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H.R. 4868, THE HOUSING PRESERVATION 

AND TENANT PROTECTION ACT OF 2010 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 24, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–116 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON HOUSING AND COMMUNITY OPPORTUNITY

MAXINE WATERS, California, Chairwoman 

NYDIA M. VELA ́ ZQUEZ, New York 

STEPHEN F. LYNCH, Massachusetts 

EMANUEL CLEAVER, Missouri 

AL GREEN, Texas 

WM. LACY CLAY, Missouri 

KEITH ELLISON, Minnesota 

JOE DONNELLY, Indiana 

MICHAEL E. CAPUANO, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

LUIS V. GUTIERREZ, Illinois 

STEVE DRIEHAUS, Ohio 

MARY JO KILROY, Ohio 

JIM HIMES, Connecticut 

DAN MAFFEI, New York 

SHELLEY MOORE CAPITO, West Virginia 

THADDEUS G. McCOTTER, Michigan 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

RANDY NEUGEBAUER, Texas 

WALTER B. JONES, JR., North Carolina 

ADAM PUTNAM, Florida 

KENNY MARCHANT, Texas 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

March 24, 2010 ................................................................................................. 1 

Appendix: 

March 24, 2010 ................................................................................................. 35 

WITNESSES 

WEDNESDAY, MARCH 24, 2010 

Caruso, George, Executive Vice President, Edgewood Management Corporation, on behalf of the National Affordable Housing Management Association 

(NAHMA) .............................................................................................................. 17 

Galante, Carol, Deputy Assistant Secretary for Multifamily Housing, U.S. 

Department of Housing and Urban Development ............................................. 5 

Halliday, Toby, Vice President for Public Policy, National Housing Trust, 

on behalf of the National Preservation Working Group ................................... 18 

James, Raymond K., Partner, Coan and Lyons, on behalf of the National 

Leased Housing Association (NLHA) ................................................................. 23 

Leung, Ricky, Vice President/East, National Alliance of HUD Tenants 

(NAHT), and President of the Cherry Street Tenants Association .................. 20 

Norris, Michelle, Senior Vice President, Acquisitions and Development, National Church Residences (NCR), on behalf of the American Association 

of Homes and Services for the Aging (AAHSA) ................................................. 21 

Shumaker, William C., President of the Board, the Council for Affordable 

and Rural Housing (CARH), and Vice President of the Provident Companies ........................................................................................................................ 24

Trevino, Tammye, Administrator, Rural Housing Service, U.S. Department 

of Agriculture ........................................................................................................ 7 

APPENDIX 

Prepared statements: 

Caruso, George .................................................................................................. 36 

Galante, Carol ................................................................................................... 46 

Halliday, Toby ................................................................................................... 50 

James, Raymond K. .......................................................................................... 58 

Leung, Ricky ..................................................................................................... 65 

Norris, Michelle ................................................................................................ 81 

Shumaker, William C. ...................................................................................... 101 

Trevino, Tammye .............................................................................................. 111 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Waters, Hon. Maxine: 

Written statement of Moises Loza, Executive Director, Housing Assistance Council .................................................................................................. 121 

Written statement of James R. Grow and Gideon Anders, the National 

Housing Law Project ..................................................................................... 124 

Written statement of the National Rural Housing Coalition ....................... 139 

Written statement of Stewards of Affordable Housing for the Future ........ 141 

Green, Hon. Al: 

Letter to Secretary Shaun Donovan, U.S. Department of Housing and 

Urban Development, dated November 19, 2009 ......................................... 148 

Letter to Chairman Barney Frank and Chairwoman Maxine Waters, 

dated February 22, 2010 .............................................................................. 150 

(1) 

H.R. 4868, THE HOUSING PRESERVATION 

AND TENANT PROTECTION ACT OF 2010 

Wednesday, March 24, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:12 a.m., in room 

2128, Rayburn House Office Building, Hon. Maxine Waters [chairwoman of the subcommittee] presiding. 

Members present: Representatives Waters, Velazquez, Cleaver, 

Green, Ellison, Donnelly, Driehaus, Himes, Maffei; Capito, Biggert, 

and Jenkins. 

Mr. CLEAVER. [presiding] Let me first of all apologize for the late 

start. The Chair should be here shortly. Chairwoman Waters will 

join this important subcommittee hearing today on H.R. 4868, the 

Housing Preservation and Tenant Protection Act of 2010. 

I would like to express appreciation to the chairwoman of this 

committee, Maxine Waters, and the ranking member, Ms. Capito. 

And I think this is a very important meeting. 

While the Financial Services Committee has held a number of 

hearings in recent years addressing threats to the Nation’s affordable housing inventory, this hearing will focus on the policy provisions contained in the legislation, including the impact of the loss 

of affordable housing properties on residents, efforts by the Federal 

Government and nongovernment organizations to recapitalize and 

preserve the affordable or federally- and State-assisted properties, 

and the cost of preserving affordable housing units compared to 

building or acquiring new units. 

Our chairman, Barney Frank, introduced H.R. 4868 on March 

17, 2010. This bill, as the chairman explains it, is intended to preserve the Nation’s existing stock of federally- and State-assisted affordable housing, multifamily rental units in both urban and rural 

communities, and to protect low-income tenants, many of whom are 

elderly and disabled, from being displaced by higher rents caused 

by conversion to market rate housing. 

I am delighted that the Chair has called this hearing, and also 

delighted to see that HUD is representated here today by Ms. 

Galante. Now, we will have an opening statement from the ranking 

member, Ms. Capito. 

Mrs. CAPITO. Thank you, Mr. Chairman. And I thank Chairwoman Waters for holding this hearing today on the legislation inVerDate Nov 24 2008 17:48 Jul 07, 2010 Jkt 056780 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\56780.TXT TERRIE
2 

troduced by Chairman Frank, H.R. 4868, which is designed to address the preservation of the existing affordable housing stock. 

Since the 1960’s, the Federal Government has supported the production of privately-owned properties that are affordable to lowand moderate-income families, those with incomes 80 percent or 

less of the area median income. 

HUD has historically supported the building and maintaining of 

affordable housing by offering property owners affordable—or, excuse me, favorable mortgage financing, long-term rental assistance 

contracts, or both, in exchange for owners’ commitments to house 

low-income tenants for at least 20 years, and in some cases up to 

40 years. 

The worry has always been that as these contracts expire or 

reach maturity, current owners will choose to convert the properties to market rate, which will translate into significant loss of 

existing affordable housing stock. Congress has grappled with how 

best to achieve the goal of preservation. 

I think it is important to highlight the important role that the 

private sector has played in the availability of affordable housing. 

Over the years, the creation and preservation of affordable housing 

has been a collaborative public/private partnership. 

While the Federal Government has played a key role in the 

availability of affordable housing for low- and moderate-income 

families, it would not have been possible without private sector 

participants. And in that regard, both for-profit and nonprofit entities have been important participants in efforts to preserve affordable housing. 

For this reason, I think it is imperative that any legislation designed to preserve the assisted housing inventory must recognize 

the complexity of preservation transactions, and it must incentivize 

rather than penalize those who participate. 

Unfortunately, I share many of the concerns that will be raised 

today by some of our witnesses, and that are outlined in the letter 

that I am going to ask to submit with unanimous consent dated 

March 23rd and signed by many of the private sector participants 

who construct and preserve affordable housing. 

I am concerned that some of the provisions included in H.R. 4868 

may discourage future private sector participation in Federal housing programs, and ultimately limit the availability of affordable 

housing. One of the more problematic provisions in H.R. 4868 is 

Section 107, which creates a Federal right of refusal, which is seen 

by some as an abrogation of housing assistant contracts or mortgage agreements. 

In addition, many of the provisions included in this bill, such as 

increased enhanced vouchers and project-based vouchers, and a requirement that HUD convert rental assistance payments to Section 

8 project-based vouchers, and the grant and loan sections in Section 102, carry significant costs. At this time of significant budget 

deficits, I am just not sure where we will find the funds to pay for 

these new and costly provisions. 

I want to take this opportunity to welcome our witnesses on both 

panels, and to again commend my colleagues for their work and 

commitment to preserving affordable, decent housing for low- and 

middle-income families. 

3 

Thank you. And I do ask unanimous consent to submit this letter 

for the record. 

Mr. CLEAVER. Without objection, it is so ordered. 

We now recognize the gentleman from New York, Mr. Maffei. 

Mr. MAFFEI. Thank you, Mr. Chairman. I just have one comment. I am very grateful to you and to Chairwoman Waters and 

to Ms. Capito for having this hearing, and to all the witnesses for 

being here. 

In terms of protecting our housing stock, I would like, if possible, 

for the witnesses to address at some point, both the first and second panels, issues of urban planning and sprawl. 

