehabilitate

17 the project;

18 ‘‘(D) providing tenant-based assistance for

19 the residents of dwelling units in the project to

20 be used to obtain dwelling units elsewhere;

21 ‘‘(E) providing assistance for the project

22 under other programs administered by the Sec23 retary of Housing and Urban Development;
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1 ‘‘(F) if the project is subject to a mortgage

2 insured under the National Housing Act, fore3 closing the mortgage; and

4 ‘‘(G) any other actions the Secretary or

5 the owner consider appropriate for the project.

6 ‘‘(4) SOCIAL IMPACT INFORMATION.—

7 ‘‘(A) Pursuant to a survey involving direct

8 interviews with a representative number of ten9 ants of the project, a description of the atti10 tudes of tenants of the project regarding resid11 ing—

12 ‘‘(i) in the project under the condi13 tions existing in the project;

14 ‘‘(ii) in the project after the project is

15 rehabilitated; and

16 ‘‘(iii) in dwelling units not located in

17 the project using tenant-based assistance

18 provided under section 8 of the United

19 States Housing Act of 1937.

20 ‘‘(B) An identification and description of

21 the community or neighborhood in which the

22 project is located and the living conditions in

23 the community or neighborhood.

24 ‘‘(C) A description of the financial invest25 ment and interest in the project of the owner
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1 of the project and of the extent of control by

2 the owner over the management of the project.

3 ‘‘(D) An analysis of the economic incen4 tives and disincentives for investing additional

5 amounts of Federal assistance in the project.

6 ‘‘(E) A description of the reasons for clas7 sification of the project as troubled or severely

8 troubled, as the case may be, and the reasons

9 why the owner failed to prevent the financial

10 and physical conditions of the project from

11 reaching a state requiring such classification.

12 ‘‘(5) ADDITIONAL INFORMATION.—Any other

13 information that the Secretary considers appro14 priate.

15 ‘‘(d) PLAN FOR REMEDIAL ACTIONS.—Each financial

16 and social impact analysis conducted under this section

17 for a troubled or severely troubled housing project shall

18 include a plan of actions to be taken with respect to the

19 project to resolve or remedy the factors resulting in the

20 project being classified as troubled or severely troubled,

21 as the case may be, which shall include—

22 ‘‘(1) a plan for implementing one or more of

23 the actions described in subsection (c)(3) that the

24 Secretary has determined are feasible, cost-effective,

25 legally viable, and available for the project;
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1 ‘‘(2) a description of the anticipated effects that

2 taking the actions pursuant to paragraph (1) will

3 have on—

4 ‘‘(A) tenants of project;

5 ‘‘(B) the community or neighborhood in

6 which the project is located; and

7 ‘‘(C) the owner of the project; and

8 ‘‘(3) a description of the reasons for selecting

9 the particular actions included in the plan pursuant

10 to paragraph (1).

11 ‘‘(e) COMPLIANCE WITH PLAN OF ACTION.—

12 ‘‘(1) IN GENERAL.—In making assistance avail13 able for a troubled or severely troubled housing

14 project, the Secretary shall comply with the plan of

15 actions established under subsection (d) for the

16 project (to the extent that amounts are available to

17 carry out such plan).

18 ‘‘(2) SEVERELY TROUBLED PROJECTS.—Not

19 later than the conclusion of the 6th month of the

20 analysis period, the Secretary shall, for each severely

21 troubled housing project, initiate the actions in22 cluded (pursuant to subsection (d)(1)) in the plan of

23 actions established under subsection (d) for the

24 project (to the extent amounts for such actions are

25 available).
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1 ‘‘(3) TROUBLED PROJECTS.—Not later than the

2 expiration of the analysis period, the Secretary shall,

3 for each troubled housing project, initiate the actions

4 included (pursuant to subsection (d)(1)) in the plan

5 of actions established under subsection (d) for the

6 project (to the extent amounts for such actions are

7 available).

8 ‘‘(f) SUBMISSION OF ANALYSES TO CONGRESS.—

9 Upon the conclusion of each month during the analysis

10 period, the Secretary shall submit to the Congress a copy

11 of each financial and social impact analysis completed dur12 ing such month.

