49–006 

109TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 109–604 

SAVING AMERICA’S RURAL HOUSING ACT OF 2006 

JULY 27, 2006.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. OXLEY, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

ADDITIONAL VIEWS 

[To accompany H.R. 5039] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 5039) to establish a program to revitalize rural multifamily housing assisted under the Housing Act of 1949, having considered the same, report favorably thereon with an amendment and 

recommend that the bill as amended do pass. 

CONTENTS 

Page 

Amendment .............................................................................................................. 2 

Purpose and Summary ............................................................................................ 8 

Background and Need for Legislation .................................................................... 8 

Hearings ................................................................................................................... 11 

Committee Consideration ........................................................................................ 11 

Committee Votes ...................................................................................................... 11 

Committee Oversight Findings ............................................................................... 12 

Performance Goals and Objectives ......................................................................... 12 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 12 

Committee Cost Estimate ....................................................................................... 12 

Congressional Budget Office Estimate ................................................................... 12 

Federal Mandates Statement ................................................................................. 15 

Advisory Committee Statement .............................................................................. 15 

Constitutional Authority Statement ...................................................................... 15 

Applicability to Legislative Branch ........................................................................ 16 

Section-by-Section Analysis of the Legislation ...................................................... 16 

Changes in Existing Law Made by the Bill, as Reported ..................................... 17 

Additional Views ...................................................................................................... 29 


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AMENDMENT

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Saving America’s Rural Housing Act of 2006’’. 

SEC. 2. FINDINGS AND PURPOSES. 

(a) FINDINGS.—The Congress finds that— (1) section 502(c) of the Housing Act of 1949 restricts the rights of certain 

owners of projects for which loans were made or insured under section 515 of 

such Act to prepay such loans; 

(2) expensive litigation against the Department of Agriculture has cost the 

taxpayers of the United States millions of dollars to date, funds that would be 

better spent preserving affordable multifamily housing; 

(3) if such section 502(c) is partially repealed and the prepayment restrictions 

are eliminated for multifamily housing loans made before 1989 under section 

515, it is expected, according to a report, that approximately 10 percent of the 

portfolio of such loans would be prepaid and those projects would leave the program; 

(4) the average age of a multifamily housing project with a section 515 loan 

is 28 years, and therefore much of the portfolio of such projects is aging and 

in need of revitalization, while the need for affordable rural housing is increasing; 

(5) section 515 projects house some of the poorest families in rural America, 

with almost 60 percent of the units occupied by senior citizens or persons with 

disabilities and an average annual household income among all occupants of approximately $10,000; 

(6) in many small towns and communities, rental housing financed by direct 

loans under section 515 is the only decent, affordable rental housing available; 

and 

(7) consequently, any revitalization or disposition of this portfolio, which 

houses nearly 450,000 low-income families and seniors, should be handled with 

great care. 

(b) PURPOSES.—The purposes of this Act are— (1) to authorize the Secretary of Agriculture to carry out a program that encourages, to the extent practicable, the retention of section 515 housing project 

developments for long-term use and the repair and preservation of such properties, and ensures that the minimum number of residents are displaced; 

(2) to repeal a portion of section 502(c) of the Housing Act of 1949 to avoid 

further costly litigation against the Department of Agriculture; 

(3) to preserve the availability of affordable rural housing by providing a voluntary mechanism for owners of multifamily rural housing projects with loans 

under section 515 to enter into loan restructuring agreements with the Secretary to provide capital for revitalization activities; and 

(4) to provide for affordable rents for tenants who live in such projects that 

are revitalized under this Act and to protect tenants who live in such projects 

for which the loan is prepaid. 

SEC. 3. REVITALIZATION OF MULTIFAMILY HOUSING. 

(a) REVITALIZATION PROGRAM.—Title V of the Housing Act of 1949 (42 U.S.C. 1471 

et seq.) is amended by adding at the end the following new section: 

‘‘SEC. 544. REVITALIZATION AND TENANT PROTECTION VOUCHERS. 

‘‘(a) PURPOSE.—The purposes of this section are— ‘‘(1) to protect tenants who live in multifamily housing projects that are subsidized under this title and, in the case of prepayments of loans under section 

515, to protect tenants that are displaced when the projects cease being eligible 

projects; ‘‘(2) to strengthen the long-term viability of eligible projects; 

‘‘(3) to promote the revitalization of rural multifamily housing projects; and 

‘‘(4) to accomplish such several purposes— ‘‘(A) by providing a voluntary mechanism for project owners to enter into 

loan restructuring agreements with the Secretary to obtain new types of financial assistance to rehabilitate and maintain the projects; and ‘‘(B) by deregulating certain projects in a manner that still provides measurable performance standards and effective financing and rehabilitation of 

multifamily housing. 

‘‘(b) REVITALIZATION.—


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‘‘(1) IN GENERAL.—The Secretary shall, subject to the availability of amounts 

appropriated, carry out a revitalization program in accordance with this subsection to provide financial incentives and other assistance to owners of eligible 

projects through voluntary long-term use agreements entered into between the 

project owners and the Secretary. ‘‘(2) APPLICATIONS TO PARTICIPATE.—The Secretary may accept applications 

from owners of eligible projects to participate in the revitalization program 

under this section. ‘‘(3) LONG-TERM VIABILITY PLAN.— ‘‘(A) REQUIREMENT.—The Secretary may prepare and approve a long-term 

viability plan under this paragraph with respect to each eligible project for 

which the owner requests to participate. ‘‘(B) CONTENTS.—Each long-term viability plan for an eligible project 

shall include the following information: ‘‘(i) PHYSICAL NEEDS ASSESSMENT.—A physical needs assessment of 

the project that identifies and projects, for the following 20 years— ‘‘(I) all necessary repairs, improvements, maintenance, and management standards for the project, and when they will be made, in 

order to meet the requirements of this title; and ‘‘(II) the costs associated with the items referred to in this subparagraph (A). 

‘‘(ii) FINANCIAL PLAN.—A financial plan for the project that—

‘‘(I) reviews the financial stability of the project; 

‘‘(II) includes the loan restructuring elements, rent adjustments, 

management and operational efficiencies, and other financial adjustments to the project that are necessary to cover operating expenses for the project and maintain an adequate financial reserve 

for the future maintenance and capital needs of the project; 

‘‘(III) provides the project owner with a long-term rate of return 

on new capital, as determined by the Secretary, commensurate to 

comparable commercial multifamily housing projects; 

‘‘(IV) meets the physical needs for the project determined under 

the physical needs assessment; 

‘‘(V) ensures that rents available under the plan are affordable 

to eligible households in accordance with paragraph (7); and 

‘‘(VI) addresses any costs associated with any temporary tenant 

displacement resulting from renovations or rehabilitation undertaken as a result of participation of the project in the revitalization 

program. 

‘‘(C) DEVELOPMENT THROUGH PARTICIPATING ADMINISTRATIVE ENTITIES.—

The Secretary may develop long-term viability plans through the use of 

third-party participating administrative entities, who may be a private contractor, a State housing finance agency, or a nonprofit organization. 

‘‘(D) REVITALIZATION DETERMINATION.—Based on the long-term viability 

plan for an eligible project, the Secretary shall determine whether to offer 

the project owner a financial restructuring plan under paragraph (4) and 

the financial incentives to be included in any such plan offered. 

‘‘(E) FINAL REVIEW AND COMMENT.—With respect to any long-term viability plan prepared by the Secretary, the Secretary shall provide the project 

owner an opportunity to review the plan and discuss the plan with the Secretary or its agent before a determination is made under subparagraph (D). 

‘‘(F) FEES.—The Secretary may charge the project owner a fee for preparation of the long-term viability plan. 

‘‘(G) PAYMENT OF FEES.—If a long-term viability for a project is approved, 

the payment of such fee may be incorporated into a project owner’s financial restructuring plan for the project provided by the Secretary pursuant 

to paragraph (4). 

‘‘(4) FINANCIAL RESTRUCTURING PLAN; REVITALIZATION INCENTIVES.—Based on 

the long-term viability plan for an eligible project, the Secretary may offer a 

project owner a financial restructuring plan for the project. Such a plan may 

include one or more of the following revitalization incentives: 

‘‘(A) Reduction or elimination of interest on the loan or loans for the 

project made under section 515. 

‘‘(B) Partial or full deferral of payments due under such loan or loans. 

‘‘(C) Forgiveness of such loan or loans. 

‘‘(D) Subordination of such loan or loans, subject to such terms and conditions as the Secretary shall determine. 

‘‘(E) Reamortization of loan payments under such loan or loans over extended terms. 


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‘‘(F) A grant from the Secretary for the project. 

‘‘(G) Payment of project costs associated with developing the long-term viability plan. 

‘‘(H) Opportunity for project owners to obtain further investment equity 

from third parties in the project. 

‘‘(I) A direct loan or guarantee of a loan for the project, with a subsidized 

interest rate without regard to the value of the project. 

‘‘(5) LONG-TERM USE AGREEMENT.—

‘‘(A) IN GENERAL.—If the owner of an eligible project agrees to the terms 

of a financial restructuring plan for the project providing revitalization benefits under paragraph (4), in exchange for such benefits, the Secretary and 

the project owner shall enter into a long-term use agreement under this 

paragraph for the project. 