And one of the concerns in my area of the country, in upstate 

New York, is as some of the housing stock gets moved, some of it— 

the owners may want to graduate from affordable housing, etc. 

And new affordable housing tends to get built in the suburbs, 

putting more of a strain on our infrastructure. And though in the 

short run, it might be better—you just want to get more housing 

for people—in the long run, it ends up hurting our overall urban 

structure, our school districts, etc., and putting more strain on our 

infrastructure. 

So I would be very pleased if the witnesses could address that 

at some point that they feel it is appropriate. I thank the Chair. 

And I yield back. 

Mr. CLEAVER. Thank you. 

The Chair recognizes Ms. Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman. I would like to thank 

Chairwoman Waters for holding this important hearing. And I 

would also like to thank Chairman Frank for including in H.R. 

4868 the language that I worked on with Mr. Maloney of Florida 

during the 110th Congress to streamline and simplify the development of affordable housing for our seniors. 

During the last Congress, I co-sponsored H.R. 2930, Section 202, 

Supportive Housing for the Elderly Act of 2007, which the House 

passed by voice vote on December 5, 2007. Like H.R. 2930, Title 

7 of the bill under discussion today provides the necessary flexibility to the Section 202 program so that local community groups 

can best serve the needs of our seniors. 

It also proposes changes to the program to enable better use of 

mixed financing—tax credits, grants, and loans—to preserve and 

build housing for seniors. And finally, it expands refinancing opportunities. 

Mr. Mike Frigo, the vice president of Mayslake Village, which is 

located in my district, testified in September 2007 about the benefits these reforms could provide to helping Mayslake rehabilitate 

around 100 apartments that were no longer rentable to seniors. He 

also testified that H.R. 2930 included reforms that would provide 

refinancing and rehabilitation opportunities so that the 100 empty 

units could again be rented for another 40 years. 

In addition, Mr. Frigo said that rehabilitating this Mayslake 

building would cost $10 million to rehabilitate, versus $15 million 

to build a new facility, a cost savings of $5 million. 

I also support Title 7 of H.R. 4868, as well as other incentivebased approaches to rehabilitating and preserving existing housing 

stock for another 40 years, as Mike Frigo mentioned. 

4 

However, I have great concerns about the provisions in this bill 

that would discourage private sector, nonprofit, as well as for-profit 

individuals and organizations from utilizing the Federal housing 

programs, and therefore dramatically reducing their participation 

in making available units of rental housing to low-income individuals and families. 

I am particularly concerned with sections of the bill, for example, 

Section 107 and 108. As with the Section 202 program, we have 

learned that encouraging owners to preserve units is a commonsense and cost-effective approach to maintaining housing for lowincome people. 

It is important that these programs continue to provide incentives, not mandates, so that there is voluntary and greater participation. I was encouraged by statements issued by Chairman Frank 

in his March 18th press release that: ‘‘We are committed to working with current owners of these affordable housing units.’’ 

So I look forward to improving this legislation with Chairwoman 

Waters, Chairman Frank, and Ranking Member Capito. And with 

that, I would yield back the balance of my time. 

Chairwoman WATERS. Mr. Green, do you have an opening statement? 

Mr. GREEN. Yes, I do, Madam Chairwoman. Thank you, Madam 

Chairwoman, and I thank the witnesses as well. 

I would also like to thank the chairman of the full— 

Chairwoman WATERS. I don’t think your microphone is on. 

Mr. GREEN. Musical chairs early in the morning can be fun. 

Reclaiming my time, I would also like to thank Chairman Frank, 

especially Chairman Frank and Chairwoman Waters, for the letter 

that we sent to HUD addressing a concern with reference to affordable housing. 

And I would like to make this letter a part of the record. The letter made an inquiry with reference to what the intentions of HUD 

were in terms of helping us with the first right of purchase and 

third party beneficiary status. I would like to make it, without objection, a part of the record, Madam Chairwoman. 

Chairwoman WATERS. Without objection, it is so ordered. 

Mr. GREEN. Also, I would like to thank Chairman Gutierrez and 

the many persons who sponsored a letter or were signatories to it 

that went to Chairman Frank and Chairwoman Waters. And this 

letter addressed and outlined the concerns associated, again, with 

these two key pieces of concern, first right of purchase and third 

party beneficiary status. 

I would like to make this a part of the record, without objection, 

as well. 

Chairwoman WATERS. Without objection, it is so ordered. 

Mr. GREEN. Thank you. The concern that I would like to call to 

the attention of the committee is one that relates to the affordable 

housing stock that is being depleted by virtue of properties that 

came online and are not deteriorating, or properties that may be 

sold because they are no longer under contract with owners who 

purchased them such that they could become a part of the affordable housing stock. 

These properties are important to us, especially at this time 

when we have this housing crisis in the country. And what we have 

5 

attempted to do in the legislation is propose that there be an opportunity for the tenants to purchase the property, a first right of purchase, which does not mean that the owner has an absolute obligation to sell to tenants. 

It does mean that the owner would go out and seek an opportunity to have a buyer purchase at market rate, and then, upon 

finding this buyer, could give the tenants—by and through HUD, 

I might add—the opportunity to purchase. HUD would have the opportunity to actually make the purchase, but could assign this to 

the tenants. 

We believe that this would allow these apartments, these units, 

these multifamily dwellings, to stay within the affordable housing 

stock, given that it costs much more to produce new stock at this 

time, and given that for every unit that we construct, it appears 

that we may be losing two units; which means that if construction 

alone is utilized, we will not maintain the stock at its current rate. 

Before my time expires, I would just like to make one final comment, which is that we have a third party beneficiary status with 

HUD such that these tenants would have the opportunity to take 

some of their concerns to HUD. And if the concerns are not addressed, then the tenants could literally litigate themselves, which 

would relieve HUD of some of its responsibilities and actually be 

of help to HUD. 

I will say more about these things at a later time. I thank you 

for your leniency, Madam Chairwoman, and I yield back the time 

that I do not have. 

Chairwoman WATERS. Thank you very much. 

At this time, I would like to welcome our distinguished first 

panel. Our first witness will be Ms. Carol Galante, Deputy Assistant Secretary for Multifamily Housing, U.S. Department of Housing and Urban Development. Our second witness will be Ms. 

Tammye Trevino, Administrator, Rural Housing Service, U.S. Department of Agriculture. 

Ms. Galante? 

STATEMENT OF CAROL GALANTE, DEPUTY ASSISTANT SECRETARY FOR MULTIFAMILY HOUSING, U.S. DEPARTMENT OF 

HOUSING AND URBAN DEVELOPMENT 

Ms. GALANTE. Good morning, Chairwoman Waters, Ranking 

Member Capito, and distinguished members of the subcommittee. 

Thank you for the opportunity to testify on behalf of the Department today on the Housing Preservation and Tenant Protection Act 

of 2010. 

Chairwoman Waters, I would first like to express my gratitude 

on behalf of the Department for yours and Chairman Frank’s tireless leadership on the issue of affordable housing preservation. 

With the introduction of this legislation, we have the opportunity 

to move forward together to safeguard affordable shelter for our 

families and neighbors in need, and to improve and revitalize multifamily properties that anchor our communities. HUD is proud to 

provide project-based rental assistance to more than 1.4 million 

households throughout the country. We value our partnership with 

private owners of the thousands of assisted properties across our 

6 

portfolio. Through these partnerships, we are able to offer safe, decent, and affordable shelter. 

However, despite the deduction of so many of our partners, these 

housing resources are at risk. We are deeply concerned about ongoing loss of long-term affordability in these properties. Today, more 

than 1,700 properties nationwide are financed with HUD direct or 

insured mortgages that will mature within 5 years. 

These properties offer affordable housing to nearly 200,000 families through an array of HUD rental assistance programs. HUD 

maintains the affordability of these properties through recorded 

use agreements. 

When the mortgages mature or expire, so will the HUD affordability use restrictions. Without the presence of such restrictions, 

owners will have more incentives and face more market pressure 

to opt out of Section 8 HAP contracts. 

For those properties with project-based rental assistance, current 

tenants would be protected through the provision of enhanced 

vouchers. Our concern is, of course, for those tenants, but also for 

the long-term affordability of these properties. Unless we take action, these affordable units may be lost to future generations. 

Built some 30 or 40 years ago, many of these aging properties 

have deferred maintenance or obsolete systems, and are in need of 

refurbishment and significant upgrading. Some are at risk of default or foreclosure, casualties of the down economy. 

In order to break free of HUD regulatory oversight and/or capture equity, some owners continue to opt out of Section 8 assistance 

and sell their properties to private entities. Some 335,000 apartments receive Section 8 assistance that will expire within one year 

unless owners make the choice to renew assistance contracts. Owners have opted out of more than 550 Section 8 contracts in the last 

5 years, stripping rental assistance from 9,000 units. 