13 ‘‘(g) CRITERIA FOR CHOOSING REMEDIAL AC14 TIONS.—Not later than the expiration of the 30-day period

15 beginning on the date of the enactment of the Section 8

16 Project-Based Program Management Improvement Act of

17 1994, the Secretary shall establish, and submit to the

18 Congress, guidelines for determining which remedial ac19 tions described in subsection (c)(3) are to be included in

20 a plan of actions established under subsection (d) for a

21 troubled or severely troubled housing project.
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1 ‘‘SEC. 424. PROHIBITION OF ADDITIONAL ASSISTANCE BE2 FORE FINANCIAL AND SOCIAL IMPACT ANAL3 YSIS.

4 ‘‘(a) PROHIBITION.—Notwithstanding any other pro5 vision of law, the Secretary may not provide assistance de6 scribed in subsection (b) for any housing project before

7 the completion of the financial and social impact analysis

8 for the project required under section 423.

9 ‘‘(b) PROHIBITED ASSISTANCE.—Assistance de10 scribed in this subsection is assistance provided—

11 ‘‘(1) pursuant to a commitment to provide such

12 assistance made after the date of the enactment of

13 the Section 8 Project-Based Program Management

14 Improvement Act of 1994; and

15 ‘‘(2) under—

16 ‘‘(A) the loan management set-aside pro17 gram under section 8 of the United States

18 Housing Act of 1937;

19 ‘‘(B) the flexible subsidy program under

20 section 201 of the Housing and Community De21 velopment Amendments of 1978; or

22 ‘‘(C) section 8 of the United States Hous23 ing Act of 1937, in the form of—

24 ‘‘(i) increases in maximum rents in

25 excess of the minimum amount required
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1 under the existing contract for project2 based assistance for the project; or

3 ‘‘(ii) additional amounts for the

4 project not required under the existing

5 contract for project-based assistance for

6 the project.

7 ‘‘SEC. 425. REPORT REGARDING LEGISLATIVE CHANGES.

8 ‘‘Not later than the expiration of the 12-month period

9 beginning on the date of the enactment of the Section 8

10 Project-Based Program Management Improvement Act of

11 1994, the Secretary shall submit a report to the Congress

12 describing any legislative provisions necessary or appro13 priate to assist the Secretary in carrying out the purposes

14 of this subtitle.

15 ‘‘SEC. 426. DEFINITIONS.

16 ‘‘For purposes of this subtitle, the following defini17 tions shall apply:

18 ‘‘(1) ANALYSIS PERIOD.—The term ‘analysis

19 period’ means the 18-month period beginning on the

20 first day of the first month that commences after

21 the date of the enactment of the Section 8 Project22 Based Program Management Improvement Act of

23 1994.

24 ‘‘(2) HOUSING PROJECT.—The terms ‘housing

25 project’ and ‘project’ mean a multifamily housing
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1 project for which project-based assistance is provided

2 pursuant to an existing contract for such assistance.

3 ‘‘(3) PROJECT-BASED ASSISTANCE.—The term

4 ‘project-based assistance’ means assistance provided

5 under section 8 of the United States Housing Act of

6 1937 that is attached to the structure pursuant to

7 subsection (d)(2) of such section.

8 ‘‘(4) SECRETARY.—The term ‘Secretary’ means

9 the Secretary of Housing and Urban Development.

10 ‘‘(5) SEVERELY TROUBLED HOUSING

11 PROJECT.—The term ‘severely troubled housing

12 project’ means a housing project that meets the cri13 teria established under section 422(b) and is classi14 fied by the Secretary as severely troubled pursuant

15 to section 421.

16 ‘‘(6) TROUBLED HOUSING PROJECT.—The term

17 ‘troubled housing project’ means a housing project

18 that meets the criteria established under section

19 422(a) and is classified by the Secretary as troubled

20 pursuant to section 421.

21 ‘‘SEC. 427. REGULATIONS.

22 ‘‘The Secretary may issue any regulations necessary

23 to carry out this subtitle.’’.
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1 (b) CLERICAL AMENDMENTS.—Title IV of the Hous2 ing and Community Development Act of 1992 (42 U.S.C.