‘‘(B) AGREEMENT.—A long-term use agreement for an eligible project shall 

include—

‘‘(i) the terms of the financial restructuring plan for the project, including any revitalization incentives to be provided; 

‘‘(ii) an agreement by the project owner—

‘‘(I) to continue the property use restrictions with respect to the 

project in accordance with this title for a period of (aa) 20 years, 

or (bb) the remaining term of any loans under this title for the 

project, whichever ends later; 

‘‘(II) to comply with the long-term viability plan for the project; 

‘‘(III) to comply with the rent terms under paragraph (7) for the 

project; and 

‘‘(IV) to make value payments under paragraph (6) to the Secretary, and the terms of such payments; 

‘‘(iii) provisions terminating the agreement if any revitalization incentives for the project to be provided under the agreement are no longer 

available and the Secretary determines that such unavailability is not 

the fault of the owner; 

‘‘(iv) any rent terms for the project pursuant to paragraph (7); 

‘‘(v) a covenant which runs with the land; and 

‘‘(vi) such other terms as the Secretary determines are necessary to 

implement the purposes of this section. 

‘‘(6) SHARED VALUE AGREEMENTS.—Each long-term use agreement shall include a shared value agreement secured by the property of the eligible project 

that is the subject of the long-term use agreement, which shall determine how 

proceeds are divided at the end of the term of the loan or loans and shall require the project owner, at the end of such loan term or terms, to pay the lesser 

of—

‘‘(A) the sum of—

‘‘(i) the amounts of any loan writedowns, write-offs, and interest subsidies provided in connection with the loan restructuring under this 

subsection, at the closing of revitalization; 

‘‘(ii) any outstanding principal and interest; and 

‘‘(iii) any non-loan funds provided by the Secretary under this subsection; or 

‘‘(B) 75 percent of the appraised value of the eligible project. 

‘‘(7) RENTS UNDER LONG-TERM USE AGREEMENT.—In any eligible project that 

is subject to a long-term use agreement, rents for eligible households shall comply with the following requirements: 

‘‘(A) MINIMUM RENT.—The Secretary, acting through the director of the 

applicable local agency or office of the Department responsible for carrying 

out the programs under this title in such area, may provide that each eligible household is charged a minimum monthly rent in an amount determined by such local director that does not in any case exceed $25. The Secretary may allow exceptions to such minimum rent for an eligible household 

or groups of eligible households for demonstrated hardship, as determined 

by the Secretary, which hardship exceptions, if allowed by the Secretary, 

shall include the hardship exceptions provided or established by the Secretary of Housing and Urban Development, as appropriate, under subclauses (I) through (V) of section 3(a)(3)(B)(i) of the United States Housing 

Act of 1937 (42 U.S.C. 1437a(a)(3)(B)(i)). ‘‘(B) MAXIMUM HOUSEHOLD CONTRIBUTION TO RENT.—Notwithstanding 

any minimum monthly rent established pursuant to subparagraph (A), the 

maximum household contribution to monthly rent for any eligible household 

may not exceed 30 percent of the adjusted income of the eligible household. 


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Such local director may take actions as may be necessary to verify tenant 

incomes for purposes of carrying out this subparagraph. ‘‘(C) RENT ADJUSTMENTS.—The rents for eligible households may be increased or decreased only on an annual basis and only in accordance with 

standards incorporated in such agreement. The Secretary shall issue regulations establishing such standards, which shall include standards for rents 

that are considered affordable for eligible households for the area in which 

a project is located and for establishing rents that conform to such standards. ‘‘(8) LOWEST COST REQUIREMENT.—In determining the terms of a restructuring 

plan, and the type and amount of revitalization benefits under such plan to approve under this subsection for an eligible project, the Secretary shall, to the 

extent practicable, approve assistance that imposes the least cost to the Secretary while meeting the requirements of the long-term viability plan for the 

project. ‘‘(9) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated for each fiscal year such sums as may be necessary to carry out the revitalization program under this subsection. ‘‘(c) HOMEOWNERSHIP OPPORTUNITIES.—The owner of an eligible project may, in 

conjunction with revitalization of the project pursuant to this section, propose a sale 

to a tenant-based condominium or cooperative. Any such proposal shall be subject 

to a notice to tenants under terms that the Secretary shall establish. 

‘‘(d) DETERMINATION OF INELIGIBILITY.—

‘‘(1) PROCEDURE.—The Secretary may determine that a project owner is ineligible for participation in the revitalization program under this section in accordance with the standards under paragraph (2). 

‘‘(2) STANDARDS.—The Secretary may determine that a project owner is ineligible if—

‘‘(A) the project owner has a history of poor management or maintenance 

of multifamily housing properties; 

‘‘(B) the project owner is in default on a loan made available under the 

section 514 or 515 housing program; 

‘‘(C) the Secretary is unable to enter into a long-term use agreement for 

the project that is the subject of the application with the project owner 

within a reasonable time; 

‘‘(D) the project owner is suspended or debarred from participating in 

Federal contracts or programs; or 

‘‘(E) the Secretary has other good cause for withholding from the project 

owner the benefits made available under this section. 

‘‘(e) DEFINITIONS.—For purposes of this section, the following definitions shall 

apply: 

‘‘(1) ELIGIBLE HOUSEHOLD.—The term ‘eligible household’ means a household 

that, under section 515, is eligible to reside in a project funded with a loan 

made by the Secretary under such section. 

‘‘(2) ELIGIBLE PROJECT.—The term ‘eligible project’ means a housing project 

funded with a loan made at any time by the Secretary under section 515, the 

principal obligation of which has not been fully repaid. 

‘‘(3) PROJECT OWNER; OWNER.—The terms ‘project owner’ and ‘owner’ mean, 

with respect to an eligible project, an individual or entity, or principals thereof 

that own, or plan to purchase, the project.’’. 

(b) PRIORITY FOR SECTION 515 FINANCING.—Subsection (j) of section 515 of the 

Housing Act of 1949 (42 U.S.C. 1485(j)) is amended—

(1) by inserting ‘‘(1)’’ before ‘‘For’’; and 

(2) by adding at the end the following new paragraph: 

‘‘(2) The Secretary may give priority, in entering into contracts under this section 

involving financing for new construction of a project, for projects located in areas 

having a need for affordable low-income rental housing due to prepayment of loans 

made or insured under this section.’’. 

(c) PARTIAL REPEAL OF PREPAYMENT RESTRICTIONS; ADMINISTRATION OF PREPAYMENT REQUESTS.—Section 502 of the Housing Act of 1949 (42 U.S.C. 1472) is 

amended—

(1) in subsection (c)—

(A) by striking ‘‘or 515’’ each place such term appears; 

(B) in paragraph (4)(B)—

(i) by striking clause (iv); 

(ii) by redesignating clauses (v) and (vi) as clauses (iv) and (v), respectively; and 

(iii) by realigning clause (v) (as so redesignated by clause (ii) of this 

subparagraph) so as to be indented two ems from the left margin; and 


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(C) in paragraph (5)(G)(i)(I), by striking ‘‘, as the case may be,’’; and 

(2) by adding at the end the following new subsection: 

‘‘(i) PREPAYMENT OF SECTION 515 MULTIFAMILY HOUSING LOANS.—

‘‘(1) ADMINISTRATION.—

‘‘(A) PLAN.—The Secretary shall develop a plan to administer requests to 

prepay (not made in connection with any revitalization under section 544) 

any loan made under section 515. The plan shall provide for administration 

of voucher assistance in accordance with paragraph (3). The plan shall encourage and facilitate owners of projects to maintain the projects, or to 

transfer projects to owners who will maintain projects, as housing affordable to low-income residents, but shall not prevent an owner from prepaying. 

‘‘(B) IMPLEMENTATION.—The Secretary shall implement this subsection 

not later than the expiration of the 90-day period beginning on the date of 

the enactment of the Saving America’s Rural Housing Act of 2006. Notwithstanding that full implementation of this subsection may not have been 

completed, the Secretary may not delay the processing of any request to 

prepay a loan made under section 515. 

‘‘(2) NOTICE OF PREPAYMENT OR SALE.—In preparation for prepayment of a 

loan made or insured under section 515, the project owner shall, not less than 

120 days before the date of prepayment of the loan or sale of the project for 

which the loan was made, provide the following notices: 

‘‘(A) NOTICE TO TENANTS.—To the tenants of the project, notice of the prepayment, as follows: 

‘‘(i) The notice shall include information sufficient to inform each tenant of the plan after prepayment for the project, in which they reside 

as a tenant, and whether such plan may result in, or is likely to result 

in, the tenant being required to move and the earliest date that the 

tenant’s lease will expire or the tenant may have to move, and of the 

availability of vouchers pursuant to paragraph (3), actions tenants 

must take to receive voucher assistance, the date prepayment is expected to take place, a telephone number and electronic mail address 

at which to contact the owner of the project, and any limitations, use, 

and other terms the Secretary considers appropriate. 

‘‘(ii) In the case of any prepayment involving transfer of the ownership of a project, the notice shall include the name of the transferee, 

the date that the transfer was agreed to, the date the transfer is to 

take place, and telephone numbers and electronic mail addresses at 

which to contact the transferor and transferee. 

‘‘(B) NOTICE TO SECRETARY.—To the Secretary, notice that the requirements under subparagraph (A) have been met, which shall identify the date 

that notice under such subparagraph was made and the names of each tenant to which such notice was provided. 

‘‘(3) RURAL TENANT PROTECTION VOUCHERS.—

‘‘(A) IN GENERAL.—In the case of a housing project subject to a loan made 

under section 515, if the loan is prepaid or foreclosed upon, the Secretary 

shall, to the extent that amounts for assistance under this paragraph are 

provided in advance in appropriation Acts, offer voucher assistance to each 

low-income family who on the date that notice is provided in accordance 

with paragraph (2)(A) is residing in a dwelling unit in the project. 