In any scenario, when Section 8 assistance is lost and affordability restrictions expire, the loss reverberates across communities. As you know, HUD offers no new project-based rental assistance to replace such lost Section 8 units, although we do protect 

the assisted tenants. 

That is why HUD supports the fundamental principles of this 

bill. With some refinements, we believe this legislation will provide 

HUD with additional tools to facilitate the preservation work that 

can renew and protect our multifamily properties. 

Red tape should never stand in the way of an owner making a 

choice to be a good steward of an affordable property. The Department applauds the bill’s focus on streamlining regulatory requirements. Sections 110, 111, 201, and 204 allow owners to use project 

resources to improve their properties and leverage State and local 

private financing. 

Section 110 gives HUD the authority to assign and forgive or 

defer flexible subsidy loans for preservation, refinances, or acquisitions. Section 111 enables owners to tap a residual receipts account 

to fund new capital improvements or facilitate preservation purchase. 

Section 204 allows the Department to approve Section 8 rents at 

post-rehab levels, which we know from experience can be used by 

owners to refinance properties. Section 201 would facilitate the 

7 

transfer of Section 8 contracts from one building to another, protecting rental assistance as properties enter into obsolescence. 

And while some of these measures are already under way or 

could be achieved administratively by HUD, the clear direction that 

the bill provides is quite welcome. Together, these sections make 

preservation deals more viable. 

We also support the principle of helping move at-risk preservation-worthy properties into the hands of preservation purchasers. 

Section 106 of the bill, the Preservation Exchange Program, provides incentives to owners who agree to sell their properties to purchasers who will maintain long-term affordability. Regulatory waivers, streamlining processing, and other project resources can be 

powerful incentives, and we believe many owners will take advantage of this opportunity. 

[The prepared statement of Deputy Assistant Secretary Galante 

can be found on page 46 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

I will now call on our second witness, Ms. Tammye Trevino. 

STATEMENT OF TAMMYE TREVINO, ADMINISTRATOR, RURAL 

HOUSING SERVICE, U.S. DEPARTMENT OF AGRICULTURE 

Ms. TREVINO. Chairwoman Waters, Ranking Member Capito, and 

members of the subcommittee, thank you for the opportunity to appear before you to discuss multifamily housing preservation in 

rural America. 

This is a critically important issue, and in broad terms, we believe that the strategy outlined in the Rural Housing Preservation 

Act of Title 8 of the proposed legislation is very promising. 

I would like to thank all those involved with this legislation, both 

in this session of Congress and in previous sessions, for your hard 

work. I am pleased to testify before you today on behalf of Secretary Tom Vilsack, Under Secretary Dallas Tonsager, and the 

USDA Rural Housing Service. 

At the USDA, we advocate a strong national housing policy that 

both supports the American dream of homeownership and provides 

affordable rental opportunities. We are greatly encouraged by the 

committee’s focus on legislation that will create national housing 

preservation standards for all government agencies that specialize 

in housing assistance, especially in rural America. 

We further believe that your goals and ours are the same in both 

the desire to preserve the Nation’s existing stock of federally-assisted, affordable multifamily rental housing, and the protection 

from displacement of low-income families, especially the elderly 

and the disabled. 

For 60 years, our rural housing programs have provided invaluable support for low- and very low-income families in rural areas. 

In the current economy, the challenges that have faced rural communities for decades have grown more acute. 

Recent studies show there are there are 386 persistent poverty 

counties in the United States. Of these 386 counties, 340, almost 

90 percent, are considered rural counties. The same study indicates 

that persistent poverty and the degree of rurality are also linked. 

The poverty rate is the highest in the completely rural counties. So 

8 

not only do rural Americans earn less than their urban counterparts, they are also more likely to live in poverty. 

Rural development multifamily housing programs were established because sufficient access to capital and credit was not available to serve the needs of the very low-income renters who wish to 

live and work in rural communities. The need to preserve the Nation’s existing stock of federally-assisted, affordable multifamily 

rental housing, and the protection from displacement of low-income 

families, especially the elderly and disabled tenants in rural America, gave rise to the Multi-family Preservation and Revitalization 

Demonstration Program that began in 2006. 

MPR is in its fourth year of existence. To date, rural development has obligated over 400 MPR revitalization transactions for 

Section 515 properties that will affect close to 14,000 tenant households. 

Currently, our MPR program is authorized as a demonstration 

program, with no permanent authority. The lack of permanent authorization makes it difficult for the agency to promulgate permanent program regulations and to address long-term issues. By providing permanent authorization, the legislation would dramatically 

enhance the quality of the multifamily housing stock and protect 

tenants in rural America. 

In rural America, low-income residents continue to be underserved, especially given the current economic environment. For example, turbulence in the housing credit investment market has had 

some effect on rural deals in the preservation pipeline. 

While the vast majority of approved MPR transactions are now 

closed, the recent depletion of investors due to market instability 

has reduced equity that is available to be brought into low-income 

housing tax credit transactions in rural areas. 

Half of all MPR transactions funded include transfers as part of 

the revitalization transaction. This has slowed the rate of closing 

for MPR transactions obligated during Fiscal Years 2008 and 2009, 

that included a transfer dependent on low-income housing tax credit funding. 

At USDA Rural Housing, we are pleased with five key features 

in your proposed legislation: 

Number one, it provides the agency with a number of revitalization tools that provide cost-effective preservation options for the existing multifamily housing rental portfolio. 

Number two, it contains enhanced voucher authority that will 

protect tenants and properties that leave the program, as well as 

ensuring long-term affordability for tenants through long-term use 

agreements. 

Number three, it includes RD’s farm labor housing programs. 

Number four, it includes provisions for long-term viability planning. 

And number five, it introduces the concept of a national database 

that will give us access to the information needed to track America’s affordable housing. Passage of the bill codifies the Demonstration Program and will provide additional tools and incentives to our 

current 515 program. 

In general, we support the principles reflected in the bill, and 

look forward to working with Congress to approve this legislation. 

9 

It is my goal to assist Secretary Vilsack and President Obama in 

working with the committee and our public and private partners to 

spur economic growth and create a lasting foundation in the heart 

of rural America. 

[The prepared statement of Administrator Trevino can be found 

on page 111 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

In the interest of time, Ms. Velazquez, who chairs another committee, will have to leave. I am going to yield to her to begin the 

questioning. I will recognize you for 5 minutes, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Madam Chairwoman. 

Ms. Galante, while the market for single-family homes shows 

some signs of stabilizing, many multifamily apartment buildings 

remain at significant risk of default and foreclosure, with buildings 

overleveraged and lacking sufficient rent rolls to support operating 

expenses and maintenance. 

Does HUD have adequate tools to address this problem, since 

FHA and the GSEs currently represent about 90 percent of today’s 

multifamily market? 

Ms. GALANTE. Thank you for that question. You know, clearly, in 

the market today, you are correct that single-family is stabilizing. 

I think most economists would say that the multifamily sector is 

behind in terms of that overall recovery, and so that there is significant stress in the multifamily sector, particularly the private 

market rate market, not so much in the affordable stock. 

So in terms of the FHA multifamily insured loans, we do have 

significant tools to deal with distressed properties. I think generally in the marketplace, there is concern that some privately financed market rate complexes don’t have the similar tools to take 

care of those needs. 

Ms. VELAZQUEZ. Well, the reason that I am asking that question 

is that I am concerned about the fate of tenants who live in multifamily buildings that are at risk of default or foreclosure. We all 

know the ripple effects of this investment in this development can 

affect entire communities. 

So what are some of the ways that provisions in H.R. 4868 will 

help you in addressing this issue? 

Ms. GALANTE. There is a provision that strengthens HUD’s ability to deal with its own portfolio of distressed properties. There are 

not provisions in this bill that would impact those other private 

market rate types of properties. 

Ms. VELAZQUEZ. And the legislation being discussed today attempts to help owners of federally-assisted housing find viable, 

long-term purchasers for their properties through a voluntary preservation exchange program, Section 106 of the bill. 

Given the voluntary nature of this program, however, do you 

think sufficient numbers of owners will participate in this program? 

Ms. GALANTE. I am quite optimistic that Section 106, the voluntary preservation exchange program, will enable a significant 

number of private owners to make the choice to stay with the HUD 

programs. And that in conjunction with some of the other streamlining of red tape that we are doing as part of this legislation, I 

think, will be quite successful. 

10 

Ms. VELAZQUEZ. Ms. Galante, you know that the bill under consideration will establish a right of first refusal. Housing advocates, 

however, believe that the right of first refusal provides weaker protections for affordable housing than a first right of purchase, which 

has shown great success in a State like Illinois. 