3 1715z–1a note) is amended

4 (1) in sections 401, 402(a), 403(a), 404(a), and

5 404(e), by striking ‘‘title’’ each place it appears and

6 inserting ‘‘subtitle’’; and

7 (2) by inserting after the title heading the fol8 lowing new subtitle heading:

9 ‘‘Subtitle A—Comprehensive Needs

10 Assessments for Assisted Multi11 family Housing’’.

12 (c) CONFORMING AMENDMENT.—Section 201(n) of

13 the Housing and Community Development Amendments

14 of 1978 (12 U.S.C. 1715z–1a(n)) is amended by inserting

15 ‘‘subtitle A of’’ before ‘‘title IV of the Housing and Com16 munity Development Act of 1992’’, each place it appears.

17 SEC. 4. TERMINATION AND REUSE OF SECTION 8 HAP CON18 TRACT BUDGET AUTHORITY.

19 Section 8 of the United States Housing Act of 1937

20 (42 U.S.C. 1437f) is amended by adding at the end the

21 following new subsection:

22 ‘‘(z) TERMINATION OF PROJECT-BASED CONTRACTS

23 AND REUSE OF RECAPTURED BUDGET AUTHORITY.—

24 ‘‘(1) GENERAL AUTHORITY.—The Secretary

25 may reuse any budget authority that is recaptured
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1 on account of the termination, in whole or in part,

2 of a housing assistance payments contract (other

3 than a contract for tenant-based assistance) to pro4 vide tenant-based assistance under this section to

5 families occupying units formerly assisted under the

6 terminated contract. Such assistance shall be made

7 available only pursuant to a contract for such assist8 ance entered into by the Secretary and a public

9 housing agency.

10 ‘‘(2) FAMILIES OCCUPYING UNITS FORMERLY

11 ASSISTED UNDER TERMINATED CONTRACT.—In pro12 viding tenant-based assistance pursuant to this sec13 tion, the Secretary shall make such assistance avail14 able first to families occupying units formerly as15 sisted under the terminated contract.

16 ‘‘(3) NEW RENTS.—Rents established in con17 nection with a contract under this subsection shall

18 be established in accordance with subsection (c)(2),

19 but shall not exceed the amount of rent previously

20 paid under the terminated contract.

21 ‘‘(4) BUDGET SAVINGS.—To the extent that

22 new rents established under paragraph (3) are less

23 than the amount of rent previously paid under the

24 terminated contract, any budget authority remaining

25 shall be rescinded.’’.
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1 SEC. 5. REPEAL OF PROHIBITION ON LOWERING SECTION

2 8 RENTS.

3 Section 8(c)(2)(C) of the United States Housing Act

4 of 1937 (42 U.S.C. 1437f(c)(2)(C)) is amended by strik5 ing the antepenultimate sentence.

6 SEC. 6. ISSUANCE OF FINAL REGULATIONS FOR COM7 PARABILITY REVIEWS.

8 The Secretary of Housing and Urban Development

9 shall issue final regulations to carry out the amendments

10 made by section 801(c) of the Department of Housing and

11 Urban Development Reform Act of 1989 (relating to an12 nual adjustment factors and comparability studies) not

13 later than the expiration of the 30-day period beginning

14 upon the date of the enactment of this Act. Such regula15 tions shall take effect upon the date of issuance.

16 SEC. 7. LIMITATIONS ON RENT INCREASES FOR NEW CON17 STRUCTION AND SUBSTANTIAL REHABILITA18 TION PROJECTS.

19 Section 8(c)(2) of the United States Housing Act of

20 1937 (42 U.S.C. 1437f(c)(2)) is amended by adding at

21 the end the following new subparagraph:

22 ‘‘(D) With respect to housing constructed or substan23 tially rehabilitated pursuant to assistance provided under

24 subsection (b)(2) (as such section was in effect before Oc25 tober 1, 1983), notwithstanding the provisions of subpara26 graph (C), upon the refinancing of the project debt se-
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1 cured by a mortgage on the housing the Secretary may

2 (in the sole discretion of the Secretary) provide for any

3 subsequent annual (or more frequent) adjustments to

4 maximum monthly rents for the project required under

5 subparagraph (A) to be made on the basis of—

6 ‘‘(i) the reasonable formula established by the

7 Secretary pursuant to subparagraph (A); or

8 ‘‘(ii) an operating budget submitted to the Sec9 retary by the owner of the housing reflecting actual

10 and necessary expenses of owning and maintaining

11 the housing.’’.

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