‘‘(B) USE.—A voucher under this paragraph for a family may be used for 

rental of a dwelling unit in the project that the family resides in on the 

date of the notice in accordance with paragraph (2)(A) or for a dwelling unit 

elsewhere. 

‘‘(C) RENEWAL.—Vouchers under this paragraph shall be renewed annually, subject to the availability of appropriations for such renewal, during 

the period that the family assisted remains eligible for such assistance. 

‘‘(D) RIGHT TO USE.—In the case of a project for which a loan made under 

section 515 is prepaid—

‘‘(i) a family residing in such project on the date of prepayment may 

elect to remain in the unit in which the family was residing on such 

date; and 

‘‘(ii) the owner of the project may not refuse to lease, to a family for 

whom voucher assistance under this paragraph is made available, any 

available rental dwelling unit in the project. 

‘‘(E) AMOUNT OF ASSISTANCE.—The amount of rental assistance provided 

under a voucher under this paragraph on behalf of a tenant shall be the 

amount by which—


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‘‘(i) the lesser of (I) the rent for the dwelling unit rented using such 

voucher, or (II) the rent for a comparable unit in the same market area 

as the housing project for which the loan was prepaid; exceeds ‘‘(ii) the lesser of (I) the amount of rent paid by the tenant for the 

dwelling unit occupied by the tenant at the time of the prepayment referred to in paragraph (1), or (II) the amount equal to 30 percent of the 

tenant’s adjusted income (as such term is defined in section 3(b) of the 

United States Housing Act of 1937 (42 U.S.C. 1437a(b)). ‘‘(F) RURAL AFFORDABLE VOUCHER.—For communities with insufficient affordable housing alternatives, and in the case of any elderly or disabled tenant who is eligible for a voucher under this paragraph and has a need to 

move to another community to be near immediate family or necessary medical services, as determined by the Secretary, voucher assistance under this 

paragraph may be provided in accordance with section 8(t)(1) of the United 

States Housing Act of 1937 (42 U.S.C. 1437f(t)(1)). ‘‘(G) ADMINISTRATION.—To the maximum extent practicable, the Secretary shall administer voucher assistance under this paragraph in accordance with, but not subject to, regulations and administrative guidance for 

housing vouchers administered by the Secretary of Housing and Urban Development under section 8 of such Act. ‘‘(H) HOMEOWNERSHIP OPPORTUNITIES.—A voucher under this paragraph 

may be used by a tenant to make payments towards the purchase of a single-family home anywhere in the United States, subject to subsidy limits 

for vouchers under this title and the same limitations applicable under section 8(y) of the United States Housing Act of 1937 (42 U.S.C. 1437f(y) to 

the use of tenant-based assistance under such section 8 for homeownership. 

‘‘(I) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated for tenant protection vouchers under this paragraph—

‘‘(i) for fiscal year 2007, $74,000,000; and 

‘‘(ii) for each of fiscal years 2008 through 2011, the amount necessary 

to provide vouchers in each such fiscal year for all of the families identified in subparagraph (A). 

‘‘(4) PREPAYMENT STANDARDS FOR PRE-1989 LOANS.—In the case of a loan made 

or insured under section 515 pursuant to a contract entered into before December 15, 1989: 

‘‘(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall approve any offer to prepay such a loan that meets the following requirements: 

‘‘(i) The borrower under the loan has not been provided any assistance to extend low-income use pursuant to section 502(c)(4) of this Act, 

as such section was in effect before the date of the enactment of the 

Saving America’s Rural Housing Act of 2006. 

‘‘(ii) The loan was not at any time restricted by servicing actions, including transfers. 

‘‘(iii) The 20-year period during which the project is subject to use restrictions under the loan has concluded. 

‘‘(B) PROHIBITION.—The Secretary may not approve any offer to prepay 

such a loan during the 20-year period during which the project is subject 

to use restrictions under the loan. 

‘‘(5) SALE RESTRICTIONS AND MARKETING ASSISTANCE.—

‘‘(A) SALE RESTRICTIONS.—During the period that begins upon the owner 

providing notice to the Secretary under paragraph (2)(B) and having a duration of 75 days, the owner may not sell the property except to a purchaser 

who enters into such binding agreements for purchase at market rates as 

the Secretary considers necessary to continue the property use restrictions 

with respect to the project in accordance with this title for a period of 20 

years. This paragraph may not be construed to prohibit an owner, during 

such period, from soliciting or receiving any offers of sale or purchase. 

‘‘(B) MARKETING ASSISTANCE.—

‘‘(i) DATABASE OF POTENTIAL BUYERS.—The Secretary shall establish 

and maintain a database of potential buyers of projects with loans 

made under section 515. Such database shall include only persons who 

have expressed an interest to the Secretary in purchasing such projects 

at fair market value and maintaining the projects for use as affordable 

housing. 

‘‘(ii) PUBLIC NOTIFICATION OF PREPAYMENT.—Upon notification to the 

Secretary under paragraph (2)(B) regarding prepayment of a loan for 

a project, the Secretary shall make publicly available, on the appropriate World Wide Web site of the Department or by other appropriate 


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electronic method, including individual notification, a notice containing 

information sufficient, in the determination of the Secretary, to notify 

persons with an interest in purchasing the project of the prepayment.’’. 

SEC. 4. CONFORMING AMENDMENTS TO TITLE V OF THE HOUSING ACT OF 1949. 

Title V of the Housing Act of 1949 is amended—

(1) in section 502(b)(2) (42 U.S.C. 1472(b)(2))—

(A) by striking ‘‘or 515’’; and 

(B) by inserting before the semicolon at the end the following: ‘‘and any 

prepayment of a loan made or insured under section 515 shall be subject 

to the provisions of subsection (i)’’; and 

(2) in section 537(b)(1) (42 U.S.C. 1490p–1(b)(1)), by inserting before the semicolon the following: ‘‘and to administer the revitalization program under section 

544’’. 

SEC. 5. EFFECTIVE DATE. 

This Act and the amendments made by this Act shall take effect on October 10, 

2007. 

PURPOSE AND SUMMARY

H.R. 5039, the Saving America’s Rural Housing Act of 2006, was 

introduced to serve three goals: (1) preserve affordable section 515 

housing, (2) remove restrictions on prepayment of certain pre-1989 

section 515 loans, and (3) protect tenants living in prepaid section 

515 properties. To preserve the section 515 portfolio, this legislation will create a revitalization program to give owners a chance 

to restructure existing debt and make necessary renovations and 

repairs. H.R. 5039 will also repeal statutory restrictions on the prepayment of eligible pre-1989 loans, thus allowing owners to prepay 

certain section 515 loans. Additionally, this bill provides a number 

of tenant protections both for tenants living in revitalized properties and for tenant displaced or affected by prepayment. 

BACKGROUND AND NEED FOR LEGISLATION

The section 515 rural multifamily housing program allows Rural 

Development to make direct loans to owners and developers of 

rural, affordable apartment housing. Section 515 apartment housing is the only affordable housing available for low-income families 

in many rural communities. While the need for affordable rural 

housing is increasing, construction of new section 515 properties 

has slowed and the average age of these properties is 28 years. To 

preserve this housing for the future, the Saving America’s Rural 

Housing Act of 2006 will create a revitalization program to allow 

for new financing for ailing section 515 properties. Under H.R. 

5039, section 515 owners will be offered incentives, such as loan restructuring, to encourage the preservation of these properties and 

to decrease the likelihood that they will be converted to other uses. 

Without the injection of new capital that the revitalization program 

will provide, section 515 units may cease to be an option for many 

families seeking affordable, decent rural housing. 

USDA Rural Development has its origins in the Housing Act of 

1949 legislation recognizing that shortages of quality housing exist 

in rural areas. For over 50 years, Rural Development—through 

various loan and grant programs—has aided in financing both 

single- and multi-family housing for rural families. The section 515 

program helps nearly 500,000 of the very poorest rural residents, 

with an average annual income of about $9,000, by financing 50- 

year, 1 percent loans to limited-profit and nonprofit developers to 


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construct or renovate affordable rental complexes in rural areas. In 

exchange for the very-low interest loan, owners of these developments agree to adhere to use restrictions for the property, generally for a term of 20 years. For FY 2006, $99 million was appropriated for section 515 direct loans. 

Typically, residents of section 515 housing also receive section 

521 rental assistance and pay a maximum of 30 percent of their 

income toward rent and utilities. However, of the nearly 500,000 

residents in section 515 housing, almost 80,000 do not receive rental assistance and thus pay more than 30 percent of their income 

towards rent. The section 515 portfolio currently contains about 

17,000 existing multi-family properties. According to the comprehensive needs assessment study conducted in 2004, if restrictions are lifted and prepayment is allowed for eligible, pre-1989 

loans, around 10 percent of the section 515 portfolio is expected to 

prepay and leave the program, mostly because these properties are 

located in areas that were rural at the time of construction but 

could now be considered suburban or even urban. Thus, these properties could likely generate a much higher market rent. In anticipation of both a section 515 revitalization program and prepayment 

reform, USDA Rural Development was appropriated $25 million to 

administer demonstration revitalization and voucher programs for 

FY 2006. 

Additionally, this legislation will repeal restrictions on the prepayment of certain section 515 loans made before 1989 in order to 

alleviate costly litigation against the USDA over these provisions. 