Do you believe that the right of first refusal should be strengthened to provide greater protections for tenants? 

Ms. GALANTE. We have concerns about—and you heard Secretary 

Donovan mention this back in June when there was a preservation 

hearing—with the mechanics of whether it is the right of first purchase or the existing Section 107 here. 

Both of those provisions, you know, have significant challenges 

in terms of implementation in this private market ownership environment that we have. So we think that, you know, those could be 

challenging to implement and to legally mandate. 

Ms. VELAZQUEZ. Okay. Thank you. Thank you, Madam Chairwoman. 

Chairwoman WATERS. Ms. Capito? 

Mrs. CAPITO. Thank you. 

I want to stay with that topic that we were just talking about, 

Ms. Galante. In terms of—you mentioned Secretary Donovan, who 

was here in June, and his experience in New York had solidified 

his opinion that incentives for preservation work much better than 

perceived mandates. Section 106, the preservation exchange, I 

think, reflects what the Secretary has in mind. 

But then Section 107 turns around and includes a Federal first 

right of refusal. Do you think there is any conflict between the two, 

Section 106 and 107, and what would be the results of trying to 

enforce both of those? 

Ms. GALANTE. Well, my reading of the bill is that if you voluntarily agree to participate in Section 106, that while you are participating in that, Section 107 would not apply. So in that way, I 

don’t think there is a direct conflict. But, you know, they are philosophically different approaches. 

Mrs. CAPITO. Right. And I want to talk again about Section 107, 

which provides the right of first refusal, for either HUD or an approved assignee to purchase low-income assistance properties at 

the fair market value to prevent those from drifting away from the 

affordable housing stock. 

I am concerned about allowing HUD to purchase these properties. I am assuming that—would this be the first time that HUD 

has entered into these kinds of arrangements? Where exactly 

would this money come from? How does HUD decide to value the 

properties? How long does HUD intend to hold the investments, 

and all kinds of questions surrounding that? Could you speak about 

that section a little bit? 

Ms. GALANTE. Yes. I am not sure I can answer all of those questions. I don’t know if this is the first time that HUD has done this. 

I am not aware of other circumstances. But I am relatively new to 

the Department, so I can’t speak to that. 

I think that the section does provide for HUD to assign its rights 

to another entity. And clearly— 

Mrs. CAPITO. So that would be after HUD—not after HUD purchases, but assigns their right of first refusal to somebody? 

11 

Ms. GALANTE. Correct. 

Mrs. CAPITO. So who else would that be? 

Ms. GALANTE. Well, HUD would have to establish a proposed 

panel of bidders, so to speak, or preservation-minded entities that 

would like to purchase these properties. And we would have to 

have some kind of program set up to enable folks to come in and 

step in, essentially, to HUD’s shoes in this case unless HUD wanted to take on doing that themselves. 

Mrs. CAPITO. Well, with HUD’s—I mean, I just think that this 

is obviously not fully fleshed out, this whole idea of right of first 

refusal. And I think it is something that if it is going to entail 

HUD actually purchasing the properties, or managing the properties, or how long are they going to hold the investments, it really, 

I think, puts a—with HUD’s reputation for technological challenges, I think it will put another technological challenge onto an 

already overburdened staff. 

I would like to ask Administrator Trevino a question. You and 

I talked about this, actually, on the phone. The 502 single-family 

loan guarantee program will exhaust its funding by the end of 

April. And we have already heard that lenders are already stopping 

taking applications for this program because they are concerned 

that their funding is not going to be there. I have received numerous e-mails from folks who use this program and say it is a great 

program, but are concerned about the lack of programs. 

How many American families have used the program so far? And 

how critical is this for rural families? And do you believe that— 

what are you doing to continue the viability of this program 

through the end of this fiscal year? 

Ms. TREVINO. Just based on our numbers that we have, we had 

over 85,000 homeowners who went through the guarantee program, 

so it was very highly successful. It was our first program in housing that used up all its funding. And that happened actually in December. 

So it is a very popular program. We have four major lenders that 

participate in the program, as well as numerous smaller ones. 

Mrs. CAPITO. And what are you doing to see that this can continue from the end of April to the end of the fiscal year, where we 

are going to have the shortfall? 

Ms. TREVINO. At the current time, there are folks at a lot higher 

level than I am that are weighing the options. There are several 

options. The two more popular ones are fee-based options. And that 

decision will be made at a higher than I, and so at some point we 

hope to have some type of resolution. 

Mrs. CAPITO. All right. Well, I am very interested in the results 

of this, as I expressed to you on the phone the other day, and 

would love to participate in trying to help find a solution to this 

program. 

Ms. TREVINO. Thank you. I appreciate that. 

Mrs. CAPITO. Thank you. 

Chairwoman WATERS. Thank you very much. I will recognize myself for 5 minutes. 

As you can see, there is a lot of interest in the Section 107 Federal first right of refusal. As you know, some of us are interested 

12 

in the opportunity for tenants to own property if the opportunity 

presents itself. And it seems a little bit confusing. 

It talks about the owner being able to accept an offer, and then 

HUD comes in behind the acceptance of the offer and matches that 

offer. And then I guess it would have the first right of purchase. 

Is that your understanding? 

Ms. GALANTE. Actually, my understanding is there is a two-part 

test under 107. And the first is that the one notifies of their intent 

to opt out of the program. And I think there is a 90-day period 

where HUD has the ability to raise their hand and say, we want 

to purchase the property or assign our ability to purchase the property. 

And if at that point HUD does not do that, then the private 

owner is free to go out and make a purchase arrangement with a 

private owner. And then HUD can come back in under certain circumstances to essentially match that private offer. 

Chairwoman WATERS. So it is not your understanding that the 

owner would, a year ahead of time, notify that they would like to 

sell the property, and then go out to the market and get a fair market value appraisal, and then HUD would have the opportunity to 

match that fair market available or value? So do they notify a year 

ahead of time? 

Ms. GALANTE. Yes, they do. 

Chairwoman WATERS. And then do they place the property on 

the market and accept an offer? That is what is kind of confusing 

me. Normally, when you think of an acceptance of an offer, it 

seems that you have something that is legally binding that you 

have to honor in some way. 

But this appears that after the acceptance of the offer, HUD can 

then come in and either match that offer or maybe over-match the 

offer and have the first right. 

Ms. GALANTE. That is correct. That is the right of first refusal 

portion of Section 107. My understanding, and maybe I read it incorrectly, but my understanding is that prior to that right of first 

refusal, there is this 90-day period where HUD could say they 

wanted to actually purchase it before the owner goes out and gets 

a third party offer. 

Chairwoman WATERS. All right. Ms. Galante, you didn’t mention 

Section 303, which would confer third party beneficiary status on 

residents. What is the Department’s position on this provision? 

Ms. GALANTE. This is a relatively new provision of the bill, and 

we haven’t taken a formal position on that. 

Chairwoman WATERS. Thank you. 

I will then call on Mr. Cleaver. 

Mr. CLEAVER. Thank you, Madam Chairwoman. I just have one 

question for this panel. 

In going over the background information for this legislation that 

our Chair has introduced, I find that 193,000 subsidized rental 

units will move into market rate over the next 10 years. 

So my question and concern—well, the point of the question is 

to determine how much of an emergency this bill is for now, when 

you consider we have walked almost to the precipice economically 

in the country. And if we are talking about 193,000 in 10 years, 

how many can we estimate falling over in 2010/2011? With less 

13 

money moving around in the economy, the renters and the owners 

are probably in a less favorable situation to recapitalize some of the 

units. 

So do you have any idea or estimate on how many will move to 

market rate this year or next year? 

Ms. GALANTE. I don’t have the exact figures. I think the place 

where we are in the economy today has two situations affecting 

these properties. On the one hand, I believe some properties are 

less likely to opt out of their Section 8 contracts because their properties might be less valuable in the market rate rent situation. 

On the other hand, there are property owners who, because they 

are reaching a certain—there is a peak of properties reaching maturity and expiring use, that if they don’t pull the trigger today, 

they are not—they have an opportunity to pull the trigger today 

and get out of the program. 

And so those properties are significantly at risk. And particularly 

those with maturing mortgages aren’t really protected under current regulations. And so I think there is a significant risk in the 

next 5 years for these properties. 

Mr. CLEAVER. Ms. Trevino, do you have any comments? 

Ms. TREVINO. Well, we have currently about 100 properties that 

have left our portfolio. That is about 2,700 units that we have lost 

in the last—based on either transferring out or no longer decent. 

Mr. CLEAVER. Yes. The point was how much of an emergency do 

we have? Is there something we need to do? I am willing to vote 

for it to be done yesterday, and I am getting a sense of the fact 

that the losses are occurring right now. 