According to industry experts, owners who entered the section 515 

program in the 1980’s viewed the direct loan as a first mortgage, 

to later be refinanced by private debt. Rural Development data 

made available to Committee staff reveals that many owners of section 515 properties tend to be either community leaders seeking to 

improve the availability of affordable housing for residents, nonprofit groups, or farmers. In 1985 and 1986, Congress received 

complaints that elderly and low-income tenants were being displaced as a result of section 515 prepayment, as owners’ contracts 

included the explicit right to prepayment. As a reaction, P.L. 100–

424, the Emergency Low Income Housing Preservation Act of 1987 

(ELIHPA), was signed into law on February 5, 1988. This legislation placed a number of restrictions on prepayment and required 

the USDA to encourage owners to stay in the program. Further, 

this act was also applied retroactively to contracts that specifically 

permitted prepayment. On October 28, 1992, P.L. 102–550 was 

signed into law, extending ELIHPA restrictions retroactively to section 515 projects funded before December 15, 1989. It should be 

noted that section 515 contracts after this date include a provision 

restricting prepayment. 

The Federal government has spent millions of dollars defending 

lawsuits brought by section 515 owners hoping to circumvent retroactive prepayment restrictions on certain loans. One set of owners 

has been allowed to bypass the prepayment process by suing for 

quiet title (e.g., removing encumbrances on the property such as 

rent restrictions). See Kimberly Associates v. United States, No. 

CV–98–0083–S–LMB (D. Idaho 2002) (on remand from the U.S. 

Court of Appeals for the Ninth Circuit). 


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Other owners have not been successful in achieving the same results. The U.S. Court of Appeals for the Eighth Circuit has twice 

upheld the prepayment restrictions and declined to allow owners to 

bypass them through a quiet title action. See Parkridge v. Farmers 

Home Administration, 13 F.3d 1192 (8th Cir. 1994) and Charleston 

Housing Authority v. USDA, 419 F.3d 729 (8th Cir. 2005). 

In 2004, however, the U.S. Court of Federal Claims held that the 

retroactive restrictions on prepayment created by ELIHPA amounted to a breach of contract by the federal government. See Franconia Associates v. United States, 61 Fed. C1. 718 (Fed. C1. 2004). 

As a remedy, the plaintiff-owners have successfully sought money 

damages, with the average damage award per property exceeding 

$400,000. 

In an effort to relieve the federal government of future damage 

awards, H.R. 5039 would repeal these restrictions so that owners 

who have fulfilled their contractual obligations to the Department 

of Agriculture may prepay section 515 loans without pursuing costly lawsuits that would likely be decided against the Federal government. The enactment of H.R. 5039 could enable Federal funds 

that might otherwise be directed towards litigation expenses, to be 

used for housing preservation and rental assistance. 

Keeping in mind that repealing restrictions on prepayment of 

pre-1989 section 515 loans will lead some properties to leave the 

program, this legislation contains significant protections for tenants who will either be displaced by prepayment or face rising, 

unaffordable rents. The voucher program created by this bill is designed to ensure that tenants are not disadvantaged by prepayment. Tenants receiving a voucher will not be responsible for additional rent beyond what they paid at their old unit before prepayment and will have the opportunity to elect to remain in their current unit post-prepayment. Additionally, H.R. 5039 requires owners 

to provide residents detailed notice of prepayment at least 120 days 

before the date of prepayment. When Rural Development is informed of an owner’s plans to prepay, it will be required to post information related to the upcoming prepayment on the USDA 

website; it will also have the authority to send personal email notice to parties interested in purchasing section 515 properties and 

maintaining them in the program. These measures will increase 

the likelihood that the development will remain in the section 515 

program after prepayment without unnecessarily burdening owners. Many of the tenant protections included in this bill mirror provisions used by the U.S. Department of Housing and Urban Development’s section 8 program, creating conformity and easing implementation. 

In order to preserve the section 515 portfolio, H.R. 5039 creates 

a revitalization program so that owners may restructure existing 

debt, thereby increasing the funding available to make necessary 

repairs and renovations. In 2004, the USDA completed a comprehensive property assessment study and published its findings. 

According to the released report, all surveyed section 515 properties were lacking adequate reserves and cash flow to cover repairs and maintenance over time, thus drawing attention to the 

need for increased financing and preservation of these properties. 

The restructuring program created by this legislation will allow for 

essential repairs and renovations, thus preserving the section 515 


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portfolio for years to come. Without this restructuring program, 

there will be a greater need for new construction, which is ultimately more expensive than preserving existing units. Rural Development launched a restructuring demonstration program in FY 

2006 and has received thousands of applications from interested 

owners. 

Believing that preserving these properties now is much more efficient than commissioning new construction later, the Committee 

understands that tenants currently living in the development to be 

restructured could face higher rents, as owners may initially encounter increased costs at the time of restructuring. Thus, it is the 

Committee’s intent that residents of section 515 properties at the 

time of restructuring be protected from such costs. 

Further, it is the Committee’s intent that ‘‘overburdened’’ tenants 

living in developments at the time of restructuring-those paying 

over 30 percent of income towards rent-find relief. To that end, 

H.R. 5039 provides that a tenant living in a restructured property 

must contribute no more than 30 percent of his or her income towards rent. 

HEARINGS

The Subcommittee on Housing and Community Opportunity held 

a legislative hearing on April 25, 2006, on H.R. 5039, the Saving 

America’s Rural Housing Act of 2006. The following witnesses testified: Mr. Russell T. Davis, Administrator for Rural Development 

Housing and Community Facilities Programs, U.S. Department of 

Agriculture; Mr. Gideon Anders, Executive Director, National 

Housing Law Project; Mr. James N. Arbury, Senior Vice President 

of Government Affairs, National Multi Housing Council, and also 

on behalf of the National Apartment Association; Mr. Thomas 

Carew, Red River Director, Frontier Housing, Inc.; Mr. Moises 

Loza, Executive Director, Housing Assistance Council; Mr. Robert 

A. Rapoza, Executive Secretary, National Rural Housing Coalition; 

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

Housing; Mr. Charles Wehrwein, Senior Vice President, Mercy 

Housing, Inc. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

June 14, 2006, and ordered reported H.R. 5039, Saving America’s 

Rural Housing Act of 2006, as amended, reported to the House by 

a voice vote. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. No record votes were 

taken with in conjunction with the consideration of this legislation. 

A motion by Mr. Oxley to report the bill, as amended, to the House 

with a favorable recommendation was agreed to by a voice vote. 

During the consideration of the bill, the following amendments 

were considered: 

An amendment in the nature of a substitute recommended by the 

Subcommittee on House and Community Opportunity, making varVerDate Aug 31 2005 05:15 Jul 30, 2006 Jkt 049006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6602 E:\HR\OC\HR604.XXX HR604

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ious technical and substantive changes, as amended, was AGREED 

TO by a voice vote. 

The following amendments to the Subcommittee amendment 

were considered: 

An amendment by Mr. Neugebauer, No. 1, providing maximum 

tenant rent subject to appropriations, was WITHDRAWN. 

An en bloc amendment by Mr. Davis (KY), No. 2, including the 

following amendments: Mr. Davis (KY) technical amendment; Mr. 

Davis (AL) enhanced voucher expiration; Mr. Cleaver extend prepayment notice period; and Mr. Sanders striking ‘‘proximate 

cause’’, was AGREED TO by a voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has held hearings and made 

findings that are reflected in this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee establishes the following performance related goals and objectives for this legislation: 

H.R. 5039, the Saving America’s Rural Housing Act of 2006, will 

serve three goals: (1) preserve affordable section 515 housing, (2) 

remove restrictions on prepayment of certain pre-1989 section 515 

loans, and (3) protect tenants living in prepaid section 515 properties. To preserve the section 515 portfolio, this legislation will 

create a revitalization program to give owners a chance to restructure existing debt and make necessary renovations and repairs. 

H.R. 5039 will also repeal statutory restrictions on the prepayment 

of eligible pre-1989 loans, thus allowing owners to prepay certain 

section 515 loans. Additionally, this bill provides a number of tenant protections both for tenants living in revitalized properties and 

for tenant displaced or affected by prepayment. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 


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JULY 10, 2006. 

Hon. MICHAEL G. OXLEY, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 5039, the Saving America’s Rural Housing Act of 2006. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Susanne S. Mehlman. 

Sincerely, 

DONALD B. MARRON, 

Acting Director. 

Enclosure. 

H.R. 5039—Saving America’s Rural Housing Act of 2006 

Summary: H.R. 5039 would require the Rural Housing Service 

(RHS) within the Department of Agriculture to implement a program aimed at preserving rural rental housing supported by section 515 of the Housing Act of 1949 by restructuring loans on existing properties. Under the legislation, RHS would provide housing 

vouchers to certain families who would be displaced if property 

owners prepay the mortgages on properties where they now reside. 

The effective date of those provisions of the bill is October 10, 2007. 

CBO estimates that implementing this legislation would cost $585 

million over the 2008–2011 period and additional amounts after 

2011, assuming appropriation of the necessary amounts. Enacting 

this bill would not affect direct spending or revenues. 

Section 515 of the Housing Act of 1949 provides RHS with the 

authority to make direct loans to developers to build affordable 

multifamily rental housing in rural areas for very low-income families, elderly people, and persons with disabilities. Owners of 

projects financed through section 515 must maintain rents at affordable levels, usually for a minimum of 20 years. According to 

RHS and housing industry experts, construction of new section 515 

properties has slowed in recent years, existing units are deteriorating, and an increasing number of project owners want to prepay 

their mortgages. Such prepayments would probably displace tenants who cannot afford housing in projects that are not subsidized. 

Under H.R. 5039, RHS would provide financial incentives, such 

as loan forgiveness and direct loans, to owners of section 515 housing who agree not to prepay their mortgages. H.R. 5039 would authorize the appropriation of such sums as may be necessary each 

year to implement those financial incentives. 

H.R. 5039 also would authorize RHS to provide vouchers to those 

families residing in projects where the owners choose not to participate in the new program and to prepay their mortgages on section 

515 properties. Such vouchers could be used by the affected tenants 

to stay in the same project or to rent or purchase housing elsewhere. This legislation would authorize the appropriation of such 

amounts as necessary to provide vouchers over the 2008–2011 period. 

H.R. 5039 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would impose no costs on state, local, or tribal governments. 


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Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 5039 is shown in the following table. The costs 

of this legislation fall within budget functions 370 (mortgage and 

housing credit) and 600 (income security). 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 2011 

SPENDING SUBJECT TO APPROPRIATION 

RHS Rental Assistance Spending Under Current Law: 

Estimated Authorization Level 1 .......................................... 647 659 670 683 695 707 

Estimated Outlays ............................................................... 849 871 904 880 803 766 

Proposed Changes: 

Mortgage Restructuring: 

Estimated Authorization Level .................................... 0 0 27 41 57 45 

Estimated Outlays ...................................................... 0 0 27 41 57 45 

Rural Tenant Protection Vouchers: 

Estimated Authorization Level .................................... 0 0 74 135 158 162 

Estimated Outlays ...................................................... 0 0 22 92 142 159 

Total Changes: 

Estimated Authorization Level ........................... 0 0 101 176 215 207 

Estimated Outlays ............................................. 0 0 49 133 199 204 

Total Spending Under H.R. 5039: 

Estimated Authorization Level ............................................. 647 659 771 859 910 914 

Estimated Outlays ............................................................... 849 871 953 1,013 1,002 970 

1 The amount shown for 2006 is the amount appropriated for rental assistance in that year. The 2007–2011 levels are CBO baseline projections, assuming adjustments for anticipated inflation. 

Note.—RHS = Rural Housing Service. 

Basis of estimate: CBO estimates that implementing H.R. 5039 

would cost $585 million over the 2008–2011 period, assuming appropriation of the necessary amounts. Of that amount, CBO estimates that about $170 million would be spent by RHS to restructure mortgages and $415 million would be used by RHS to provide 

tenant protection vouchers. Details of these two provisions are provided below. 

Mortgage restructuring 

Under this legislation, long-term viability plans would be developed for those owners of section 515 properties who choose to have 

their mortgages restructured. A long-term viability plan would include an assessment of a project’s physical needs and a financial 

plan that addresses the restructuring tools needed to cover operating expenses and physical needs of the project. The restructuring 

tools that could be used include loan forgiveness and a reduction 

or elimination of interest. In return for such assistance, owners 

would agree to enter into long-term commitments with RHS to 

make low-income rental housing available for the greater of 20 

years or the remaining loan term. 

According to RHS, the portfolio of section 515 loans encompasses 

almost 16,000 properties with nearly 450,000 units. Furthermore, 

of these roughly 16,000 properties, around 9,560 will be eligible for 

prepayment over the 2008–2011 period because their 20–year rent 

restrictions will be expiring. The remaining balance of properties 

(around 6,440 properties) include about 4,000 properties that are 

eligible for prepayment after 2011, 1,480 properties that are not 

under consideration for prepayment despite being currently eligible, and about 960 properties that will have their mortgages prepaid or will have their mortgages restructured under an ongoing 

demonstration program by the end of fiscal year 2007. 


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The ongoing agency demonstration program that offers mortgage 

restructuring indicates that the vast majority of property owners 

eligible for prepayment would be interested in obtaining some form 

of financial assistance to prevent defaulting on their mortgages. 

Based on information from RHS, CBO estimates that 88 percent of 

the 9,560 properties eligible for prepayment over the 2008–2011 period would undergo a mortgage restructuring; the remaining 12 

percent would prepay their mortgages. We estimate that the restructuring tools used would cost $20,000 for an average property 

with a $700,000 outstanding loan balance. The cost to restructure 

mortgages for about 8,400 properties would be about $170 million 

over the 2008–2011 period. 

Rural tenant protection vouchers 

Under this legislation, RHS would provide tenant protection 

vouchers that would be annually renewable to families residing in 

properties whose owners prepay their section 515 loans. Based on 

information from RHS, CBO estimates that owners of about 1,150 

properties (with about 34,500 units) in the section 515 loan program would opt to prepay their mortgages over the 2008–2011 period. CBO assumes that families in all of the affected 34,500 units 

would elect to receive a voucher. Assuming that the average cost 

of a voucher would be $4,400 in fiscal year 2008 (adjusted for inflation in subsequent years) and that those vouchers would be renewed annually, CBO estimates that this provision would cost $415 

million over the 2008–2011 period. 

Intergovernmental and private-sector impact: H.R. 4804 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would impose no costs on state, local, or tribal governments. 

Estimate prepared by: Federal Costs: Susanne S. Mehlman and 

Chad Chirico. Impact on State, Local, and Tribal Governments: 

Sarah Puro. Impact on the Private Sector: Craig Cammarata. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the general welfare of the 

United States) and clause 3 (relating to the power to regulate interstate commerce). 


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APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

The short title of this bill is the ‘‘Saving America’s Rural Housing 

Act of 2006.’’

Section 2. Findings and purposes 

This section sets forth certain findings, including the need for a 

revitalization program to rehabilitate ailing section 515 housing 

projects and to protect tenants. This section also lists the purposes 

of the Act. 

Section 3. Revitalization of multifamily housing 

This section amends Title V of the Housing Act of 1949 by adding a new section 544 to allow Rural Development and section 515 

project owners to enter into voluntary Long-Term Use Agreements. 

The Long-Term Use Agreement will require section 515 project 

owners, in exchange for receiving financial incentives for use in 

making repairs and renovations, to agree to continue property-use 

restrictions for at least 20 years. Before entering into the Use 

Agreement, Rural Development will prepare a Long-Term Viability 

Plan that will assess the needs of the project for the next 20 years. 

This Plan will help determine the specific financial incentives the 

owner will be offered as part of the restructuring program. 

This section also allows for the partial repeal of section 515 prepayment restrictions, so that owners of pre-1989 properties who 

have fulfilled their contractual duties to the USDA may prepay and 

leave the program. Owners who wish to prepay their section 515 

loan will be required to provide detailed notice of prepayment to 

tenants at least 120 days before the owner sells or prepays the 

loan. 

To protect tenants who will either be displaced by prepayment or 

who will face rising, unaffordable rents post-prepayment, this section creates a voucher program with two types of voucher assistance. Rural Tenant Protection vouchers will be available for families on the date they receive notice of the impending prepayment. 

This voucher will strive to make-up the difference between the tenant’s rent before prepayment and the rental amount after (for either that same unit or a comparable unit), so that families are not 

disadvantaged by prepayment. Rural Affordable vouchers will be 

available for tenants affected by section 515 prepayment living in 

communities that lack sufficient affordable housing alternatives 

and will be administered in accordance with section 8 of the HUD 

statute. These vouchers will also be available for elderly and disabled tenants who need to move to another community to access 

necessary medical services or to be near immediate family. 

Under this section, voucher-holding tenants living in section 515 

units subject to prepayment may elect to remain in their unit and 


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owners of these properties may not refuse to rent to a family holding such a voucher. 

This section also requires that, for 75 days after the section 515 

owner notifies the USDA Secretary of his or her intention to prepay, the owner must entertain market-rate offers to purchase the 

project from non-profits or other groups or individuals who will 

keep the property affordable for 20 years. Rural Development is 

also directed to establish maintain a database of potential buyers 

who have expressed an interest in purchasing section 515 properties. The agency will then use this database to post electronic notice of upcoming prepayments and, if appropriate, may also disseminate individual, electronic notice to interested parties. 

Section 4. Conforming amendments to Title V of the Housing Act of 

1949 

This section provides instructions to conform this legislation to 

existing law. 

Section 5. Effective date 

If enacted, this legislation will take effect on October 1, 2007. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

TITLE V OF THE HOUSING ACT OF 1949 

TITLE V—FARM HOUSING 

* * * * * * * 

LOANS FOR HOUSING AND BUILDINGS ON ADEQUATE FARMS

SEC. 502. (a) * * * 

(b) The instruments under which the loan is made and the security given shall— (1) * * * 

(2) provide for the repayment of principal and interest in accordance with schedules and repayment plans prescribed by 

the Secretary, except that any prepayment of a loan made or 

insured under section 514 øor 515¿ shall be subject to the provisions of subsection (c) and any prepayment of a loan made or 

insured under section 515 shall be subject to the provisions of 

subsection (i); 

* * * * * * * 

(c)(1)(A) The Secretary may not accept an offer to prepay, or request refinancing in accordance with subsection (b)(3) of, any loan 

made or insured under section 514 øor 515¿ of this title pursuant 

to a contract entered into after December 21, 1979, but before the 

date of the enactment of the Department of Housing and Urban 

Development Reform Act of 1989, unless the Secretary takes appropriate action which will obligate the borrower (and successors in interest thereof) to utilize the assisted housing and related facilities 


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for the purposes specified in section 514 øor 515¿, as the case may 

be, for a period of— (i) * * * 

* * * * * * * 

(2) If any loan which was made or insured under section 514 øor 

515¿ pursuant to a contract entered into prior to the date of enactment of the Department of Housing and Urban Development Reform Act of 1989, is prepaid or refinanced on or after the date of 

enactment of the Housing and Community Development Act of 

1980, and tenants of the housing and related facilities financed 

with such loan are displaced due to a change in the use of the 

housing, or to an increase in rental or other charges, as a result 

of such prepayment or refinancing, the Secretary shall provide such 

tenants a priority for relocation in alternative housing assisted pursuant to this title. 