Ms. TREVINO. It is about the same. We lose about a hundred. Our 

portfolio, about 10 percent of our total portfolio, is in the worst condition. 

Mr. CLEAVER. How are we going to handle the fact real estate 

values have dropped about 36 percent since the beginning of the 

great recession? Are we going to have problems with property owners who, when they began participating in this program, had one 

value on their property, and now it is 36 percent lower? 

Do you have any idea how we would be able to handle that, and 

whether property owners are going to be willing? My assumption 

is that the cost is going to be significantly less today than it would 

have been if we had tried to do this 2 years ago. 

We have a bridge in my district that came in when the city first 

sent out a request for bids at $25,000 to rebuild it. When we receive the money through the TIGER grant, the new bid is $10,000. 

So people are moving to a new economy that we have unwittingly 

created. Do you think we will have problems? 

Ms. GALANTE. If I could just say, again, it cuts both ways. In this 

situation, owners whose properties are less valuable in the private 

market with market rate rents because of the drop in values may 

be more likely continue to opt in to project-based Section 8 because 

that is a more secure situation. 

On the other hand, if they are under economic distress with 

other properties that they own, even though they may be getting 

less value for the property than they would have 2 years ago, they 

may be motivated to take out equity now for other reasons and figVerDate Nov 24 2008 17:48 Jul 07, 2010 Jkt 056780 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\56780.TXT TERRIE
14 

ure it is going to be a while before the market comes back, and 

they have an opportunity now and they are going to take it. 

So it is a complicated situation and I think it is partly a microeconomic valuation at different parts of the country. 

Mr. CLEAVER. Thank you. 

Chairwoman WATERS. Thank you very much. 

Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Madam Chairwoman. 

Let me go first to the letter that I referenced earlier to Secretary 

Donovan, which is signed by Chairman Frank, Chairwoman 

Waters, and myself. A slight modification in my earlier statement 

because this letter actually deals with an amendment that I had 

to H.R. 3965, the Mark-to-Market Extension and Enhancement Act 

of 2007. It would reactivate Section 514 of the grant program, 

which accords about $10 million to tenant groups for training and 

technical assistance, the purpose of which would be to improve and 

preserve properties. 

My understanding is that there is now a proposal to develop language that has not been shared to date, and HUD would do this. 

Ms. Galante, can you briefly, as tersely as possible, share with me 

how your language would be better than the language that is currently proposed in Section 514? 

Ms. GALANTE. Certainly. In concept, we are very supportive of 

Section 514 and tenant outreach and education. We have developed 

a draft program on which we are having conversations with tenant 

organizations. It is not final. We want to get input to make sure 

that it is going to work. We are calling it the Tenant Resource Network, or TRN. 

And, fundamentally, it is a very solid program. I think the one 

difference between where this program is going and the language 

in the legislation is the language in the legislation requires there 

to be a national MOU with the corporation that runs Vista. 

And in our program, we are allowing grants to go to resident organizations, and they can use those grants as matching funds to 

receive local Vista volunteers. 

Mr. GREEN. Because I have one other question and time is of the 

essence— 

Ms. GALANTE. Yes. 

Mr. GREEN. —may I make a request that, if it does not breach 

some protocol or ethics, that my office be involved with you as you 

are developing this? Given that I have demonstrated an interest in 

this— 

Ms. GALANTE. Certainly. 

Mr. GREEN. —prior to this moment in time. And I will have 

someone visit with you afterwards. 

Ms. GALANTE. Great. 

Mr. GREEN. Now, let’s move to the next letter, and talk about the 

first right of purchase versus the first right of refusal. 

Do you agree that a right to purchase is a stronger right than 

a right to refuse? 

Ms. GALANTE. Yes. 

Mr. GREEN. And as such, it appears that the right to refuse, 

while it can be of benefit, the right to purchase would put a tenant 

organization—or HUD, if indeed HUD chose to make the purchase, 

15 

and I am not sure that would be the case—but it would put you 

in better standing in terms of moving forward. 

Would you agree with this? 

Ms. GALANTE. I would say this; I think Section 107 is relatively 

new. I have read through it a number of times. It is complex. 

Again, my reading of it was that even though it is called a right 

of first refusal, that there is a kind of initial stage which is more 

like a right—it is not a right to purchase, but it is more like a right 

to offer that kind of takes care of both of those situations. 

That is my reading of it, and I could be wrong. 

Mr. GREEN. So currently, you are supportive of 107 as structured? 

Ms. GALANTE. Well, again, we have concerns about the mechanics of 107 as expressed by the Secretary back in June on the right 

of first purchase, the Section 106, which is the preservation/exchange voluntary program we think has more flexibility in terms 

of how it gets implemented. 

Mr. GREEN. Have you looked at the rural development program 

and the mandatory purchase rights contained therein? 

Ms. GALANTE. I have not. 

Mr. GREEN. Would you be amenable to our working with you— 

and I would, of course, work with the Chair as well, if the Chair 

permits—on language for 107? 

Ms. GALANTE. Certainly. 

Mr. GREEN. And of course, the Chair has proposed language, 

which means that I would obviously talk to the Chair before encroaching in this area. But it is something of concern because one 

of the best ways for tenants to maintain affordable housing is to 

have a stake in it beyond being a renter. 

And if they can have the opportunity to be a part of a purchase 

program, which I think can be replicated quite efficiently across 

the country, I think that it will bode well for tenants in the future. 

It would be a new paradigm, or a paradigm that would expand. I 

think it has been before, but if we could expand a paradigm. 

So thank you very much, and I yield back. 

Chairwoman WATERS. Thank you very much. 

Mr. Ellison, for 5 minutes. 

Mr. ELLISON. Thank you, Madam Chairwoman, and thank you 

for holding this very important hearing. I just want to point out a 

quick fact before I get to my question. My home district of Minneapolis is poised to lose over 5,000 apartments with Federal 

project-based contracts by 2019. And the loss of these assisted 

housing units could not come at a more difficult time for the residents of Minneapolis. Nearly 60 percent of the foreclosed homes in 

our City were occupied by tenants. This means that the housing insecure face even fewer options. And so I would just put that out 

there for you. And maybe I will just ask you a general question. 

How serious is this problem around the rest of the country? 

Ms. GALANTE. I certainly can say that I think Minneapolis is not 

the only location. I think it is a universal problem across the country, wherever there are these types of rental assistance programs. 

Hot markets are more vulnerable than weaker market locations in 

terms of market rate rents. But, it is a serious problem. 

16 

Mr. ELLISON. Ms. Trevino, let me ask you this question. In your 

testimony, you noted that of the 10,000 rural development vouchers 

that are offered to tenants, only about a third of them actually use 

them. 

Why do you think so few tenants use the voucher program, and 

would it—could we redistribute them without doing any damage to 

our rural tenant program? Because that is something I would never 

want to do. In Minnesota, we have a very nice balance between 

rural, suburban, and urban. 

But if they are not using them, couldn’t they be redirected? 

Ms. TREVINO. I think that the way you have proposed them in 

the bill with the three different vouchers, I don’t think we are 

going to have a problem using them up in that scenario. Right now, 

we run one voucher program, and this bill proposes three. So I 

don’t think that will be an issue if this bill goes forward. 

Mr. ELLISON. Okay. Well, thank you for your questions. I yield 

back. 

Chairwoman WATERS. Thank you very much. The Chair notes 

that some members may have additional questions for this panel, 

which they may wish to submit in writing. Without objection, the 

hearing record will remain open for 30 days for members to submit 

written questions to these witnesses and to place their responses 

in the record. This panel is now dismissed, and I would like to welcome our second panel. Thank you very much. 

Good morning. I am pleased to welcome our distinguished second 

panel. 

Our first witness will be Mr. George Caruso, executive vice president, Edgewood Management Corporation, on behalf of the National Affordable Housing Management Association. 

Our second witness will be Mr. Toby Halliday, vice president for 

public policy, National Housing Trust, on behalf of the National 

Preservation Working Group. 

Our third witness will be Mr. Ricky Leung, treasurer, National 

Alliance of HUD Tenants, and president of the Cherry Street Tenants Association. 

Our fourth witness will be Ms. Michelle Norris, senior vice president, acquisitions and development, National Church Residences, 

on behalf of the American Association of Homes and Services for 

the Aging. 

Our fifth witness will be Mr. Raymond K. James, partner, Coan 

& Lyons, on behalf of the National Leased Housing Association. 

And our final witness will be Mr. William Shumaker, president 

of the board, the Council for Affordable and Rural Housing, and 

vice president of the Provident Companies. 