(3) NOTICE OF OFFER TO PREPAY.—Not less than 30 days after receiving an offer to prepay any loan made or insured under section 

514 øor 515¿, the Secretary shall provide written notice of the offer 

or request to the tenants of the housing and related facilities involved, to interested nonprofit organizations, and to any appropriate State and local agencies. 

(4)(A) AGREEMENT BY BORROWER TO EXTEND LOW INCOME USE.— Before accepting any offer to prepay, or requesting refinancing in 

accordance with subsection (b)(3) of, any loan made or insured 

under section 514 øor 515¿ pursuant to a contract entered into 

prior to the date of enactment of the Department of Housing and 

Urban Development Reform Act of 1989, the Secretary shall make 

reasonable efforts to enter into an agreement with the borrower 

under which the borrower will make a binding commitment to extend the low income use of the assisted housing and related facilities involved for not less than the 20-year period beginning on the 

date on which the agreement is executed. 

(B) ASSISTANCE AVAILABLE TO BORROWER TO EXTEND LOW INCOME

USE.—To the extent of amounts provided in appropriation Acts, the 

agreement under subparagraph (A) may provide for 1 or more of 

the following forms of assistance that the Secretary, after taking 

into account local market conditions, determines to be necessary to 

extend the low income use of the housing and related facilities involved: 

(i) * * * 

* * * * * * * 

ø(iv) An equity loan to the borrower under paragraphs (1) 

and (2) of section 515(c) or under paragraphs (1) and (2) of section 514(j), except that an equity loan referred to in this clause 

may not be made available after the date of the enactment of 

the Act entitled ‘‘An Act making appropriations for Agriculture, 

Rural Development, Food and Drug Administration, and Related Agencies programs for the fiscal year ending September 

30, 1997, and for other purposes’’, unless the Secretary determines that the other incentives available under this subparagraph are not adequate to provide a fair return on the investment of the borrower, to prevent prepayment of the loan insured under section 514 øor 515¿, or to prevent the displacement of tenants of the housing for which the loan was made.¿ 


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ø(v)¿ (iv) Incremental rental assistance in connection with 

loans under clauses (ii) and (iv) to the extent necessary to 

avoid increases in the rental payments of current tenants not 

receiving rental assistance under section 521(a)(2) or under 

section 8 of the United States Housing Act of 1937, or current 

tenants of projects not assisted under section 521(a)(5). 

ø(vi)¿ (v) In the case of a project that has received rental assistance under section 8 of the United States Housing Act of 

1937, permitting the owner to receive rent in excess of the 

amount determined necessary by the Secretary to defray the 

cost of long-term repair or maintenance of such a project. 

(C) APPROVAL OF ASSISTANCE.—The Secretary may approve assistance under subparagraph (B) for assisted housing only if the restrictive period has expired for any loan for the housing made or 

insured under section 514 øor 515¿ pursuant to a contract entered 

into after December 21, 1979, but before the date of the enactment 

of the Department of Housing and Urban Development Reform Act 

of 1989, and the Secretary determines that the combination of assistance provided—

(i) * * * 

* * * * * * * 

(5)(A) * * * 

* * * * * * * 

(C) FINANCING OF SALE.—To facilitate the sale described in subparagraph (A), the Secretary shall— (i) * * * 

(ii) approve the assumption, by the nonprofit organization or 

public agency involved, of the loan made or insured under section 514 øor 515¿; 

* * * * * * * 

(F) GENERAL RESTRICTION ON PREPAYMENTS AND REFINANCINGS.— Following the transfer of the maximum number of dwelling units 

set forth in subparagraph (H)(i) in any fiscal year or the maximum 

number of dwelling units for which budget authority is available in 

any fiscal year, the Secretary may not accept in such fiscal year 

any offer to prepay, or request refinancing in accordance with subsection (b)(3) of, any loan made or insured under section 514 øor 

515¿ pursuant to a contract entered into prior to the date of enactment of the Department of Housing and Urban Development Reform Act of 1989, except in accordance with subparagraph (G). The 

limitation established in this subparagraph shall not apply to an 

offer to prepay, or request to refinance, if, following the date on 

which such offer or request is made (or following the date of the 

enactment of the Housing and Community Development Act of 

1987, whichever occurs later) a 15-month period expires during 

which no budget authority is available to carry out this paragraph. 

For purposes of this subparagraph, the Secretary shall allocate 

budget authority under this paragraph in the order in which offers 

to prepay, or request to refinance, are made. 

(G) EXCEPTION.—This paragraph shall not apply to any offer to 

prepay, or any request to refinance in accordance with subsection 

(b)(3), any loan made or insured under section 514 øor 515¿ pursuant to a contract entered into prior to the date of enactment of the 


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Department of Housing and Urban Development Reform Act of 

1989, if—

(i) the borrower enters into an agreement with the Secretary 

that obligates the borrower (and successors in interest thereof)— (I) to utilize the assisted housing and related facilities 

for the purposes specified in section 514 øor 515, as the 

case may be,¿ for a period determined by the Secretary 

(but not less than the period described in paragraph (1)(B) 

calculated from the date on which the loan is made or insured); and 

* * * * * * * 

(i) PREPAYMENT OF SECTION 515 MULTIFAMILY HOUSING

LOANS.—

(1) ADMINISTRATION.— (A) PLAN.—The Secretary shall develop a plan to administer requests to prepay (not made in connection with any 

revitalization under section 544) any loan made under section 515. The plan shall provide for administration of 

voucher assistance in accordance with paragraph (3). The 

plan shall encourage and facilitate owners of projects to 

maintain the projects, or to transfer projects to owners who 

will maintain projects, as housing affordable to low-income 

residents, but shall not prevent an owner from prepaying. 

(B) IMPLEMENTATION.—The Secretary shall implement 

this subsection not later than the expiration of the 90-day 

period beginning on the date of the enactment of the Saving 

America’s Rural Housing Act of 2006. Notwithstanding 

that full implementation of this subsection may not have 

been completed, the Secretary may not delay the processing 

of any request to prepay a loan made under section 515. 

(2) NOTICE OF PREPAYMENT OR SALE.—In preparation for prepayment of a loan made or insured under section 515, the 

project owner shall, not less than 120 days before the date of 

prepayment of the loan or sale of the project for which the loan 

was made, provide the following notices: 

(A) NOTICE TO TENANTS.—To the tenants of the project, 

notice of the prepayment, as follows: 

(i) The notice shall include information sufficient to 

inform each tenant of the plan after prepayment for the 

project, in which they reside as a tenant, and whether 

such plan may result in, or is likely to result in, the 

tenant being required to move and the earliest date 

that the tenant’s lease will expire or the tenant may 

have to move, and of the availability of vouchers pursuant to paragraph (3), actions tenants must take to receive voucher assistance, the date prepayment is expected to take place, a telephone number and electronic 

mail address at which to contact the owner of the 

project, and any limitations, use, and other terms the 

Secretary considers appropriate. 

(ii) In the case of any prepayment involving transfer 

of the ownership of a project, the notice shall include 

the name of the transferee, the date that the transfer 

was agreed to, the date the transfer is to take place, 


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and telephone numbers and electronic mail addresses 

at which to contact the transferor and transferee. 

(B) NOTICE TO SECRETARY.—To the Secretary, notice that 

the requirements under subparagraph (A) have been met, 

which shall identify the date that notice under such subparagraph was made and the names of each tenant to 

which such notice was provided. 

(3) RURAL TENANT PROTECTION VOUCHERS.—

(A) IN GENERAL.—In the case of a housing project subject 

to a loan made under section 515, if the loan is prepaid or 

foreclosed upon, the Secretary shall, to the extent that 

amounts for assistance under this paragraph are provided 

in advance in appropriation Acts, offer voucher assistance 

to each low-income family who on the date that notice is 

provided in accordance with paragraph (2)(A) is residing in 

a dwelling unit in the project. 

(B) USE.—A voucher under this paragraph for a family 

may be used for rental of a dwelling unit in the project that 

the family resides in on the date of the notice in accordance 

with paragraph (2)(A) or for a dwelling unit elsewhere. 

(C) RENEWAL.—Vouchers under this paragraph shall be 

renewed annually, subject to the availability of appropriations for such renewal, during the period that the family 

assisted remains eligible for such assistance. 

(D) RIGHT TO USE.—In the case of a project for which a 

loan made under section 515 is prepaid—

(i) a family residing in such project on the date of 

prepayment may elect to remain in the unit in which 

the family was residing on such date; and 

(ii) the owner of the project may not refuse to lease, 

to a family for whom voucher assistance under this 

paragraph is made available, any available rental 

dwelling unit in the project. 