Without objection, your written statements will be made a part 

of the record. You will now be recognized for a 5-minute summary 

of your testimony. And we will start with our first witness, Mr. 

George Caruso. 

17 

STATEMENT OF GEORGE CARUSO, EXECUTIVE VICE PRESIDENT, EDGEWOOD MANAGEMENT CORPORATION, ON BEHALF OF THE NATIONAL AFFORDABLE HOUSING MANAGEMENT ASSOCIATION (NAHMA) 

Mr. CARUSO. Good morning, Chairwoman Waters and Ranking 

Member Capito. I am George Caruso, executive vice president of 

Edgewood Management Corporation in Germantown, Maryland. 

We are the ninth largest manager of assisted housing in the Nation. I am appearing today for the National Affordable Housing 

Management Association. Thank you for allowing my statement to 

be introduced into the record. 

We are pleased with much of H.R. 4868, the Housing Preservation and Tenant Protection Act of 2010. NAHMA has been a strong 

supporter of preservation for some 20 years now. NAHMA has had 

an opportunity to review the bill in detail at our winter meetings 

last week. 

Although our general membership opposes the bill in its current 

form, our opposition is limited to provisions in seven sections: Sections 107; 108; 109; 110; 302; 303; and 304. We applaud the remaining 60 sections of the bill. 

Indeed, we appreciate that numerous provisions address issues 

that we have been discussing with the committee members on both 

sides of the aisle for a number of years. These issues include the 

long-term physical and financial viability of properties, the continued affordability of properties with mature mortgages, and finally, 

protecting tenants from severe rent burdens when affordability restrictions expire. 

Allow me to get to the major issues we have. First, Section 107, 

the Federal first right of refusal: This provision will, in our view, 

serve to drive potential purchasers and equity providers away. 

There are a variety of problems with this provision which include, 

but are not limited to: undermining owner and investor confidence 

in their agreements with the Federal Government; and potentially 

alienating willing purchasers, who must wait through a lengthy 

process, thereby affecting market value. We believe a better and 

more workable approach is suggested in Section 106, the preservation exchange program, which NAHMA supports. 

Second, Section 304, the resident access to building information: 

The provisions of this section are overly broad, and they will force 

the release of proprietary information. It is useful to observe that 

the bulk of the information required to be released here is submitted to HUD through the most secure computer system that 

HUD has, and it is accessible only on a limited basis inside HUD, 

since they judge the data to be very sensitive. The less sensitive 

building information referenced in this section is already publicly 

available from HUD. 

Third, the Section 110 authority for HUD to assign flex subsidy 

loans: We view this provision, among others, as tilting the playing 

field in preservation to nonprofit organizations. NAHMA represents 

both for-profit and nonprofit owners. Part of our policy is that there 

be no bias between the two types of ownership. Both bring substantial advantages to the table. Both are required to make preservation work. Preservation tools, we believe, should be equally available. 

18 

Our concerns on the remaining sections we object to are detailed 

in our written testimony. Let me move now to a more positive note. 

We are particularly pleased to see the provisions in: Section 406 

addressing correcting harm caused by late subsidy payments; Section 501, the extension of the mark-to-market program; and Section 

508, budget-based rent adjustments. 

Section 406 penalizes HUD for making excessively late subsidy 

payments to owners, and will assure that the properties are properly funded going forward. The language in Section 508 will allow 

for a re-underwriting of a group of mark-to-market properties that 

were incorrectly underwritten initially, and will retain them as viable assisted housing going forward. These sections will work to assure that more housing is preserved. 

There are many other sections of the bill that we find very encouraging. They, too, are detailed in our written materials. 

Madam Chairwoman and Ranking Member Capito, thank you 

very much for allowing us to share our views and concerns with the 

subcommittee. NAHMA remains committed to the essential task of 

preserving the assisted and affordable housing portfolio. We remain 

available to members and staff to answer questions and make suggestions to get to a successful conclusion of this legislation. 

Thank you very much. 

[The prepared statement of Mr. Caruso can be found on page 36 

of the appendix.] 

Chairwoman WATERS. Thank you. 

Our second witness will be Mr. Toby Halliday. 

STATEMENT OF TOBY HALLIDAY, VICE PRESIDENT FOR PUBLIC POLICY, NATIONAL HOUSING TRUST, ON BEHALF OF 

THE NATIONAL PRESERVATION WORKING GROUP 

Mr. HALLIDAY. Thank you, Subcommittee Chairwoman Waters, 

Ranking Member Capito, and members of the subcommittee. My 

name is Toby Halliday, and I am vice president for Federal policy 

for the National Housing Trust. It is my pleasure to testify today 

in support of H.R. 4868, the Housing Preservation and Tenant Protection Act of 2010. Today, I am also testifying on behalf of the National Preservation Working Group, which is a coalition of 36 nonprofit organizations supporting affordable rental housing. 

H.R. 4868 safeguards affordable apartments that are home to 

more than one million extremely low-income families, elderly, and 

disabled persons. As foreclosures on homes and apartment buildings continue to unfold, a growing number of renters are competing 

for a limited supply of affordable rental housing. Many of these 

families will be seeking apartments at the lower end of the scale, 

where there is already a shortage of affordable housing for the 

poorest households. 

Although market conditions have resulted in lower housing costs 

for many middle-income households, increased demand for the 

most affordable housing is actually leading to higher rents and 

tighter credit screening in some markets. 

Shortages of decent, safe, affordable housing are complicated further by ongoing problems in the low-income housing tax credit 

market. Uncertainty among traditional tax credit investors about 

future profitability, together with a preference for the simplest and 

19 

shortest investment options available to other investors, has left 

the tax credit market crippled in all but a few markets, dramatically reducing the creation of new affordable units from its peak in 

2007. 

This legislation includes important new tools to protect residents 

and preserve affordability when assisted housing is refinanced, recapitalized, or when the underlying HUD financing or RD financing 

matures. This legislation includes provisions that would, at the 

owner’s discretion, provide rental assistance for affected apartments both for HUD-assisted and rural development 515 properties. Improving preservation tools makes the rehabilitation of 

these properties easier to finance, leading to the creation of needed 

construction jobs. 

The legislation we see today also benefits from extensive discussion and revision to accommodate competing interests. For example, last summer, several private industry groups raised strong objections to four draft provisions. In the bill as it currently stands, 

all four of these provisions have been revised or removed entirely, 

despite the objections of many housing advocates. 

The right of first refusal in Section 107 allows preservation-oriented buyers to match the offer of any other bona fide purchaser 

of HUD-assisted property. This ensures any seller a full and fair 

sales price, and is modeled on similar provisions already in force 

in many jurisdictions. It is a fair, low-cost way to protect the substantial taxpayer investment that has already been made in existing affordable rental housing. 

H.R. 4868 also retains an important local control provision in 

Section 108 that ensures that State and local preservation and tenant protection laws are not preempted by Federal law. 

Section 303 includes a revised provision that allows legal action 

for building violations only when HUD has failed to act on a documented deficiency. This protects responsible owners while ensuring 

that residents have some recourse against unscrupulous landlords. 

Section 302 permits residents to escrow their rents only when 

the Secretary of HUD determines serious violations of housing 

quality standards or housing program requirements. 

We are interested to learn more about a new proposal to create 

a voluntary program to encourage the transfer of assisted rental 

properties to preservation owners in Section 106. We believe this 

could be a useful new preservation tool so long as appropriate 

checks are in place to prevent the deterioration of property during 

negotiation, and to make sure that buyers have both the desire and 

the capacity to support long-term affordability. 

Titles 7 and 8 include important provisions needed to facilitate 

repair and preservation of thousands of Section 515 affordable 

rural housing units and Section 202 elderly housing units. 

We thank Chairman Frank and the 13 co-sponsors for the introduction of this legislation, and urge committee action on this muchneeded legislation. Thank you very much. 

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

50 of the appendix.] 

Chairwoman WATERS. Thank you. 

Next, we will hear from Mr. Ricky Leung. 

20 

STATEMENT OF RICKY LEUNG, VICE PRESIDENT/EAST, NATIONAL ALLIANCE OF HUD TENANTS (NAHT), AND PRESIDENT, THE CHERRY STREET TENANTS ASSOCIATION 

Mr. LEUNG. Good morning, Chairwoman Waters. 

Since the Title 6 preservation program ended in 1996, our Nation 

has lost at least 360,000 units of affordable low-income housing. 

Chairman Frank has filed a very exciting and extremely comprehensive bill that will sustain our homes for decades to come. 

We also thank my own representative, Congresswoman Velazquez, for filing H.R. 44, now Title 4 in the bill, to address the related loss of 120,000 units of HUD’s troubled housing stock, and for 

her leadership in addressing the new crisis of predatory equity. 