(E) AMOUNT OF ASSISTANCE.—The amount of rental assistance provided under a voucher under this paragraph on 

behalf of a tenant shall be the amount by which—

(i) the lesser of (I) the rent for the dwelling unit 

rented using such voucher, or(II) the rent for a comparable unit in the same market area as the housing 

project for which the loan was prepaid; exceeds 

(ii) the lesser of (I) the amount of rent paid by the 

tenant for the dwelling unit occupied by the tenant at 

the time of the prepayment referred to in paragraph 

(1), or (II) the amount equal to 30 percent of the tenant’s adjusted income (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 

U.S.C. 1437a(b)). 

(F) RURAL AFFORDABLE VOUCHER.—For communities 

with insufficient affordable housing alternatives, and in the 

case of any elderly or disabled tenant who is eligible for a 

voucher under this paragraph and has a need to move to 

another community to be near immediate family or necessary medical services, as determined by the Secretary, 

voucher assistance under this paragraph may be provided 


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in accordance with section 8(t)(1) of the United States 

Housing Act of 1937 (42 U.S.C. 1437f(t)(1)). 

(G) ADMINISTRATION.—To the maximum extent practicable, the Secretary shall administer voucher assistance 

under this paragraph in accordance with, but not subject 

to, regulations and administrative guidance for housing 

vouchers administered by the Secretary of Housing and 

Urban Development under section 8 of such Act. 

(H) HOMEOWNERSHIP OPPORTUNITIES.—A voucher under 

this paragraph may be used by a tenant to make payments 

towards the purchase of a single-family home anywhere in 

the United States, subject to subsidy limits for vouchers 

under this title and the same limitations applicable under 

section 8(y) of the United States Housing Act of 1937 (42 

U.S.C. 1437f(y) to the use of tenant-based assistance under 

such section 8 for homeownership. 

(I) AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated for tenant protection vouchers 

under this paragraph—

(i) for fiscal year 2007, $74,000,000; and 

(ii) for each of fiscal years 2008 through 2011, the 

amount necessary to provide vouchers in each such fiscal year for all of the families identified in subparagraph (A). 

(4) PREPAYMENT STANDARDS FOR PRE-1989 LOANS.—In the 

case of a loan made or insured under section 515 pursuant to 

a contract entered into before December 15, 1989: 

(A) IN GENERAL.—Subject to subparagraph (B), the Secretary shall approve any offer to prepay such a loan that 

meets the following requirements: 

(i) The borrower under the loan has not been provided any assistance to extend low-income use pursuant to section 502(c)(4) of this Act, as such section was 

in effect before the date of the enactment of the Saving 

America’s Rural Housing Act of 2006. 

(ii) The loan was not at any time restricted by servicing actions, including transfers. 

(iii) The 20-year period during which the project is 

subject to use restrictions under the loan has concluded. 

(B) PROHIBITION.—The Secretary may not approve any 

offer to prepay such a loan during the 20-year period during which the project is subject to use restrictions under the 

loan. 

(5) SALE RESTRICTIONS AND MARKETING ASSISTANCE.—

(A) SALE RESTRICTIONS.—During the period that begins 

upon the owner providing notice to the Secretary under 

paragraph (2)(B) and having a duration of 75 days, the 

owner may not sell the property except to a purchaser who 

enters into such binding agreements for purchase at market 

rates as the Secretary considers necessary to continue the 

property use restrictions with respect to the project in accordance with this title for a period of 20 years. This paragraph may not be construed to prohibit an owner, during 


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such period, from soliciting or receiving any offers of sale 

or purchase. 

(B) MARKETING ASSISTANCE.— (i) DATABASE OF POTENTIAL BUYERS.—The Secretary 

shall establish and maintain a database of potential 

buyers of projects with loans made under section 515. 

Such database shall include only persons who have expressed an interest to the Secretary in purchasing such 

projects at fair market value and maintaining the 

projects for use as affordable housing. 

(ii) PUBLIC NOTIFICATION OF PREPAYMENT.—Upon 

notification to the Secretary under paragraph (2)(B) regarding prepayment of a loan for a project, the Secretary shall make publicly available, on the appropriate World Wide Web site of the Department or by 

other appropriate electronic method, including individual notification, a notice containing information 

sufficient, in the determination of the Secretary, to notify persons with an interest in purchasing the project 

of the prepayment. 

* * * * * * * 

DIRECT AND INSURED LOANS TO PROVIDE HOUSING AND RELATED

FACILITIES FOR ELDERLY PERSONS AND FAMILIES IN RURAL AREAS

SEC. 515. (a) * * * 

* * * * * * * 

(j)(1) For the purpose of achieving the lowest cost in providing 

units in newly constructed projects assisted under this section, the 

Secretary shall give a preference in entering into contracts under 

this section for projects which are to be located on specific tracts 

of land provided by States, units of local government, or others if 

the Secretary determines that the tract of land is suitable for such 

housing, and that affording such preference will be cost effective. 

(2) The Secretary may give priority, in entering into contracts 

under this section involving financing for new construction of a 

project, for projects located in areas having a need for affordable 

low-income rental housing due to prepayment of loans made or insured under this section. 

* * * * * * * 

SEC. 537. OFFICE OF RURAL HOUSING PRESERVATION. 

(a) * * * 

(b) PURPOSES.—The purposes of the Office are: 

(1) to review and process applications under section 502(c) 

and section 515(t) related to the preservation of rural rental 

housing and to administer the revitalization program under 

section 544; 

* * * * * * * 

SEC. 544. REVITALIZATION AND TENANT PROTECTION VOUCHERS. 

(a) PURPOSE.—The purposes of this section are—

(1) to protect tenants who live in multifamily housing projects 

that are subsidized under this title and, in the case of prepayVerDate Aug 31 2005 05:15 Jul 30, 2006 Jkt 049006 PO 00000 Frm 00023 Fmt 6659 Sfmt 6603 E:\HR\OC\HR604.XXX HR604

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ments of loans under section 515, to protect tenants that are 

displaced when the projects cease being eligible projects; 

(2) to strengthen the long-term viability of eligible projects; 

(3) to promote the revitalization of rural multifamily housing 

projects; and 

(4) to accomplish such several purposes— (A) by providing a voluntary mechanism for project owners to enter into loan restructuring agreements with the 

Secretary to obtain new types of financial assistance to rehabilitate and maintain the projects; and 

(B) by deregulating certain projects in a manner that still 

provides measurable performance standards and effective 

financing and rehabilitation of multifamily housing. 

(b) REVITALIZATION.—

(1) IN GENERAL.—The Secretary shall, subject to the availability of amounts appropriated, carry out a revitalization program in accordance with this subsection to provide financial incentives and other assistance to owners of eligible projects 

through voluntary long-term use agreements entered into between the project owners and the Secretary. 

(2) APPLICATIONS TO PARTICIPATE.—The Secretary may accept 

applications from owners of eligible projects to participate in 

the revitalization program under this section. 

(3) LONG-TERM VIABILITY PLAN.— (A) REQUIREMENT.—The Secretary may prepare and approve a long-term viability plan under this paragraph with 

respect to each eligible project for which the owner requests 

to participate. 

(B) CONTENTS.—Each long-term viability plan for an eligible project shall include the following information: 

(i) PHYSICAL NEEDS ASSESSMENT.—A physical needs 

assessment of the project that identifies and projects, 

for the following 20 years— (I) all necessary repairs, improvements, maintenance, and management standards for the project, 

and when they will be made, in order to meet the 

requirements of this title; and 

(II) the costs associated with the items referred 

to in this subparagraph (A). 

(ii) FINANCIAL PLAN.—A financial plan for the project 

that—

(I) reviews the financial stability of the project; 

(II) includes the loan restructuring elements, 

rent adjustments, management and operational efficiencies, and other financial adjustments to the 

project that are necessary to cover operating expenses for the project and maintain an adequate financial reserve for the future maintenance and 

capital needs of the project; 

(III) provides the project owner with a long-term 

rate of return on new capital, as determined by the 

Secretary, commensurate to comparable commercial multifamily housing projects; 

(IV) meets the physical needs for the project determined under the physical needs assessment; 


ccoleman on PROD1PC71 with HEARING
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(V) ensures that rents available under the plan 

are affordable to eligible households in accordance 

with paragraph (7); and 

(VI) addresses any costs associated with any 

temporary tenant displacement resulting from renovations or rehabilitation undertaken as a result of 

participation of the project in the revitalization 

program. 

(C) DEVELOPMENT THROUGH PARTICIPATING ADMINISTRATIVE ENTITIES.—The Secretary may develop long-term viability plans through the use of third-party participating administrative entities, who may be a private contractor, a 

State housing finance agency, or a nonprofit organization. 

(D) REVITALIZATION DETERMINATION.—Based on the longterm viability plan for an eligible project, the Secretary 

shall determine whether to offer the project owner a financial restructuring plan under paragraph (4) and the financial incentives to be included in any such plan offered. 

(E) FINAL REVIEW AND COMMENT.—With respect to any 

long-term viability plan prepared by the Secretary, the Secretary shall provide the project owner an opportunity to review the plan and discuss the plan with the Secretary or 

its agent before a determination is made under subparagraph (D). 

(F) FEES.—The Secretary may charge the project owner a 

fee for preparation of the long-term viability plan. 

(G) PAYMENT OF FEES.—If a long-term viability for a 

project is approved, the payment of such fee may be incorporated into a project owner’s financial restructuring plan 

for the project provided by the Secretary pursuant to paragraph (4) 

(4) FINANCIAL RESTRUCTURING PLAN; REVITALIZATION INCENTIVES.—Based on the long-term viability plan for an eligible 

project, the Secretary may offer a project owner a financial restructuring plan for the project. Such a plan may include one 

or more of the following revitalization incentives: 

(A) Reduction or elimination of interest on the loan or 

loans for the project made under section 515. 