The bill includes virtually all the priority items sought by the 

National Alliance of HUD Tenants for many years, most of which 

are consensus items. NAHT supports voluntary incentives in the 

bill to encourage owners to save our homes, including the new preservation exchange program. Our written testimony suggests ways 

to strengthen the exchange to better protect tenants. 

The bill also substitutes a new first right of refusal section for 

the broader right of first purchase that I testified on last summer. 

We urge the committee to restore the broader right of first purchase in committee markup, and we want to thank Representative 

Gutierrez and the 11 other committee members for their strong letter in support on this issue. 

The first right of refusal in Section 107 would allow HUD to step 

in only where owners are selling to someone who proposes to end 

HUD use agreements. But owners in high-market areas are not 

selling; they are simply converting to market rents, while retaining 

ownership of the buildings. 

Massachusetts recently passed a proposal on which Section 107 

is based. There is not a single current instance of a building in that 

State that would be saved by the first right of refusal. Instead, 

owners have filed opt-out notices to either convert to market or leverage higher government subsidies to stay in the program. 

By contrast, the broader first right of purchase in last summer’s 

bill would allow HUD to buy out owners at fair market value in 

any case where owners attempt to convert to market rent, whether 

or not they are selling. Only this would provide the regulatory tools 

to ensure that voluntary programs work to save our homes. 

My own building is an example. The 480 families at Cherry 

Street are diverse working and middle-class, a microcosm of the 

City and the Nation. In 2008, our building was bought by a predatory owner, and our Section 8 contract was renewed for 5 more 

years. In 2 years, the new owner will decide what to do. Only passage of a first right of purchase will give our tenants association 

peace of mind and at least a fighting chance to save our homes. 

The need for the measure is urgent, especially in New York City. 

A first right of purchase would help save 20,000 more apartments 

like Cherry Street that are at immediate risk. Nationally, as many 

as 200,000 units are at risk to be saved. 

There is ample precedent for the broader first right of purchase. 

Besides Title 6, Congress has provided a Federal right of purchase 

for rural housing for 20 years, and several States have adopted 

similar laws. As Representative Gutierrez pointed out, owners have 

21 

learned to live with the Illinois law and have not challenged it in 

the courts. We appreciate the inclusion of Section 108 in the bill, 

which would allow States to do more to regulate the stock if they 

choose. 

Last summer, Secretary Donovan raised constitutional questions 

about these regulatory proposals. In response, Chairwoman Waters 

obtained a memo from the Congressional Research Service. The 

CRS memo did not conclude there are constitutional barriers to either right to purchase or right of first refusal as long as owners are 

awarded full market compensation and there is no delay in implementation. In fact, the owner representative who testified in 2008 

supported the right to purchase if it could meet that test. 

NAHT also strongly supports the tenant empowerment provisions in the bill. These no-cost measures would allow tenants to 

join HUD as partners to improve our homes. Some owners have objected that giving tenants access to information or third party status to enforce HUD contracts would unduly burden businesses and 

violate their rights. But in my State, tenants have long been able 

to access budget and repair information without any discernible 

controversy or harm to owners. 

I am testifying today on behalf of residents living in multifamily 

housing who just want to live in a safe and healthy home. Two of 

our board members here, Judy and Lonene, right there, please take 

a snapshot of us. You will see there is a diverse ethnicity, age, and 

profession and culture background of residents living in subsidized 

affordable housing across the Nation. 

Let’s be real. Only owners and agents who have something to 

hide or slumlords will mostly be objecting to these provisions. So 

as— 

Chairwoman WATERS. I’m sorry. We are going to have to move 

on. 

Mr. LEUNG. Thank you very much. 

[The prepared statement of Mr. Leung can be found on page 65 

of the appendix.] 

Chairwoman WATERS. Ms. Norris? 

STATEMENT OF MICHELLE NORRIS, SENIOR VICE PRESIDENT, 

ACQUISITIONS AND DEVELOPMENT, NATIONAL CHURCH 

RESIDENCES (NCR), ON BEHALF OF THE AMERICAN ASSOCIATION OF HOMES AND SERVICES FOR THE AGING (AAHSA) 

Ms. NORRIS. Good morning, Chairwoman Waters, Ranking Member Capito, and members of the subcommittee. My name is 

Michelle Norris. I currently serve as senior vice president of acquisitions and development at National Church Residences. 

I thank you for the opportunity to speak on behalf of AAHSA, a 

national association that represents not-for-profit providers who 

offer a continuum of care of services—adult day services, home 

health, community services, senior housing, assisted living, continuing care communities, and nursing homes. AAHSA has State 

associations in each of your States as well. 

NCR has been an active member of AAHSA for the last 30 years. 

Our CEO, Tom Slemmer, served as chairman of AAHSA for the 

last 2 years. At NCR, I also have had the opportunity to be the 

past president of NAHMA, another really great organization. 

22 

NCR has the privilege of having a very significant affordable senior housing portfolio that has been financed with a wide variety of 

programs and funding sources, including the HUD 202 loan program, the HUD 202 PRAC program, the low-income housing tax 

credit program, and others. 

In addition, we have a large health care group in Ohio, so we 

have a really unique perspective on the costs and benefits of the 

various levels of housing and health care when you combine the 

two. 

For most of our 50-year history, our development of affordable 

housing focused on new construction. About 8 years ago, our leadership team realized the thing that we now are all aware of: Our 

Nation is losing affordable housing faster than we can build it. 

Since 2002, NCR has been proud to say that we have been an 

active participant in preserving over 5,000 units of affordable housing with various locations in this country, including: Manhattan, 

Kansas; Detroit, Michigan; St. Louis, Missouri; Mount Sterling, 

Ohio; and Montgomery, West Virginia. 

Therefore, because of our experiences, I want to commend your 

leadership for the efforts of this bill. H.R. 4868 is sorely needed if 

affordable senior housing is to survive in the future. I have seen 

firsthand numerous examples of existing senior housing units that 

were converted to market rate, or that became obsolete either financially or physically to the point of no return. 

Though time does not permit me to elaborate on many of the 

most significant and positive features of this bill, please let me 

highlight a few. 

Title 7 includes in its entirety Section 202, Supportive Housing 

for the Elderly Reform bill. This section is dedicated to the many 

issues that will improve the existing 202 new construction program 

and will greatly facilitate the efforts to preserve and rehab the existing 202 stock. 

Section 101 converts rent sup and RAP contracts into Section 8 

rental assistance. This is a great example of a technical fix that 

can have an enormous impact on many of the most frail seniors living in older HUD buildings. 

Section 104 allows project-based preservation assistance in lieu 

of enhanced vouchers. I know this sounds like a technical fix, but 

it can have a significant impact on leveraging other funds necessary to do substantial rehab and to preserve communities. 

Section 110 allows HUD to assign existing flex subsidy loans as 

part of a preservation transaction. In North Carolina, our own organization essentially had to use HOME monies to pay off a flex 

sub loan instead of diverting the HOME monies to substantial 

rehab. 

Finally, a very important modification under Section 731 encourages organizations like NCR to create very needed affordable assisted living facilities. In 2009, NCR officially opened our very first 

community using a HUD assisted living conversion grant. This was 

the first in the State of Ohio, and we were proud to be the first 

owner. 

This section of the legislation will decrease the cost of such facilities by eliminating a mandatory licensure requirement. These are 

23 

just some of the great examples of the technical fixes and policy 

initiatives this bill provides. 

My written testimony describes in more detail these and other 

powerful and important provisions. In spite of the many positive 

provisions, there are several sections that do concern us. However, 

we have conferred with our industry colleagues, and I will defer to 

them to highlight some of those concerns. 

So in conclusion, on behalf of AAHSA and NCR, I commend you 

for the hard work done on this bill. As the legislation moves forward, AAHSA and NCR stand ready to provide resources to assist 

in the necessary fine-tuning. 

I thank you for the opportunity to testify on behalf of AAHSA. 

[The prepared statement of Ms. Norris can be found on page 81 

of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Mr. James, for 5 minutes. 

STATEMENT OF RAYMOND K. JAMES, PARTNER, COAN AND 

LYONS, ON BEHALF OF THE NATIONAL LEASED HOUSING ASSOCIATION (NLHA) 

Mr. JAMES. Thank you, Madam Chairwoman, Ranking Member 

Capito, and members of the subcommittee. I am Raymond K. 

James of the law firm of Coan & Lyons in Washington, D.C., and 

I am testifying on behalf of the National Leased Housing Association, which for the past 38 years has represented developers, lenders, housing managers, State and local agencies, and others interested in assisted housing, with a focus on Section 8 and the lowincome housing tax credit. NLHA’s members have provided or administered housing assistance for over 3 million families. 