(B) Partial or full deferral of payments due under such 

loan or loans. 

(C) Forgiveness of such loan or loans. 

(D) Subordination of such loan or loans, subject to such 

terms and conditions as the Secretary shall determine. 

(E) Reamortization of loan payments under such loan or 

loans over extended terms. 

(F) A grant from the Secretary for the project. 

(G) Payment of project costs associated with developing 

the long-term viability plan. 

(H) Opportunity for project owners to obtain further investment equity from third parties in the project. 

(I) A direct loan or guarantee of a loan for the project, 

with a subsidized interest rate without regard to the value 

of the project. 

(5) LONG-TERM USE AGREEMENT.—


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(A) IN GENERAL.—If the owner of an eligible project 

agrees to the terms of a financial restructuring plan for the 

project providing revitalization benefits under paragraph 

(4), in exchange for such benefits, the Secretary and the 

project owner shall enter into a long-term use agreement 

under this paragraph for the project. 

(B) AGREEMENT.—A long-term use agreement for an eligible project shall include— (i) the terms of the financial restructuring plan for 

the project, including any revitalization incentives to be 

provided; 

(ii) an agreement by the project owner— (I) to continue the property use restrictions with 

respect to the project in accordance with this title 

for a period of (aa) 20 years, or (bb) the remaining 

term of any loans under this title for the project, 

whichever ends later; 

(II) to comply with the long-term viability plan 

for the project; 

(III) to comply with the rent terms under paragraph (7) for the project; and 

(IV) to make value payments under paragraph 

(6) to the Secretary, and the terms of such payments; 

(iii) provisions terminating the agreement if any revitalization incentives for the project to be provided 

under the agreement are no longer available and the 

Secretary determines that such unavailability is not 

the fault of the owner; 

(iv) any rent terms for the project pursuant to paragraph (7); 

(v) a covenant which runs with the land; and 

(vi) such other terms as the Secretary determines are 

necessary to implement the purposes of this section. 

(6) SHARED VALUE AGREEMENTS.—Each long-term use agreement shall include a shared value agreement secured by the 

property of the eligible project that is the subject of the longterm use agreement, which shall determine how proceeds are divided at the end of the term of the loan or loans and shall require the project owner, at the end of such loan term or terms, 

to pay the lesser of— (A) the sum of— (i) the amounts of any loan writedowns, write-offs, 

and interest subsidies provided in connection with the 

loan restructuring under this subsection, at the closing 

of revitalization; 

(ii) any outstanding principal and interest; and 

(iii) any non-loan funds provided by the Secretary 

under this subsection; or 

(B) 75 percent of the appraised value of the eligible 

project. 

(7) RENTS UNDER LONG-TERM USE AGREEMENT.—In any eligible project that is subject to a long-term use agreement, rents 

for eligible households shall comply with the following requirements: 


ccoleman on PROD1PC71 with HEARING
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(A) MINIMUM RENT.—The Secretary, acting through the 

director of the applicable local agency or office of the Department responsible for carrying out the programs under 

this title in such area, may provide that each eligible 

household is charged a minimum monthly rent in an 

amount determined by such local director that does not in 

any case exceed $25. The Secretary may allow exceptions to 

such minimum rent for an eligible household or groups of 

eligible households for demonstrated hardship, as determined by the Secretary, which hardship exceptions, if allowed by the Secretary, shall include the hardship exceptions provided or established by the Secretary of Housing 

and Urban Development, as appropriate, under subclauses 

(I) through (V) of section 3(a)(3)(B)(i) of the United States 

Housing Act of 1937 (42 U.S.C. 1437a(a)(3)(B)(i)). 

(B) MAXIMUM HOUSEHOLD CONTRIBUTION TO RENT.—Notwithstanding any minimum monthly rent established pursuant to subparagraph (A), the maximum household contribution to monthly rent for any eligible household may 

not exceed 30 percent of the adjusted income of the eligible 

household. Such local director may take actions as may be 

necessary to verify tenant incomes for purposes of carrying 

out this subparagraph. 

(C) RENT ADJUSTMENTS.—The rents for eligible households may be increased or decreased only on an annual 

basis and only in accordance with standards incorporated 

in such agreement. The Secretary shall issue regulations establishing such standards, which shall include standards 

for rents that are considered affordable for eligible households for the area in which a project is located and for establishing rents that conform to such standards. 

(8) LOWEST COST REQUIREMENT.—In determining the terms of 

a restructuring plan, and the type and amount of revitalization 

benefits under such plan to approve under this subsection for 

an eligible project, the Secretary shall, to the extent practicable, 

approve assistance that imposes the least cost to the Secretary 

while meeting the requirements of the long-term viability plan 

for the project. 

(9) AUTHORIZATION OF APPROPRIATIONS.—There are authorized to be appropriated for each fiscal year such sums as may 

be necessary to carry out the revitalization program under this 

subsection. 

(c) HOMEOWNERSHIP OPPORTUNITIES.—The owner of an eligible 

project may, in conjunction with revitalization of the project pursuant to this section, propose a sale to a tenant-based condominium 

or cooperative. Any such proposal shall be subject to a notice to tenants under terms that the Secretary shall establish. 

(d) DETERMINATION OF INELIGIBILITY.—

(1) PROCEDURE.—The Secretary may determine that a project 

owner is ineligible for participation in the revitalization program under this section in accordance with the standards 

under paragraph (2). 

(2) STANDARDS.— The Secretary may determine that a project 

owner is ineligible if—


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(A) the project owner has a history of poor management 

or maintenance of multifamily housing properties; 

(B) the project owner is in default on a loan made available under the section 514 or 515 housing program; 

(C) the Secretary is unable to enter into a long-term use 

agreement for the project that is the subject of the application with the project owner within a reasonable time; 

(D) the project owner is suspended or debarred from participating in Federal contracts or programs; or 

(E) the Secretary has other good cause for withholding 

from the project owner the benefits made available under 

this section. 

(e) DEFINITIONS.—For purposes of this section, the following definitions shall apply: 

(1) ELIGIBLE HOUSEHOLD.—The term ‘‘eligible household’’

means a household that, under section 515, is eligible to reside 

in a project funded with a loan made by the Secretary under 

such section. 

(2) ELIGIBLE PROJECT.—The term ‘‘eligible project’’ means a 

housing project funded with a loan made at any time by the 

Secretary under section 515, the principal obligation of which 

has not been fully repaid. 

(3) PROJECT OWNER; OWNER.—The terms ‘‘project owner’’ and ‘‘owner’’ mean, with respect to an eligible project, an individual 

or entity, or principals thereof that own, or plan to purchase, 

the project. 

* * * * * * * 


ccoleman on PROD1PC71 with HEARING
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ADDITIONAL VIEWS 

H.R. 5039 is needed legislation, and I compliment Congressman 

Geoff Davis for his work on the bill. USDA Rural Development’s review of rental properties built through the Section 515 program 

shows that many are in bad shape and that owners are short on 

funding for improvements. If Congress does not set up an effective 

means for RHS to help owners revitalize these properties, rural 

residents will lose affordable housing options. 

Before this legislation is considered in the House, I believe the 

Committee needs to give further consideration to the provision in 

the legislation that caps tenant contribution to rent in restructured 

properties at 30 percent of income. I understand that the Committee’s intent is to protect currently overburdened tenants living in 

developments at the time of loan restructuring. However, this cap 

on rent contribution will likely also result in higher costs for USDA 

that will limit the number of properties than can undergo loan restructuring and revitalization. 

Like Rural Development, I am concerned that the cap on tenant 

rent contribution will force USDA to restructure only properties 

with few overburdened tenants or force property owners to rent to 

tenants who do not pay more than 30 percent of their income toward rent. In addition, investors and other industry participants 

may have difficulty in predicting cash flows and the incomes of future tenants. This provision in H.R. 5039 results in a high liability 

on the federal government, property owners and possibly other tenants by increasing the cost of preserving these properties. 

Rural Development has proposed a solution that gives the agency 

flexibility when entering into restructuring agreements, helping to 

control costs while also protecting tenants overburdened at the 

time of restructuring. I ask that the Committee consider RHS’ recommendations in order to refine H.R. 5039 so that the goals of preserving units and protecting tenants will be realized in a reasonable, cost-effective way that will encourage preservation, rather 

than make it more difficult. 

LOW INCOME HOUSING TAX CREDIT EQUITY

In addition to the use of other restructuring incentives, I believe 

that Rural Development should have the discretion to create a rule 

permitting the return of low-income housing tax credit equity to 

Section 515 owners for hard-construction costs where appropriate. 

While the introduced version of H.R. 5039 contained a provision explicitly allowing the return of this equity, this provision was removed at subcommittee markup without any prejudice regarding 

Rural Development’s existing tools and flexibility at the time of restructuring. Notwithstanding this removal, I encourage Rural Development to consider the return of low-income housing tax-credit 

equity for hard-construction costs as a restructuring tool. The lowVerDate Aug 31 2005 05:15 Jul 30, 2006 Jkt 049006 PO 00000 Frm 00029 Fmt 6604 Sfmt 6604 E:\HR\OC\HR604.XXX HR604

ccoleman on PROD1PC71 with HEARING
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income housing tax credit has been a very useful tool for affordable 

housing development, and credit equity will be useful to property 

owners in revitalization. 

RANDY NEUGEBAUER. 

Æ 


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