This legislation has many faces. I would like to talk about three 

of them: first, the statutory gaps it fills; second, the statutory mistakes it corrects; and third, the new statutory provisions that we 

believe will be mistakes for the future. 

First, the gaps it fills. There are a number of situations where 

project subsidies terminate and the tenants are not afforded protection in the form of enhanced vouchers. This legislation would correct that. 

These are the programs that people often talk about when they 

say there are 100,000 or so units at risk in the near future. These 

are units that are part of programs with older subsidy forms that 

terminate at certain points and cannot be extended, even if the 

owner wants to extend those subsidies. There is nothing that can 

be done about it under current law. 

Now, this bill does contain something that could be useful by allowing owners to convert these older subsidies that cannot be extended in their current form, to convert those to Section 8. And as 

we know, Section 8 can be extended indefinitely as long as there 

are appropriations. 

Statutory mistakes of the past that are being corrected: The Section 8 moderate rehabilitation program has been subject to statutory provisions over the last 13 years that have been a preservation 

disaster. The inventory of mod rehab units has been reduced from 

about 100,000 units to approximately 25,000 units, a reduction of 

75 percent. 

24 

This bill attempts to correct that 13-year statutory mistake. And 

it is not the fault of this committee; this committee has tried to correct it in the past, but other parts of the Congress have prevented 

that. 

Third, there are some proposed statutory mistakes. I will mention two. 

Section 108, which is a wide-open preemption provision that 

turns the supremacy clause of the U.S. constitution on its head. It 

would permit State laws, local laws, to basically overturn Federal 

law in a number of situations. There is no need—if there is a problem with a particular Federal law that is thwarting a specific State 

law, the thing to do is to address that specific Federal law and not 

thousands of Federal laws, which this provision does. It is totally 

chaotic and would destabilize the program. 

Finally, Section 107. This program 10 years ago, 11 years ago, 

had no stability and predictability. Renewal authorities were on a 

year-to-year basis and the terms were not generous. Owners could 

not mark the rents up to market, so the opt-out rate in the early 

years was quite high. 

Chairman Frank and others, particularly Chairman Frank, 

worked with OMB and the Department to get them to accept a 

markup to market. On a bipartisan basis, a renewal law was enacted 10 years ago, and that has formed the basis for giving owners 

predictability, and giving lenders and investors predictability and 

stability. 

We are worried about any provision that would upset that longterm stability, and we think the right of first refusal is something 

that owners feel restricts their choice of a buyer and the time to 

sell that will be disadvantageous to them. 

Now, there is more to selling a project than just the terms, the 

sales terms—how much the sale price is, when the consummation 

should take place. Owners want to pick their buyers. Sometimes it 

is difficult to get financing in small towns and rural areas, and a 

larger nonprofit organization that is on the approved list may not 

be able to get the financing. 

So it is very important that buyers feel they have those property 

rights preserved to select the owners and the time of their transactions. Thank you. 

[The prepared statement of Mr. James can be found on page 58 

of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Mr. Shumaker? 

STATEMENT OF WILLIAM C. SHUMAKER, PRESIDENT OF THE 

BOARD, THE COUNCIL FOR AFFORDABLE AND RURAL HOUSING (CARH), AND VICE PRESIDENT OF THE PROVIDENT 

COMPANIES 

Mr. SHUMAKER. Madam Chairwoman, Ranking Member Capito, 

and members of the subcommittee, I am Bill Shumaker. I am the 

president of the Council for Affordable and Rural Housing, located 

here in the D.C. area. I am also vice president of the Provident 

Companies, located in Ohio. We own, manage, construct, develop, 

and do everything we can to promote and develop affordable housing. 

25 

CARH members house hundreds of thousands of low-income, elderly, and disabled residents in rural America. CARH has sought 

to promote the development and preservation of affordable rural 

housing through its 30-year history as the association of for-profit, 

nonprofit, and public agencies that build, own, manage, and invest 

in rural affordable housing. 

We looked at the bill. Most of our comments refer to Title 8, 

which is the section on rural housing. One of the most important 

things in our written testimony says neither the public nor the private sector can produce affordable rural housing independently of 

the other. It has been and should be a partnership. 

The 514 and 515 portfolio consists of 15,977 apartment complexes containing over 452,000 units. Our portfolio is aging, and we 

need help. Maintaining the existing housing stock is more cost-effective and less expensive than allowing the stock to deteriorate 

and to be replaced with new housing. 

Most important, these housing units constitute a vital social resource by providing a decent home in which elderly and families 

can live with dignity. More importantly, also, the recession has created turmoil among residents and applicants. 

CARH members report a material change where residents are 

moving to find work or moving into Section 515 properties as a last 

resort after losing jobs. We are greatly concerned that some current 

and former residents are at a tipping point towards homelessness. 

We have several issues which we would like to bring forth to the 

committee. And we recently updated our aging portfolio bill, and I 

am going to review some of those quickly. First, we believe that the existing portfolio needs $5 billion, or $1 billion a year for 5 years, to invest in this housing stock to rehabilitate it. USDA’s funding commitment does not adequately reflect 

the MPR is RD’s priority. Indeed, USDA should take advantage of 

credit reform rules, and has not done so. 

Most of the 515 mortgages that can be restructured under MPR 

were originated before credit reform. As such, RD should not need 

new budget authority to restructure most loans, but USDA has not 

allowed RD to proceed under existing budget rules. 

The Section 521 rural assistance program is an essential component of the Section 515 program. RD provides deep subsidies to 

very low-income residents by paying the difference between 30 percent of the residents’ income and base rent required to operate the 

property. 

Our members would like to see first in line for RA and override 

the administrator’s requirement giving preference to the most rent 

overburden; otherwise, eligible, needy residents who have waited 

for a longer period. Most importantly, there needs to be additional 

RA to remove rent overburden. 

One quick fix to RA to make RA more effective is to provide 20- 

year contracts subject to annual appropriations. The Section 538 

program was enacted in 1996, and most recently Congress eliminated the interest subsidy for that program. This needs to be reinstated. I checked with Ohio. Two years ago, they were processing 

15 to 20 applications for 538. This year, they are processing two. 

A long-neglected tool in Section 515 is the 515(t), where Rural 

Development is authorized to guarantee equity loans to provide a 

26 

fair return and further preservation resources for properties that 

are 20 years or older. This program should be funded and implemented. It will provide owners a further incentive to remain in the 

515 program and provide further resources to capitalize the property. 

A modest change in the tax rules must be adopted to preserve 

the stock of Section 515 affordable housing. This could be accomplished by waiving the depreciation recapture tax liability, where 

investors sell their properties to new owners who agree to invest 

new capital in the property and to preserve the property as affordable housing for another 30 years. 

We need to extend the current LIHTC carryback period from 1 

year to 5 years, and tax credits should be available to S corporations, limited liability companies, and closely held C corps, to the 

same degree that tax credits are currently available to widely held 

C corps. 

We ask you to please review our written testimony, and we 

thank you very much. 

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

101 of the appendix.] 

Chairwoman WATERS. Thank you very much for your testimony, 

all of you. It was tremendously informative. And I would like to 

recognize myself for 5 minutes. I have a few questions. 

My first question is directed to Mr. Caruso. Mr. Caruso, it appears that you oppose all of the sections of the bill that were requested by tenant groups. However, I have been informed that all 

of the sections that owner groups requested were included in the 

bill. 

Can you explain to me how this bill can protect the tenants who 

live in these properties since you oppose the provisions that they 

believe will do the best job of protecting them? 

Mr. CARUSO. Madam Chairwoman, I will try. Let me start with 

Section 107, and then I will move to the other sections. 

There are minor problems in the 300 series sections that we 

think need to be addressed. Section 107—and there has been a lot 

of back and forth this morning on, you know, the right of first purchase or an option to purchase a building. In my own firm, we have 

actually done three tenant acquisitions of buildings, so I have some 

considerable experience in this area. 

I think the biggest issue you have with these sections is how 

they will be viewed by the banking and investment community. At 

the end of the day, if you are going to do any transaction, you have 

to go borrow a lot of money to do it with. And there has to be confidence on the part of the lenders and the other equity providers, 

and particularly the tax credit equity providers, that the transaction can move forward on a timely basis, it is properly financed, 

and it can go. 

The language that exists today with the timeframes in it is very 

long indeed. We just in my firm did an acquisition last fall; from 

the point at which we started looking at the documents to the point 

at which we closed the transaction was about 80 days. 

If the timeframes could be tightened up and other issues could 

be addressed, we might be able to look more favorably upon those 

provisions. But one of the biggest problems is in fact the timeframe 

27 

and the fact that you have—in almost all of these transactions to 

preserve housing, we are going to need to bring tax credits in, and 

that is very time-demanding. 

So that is my answer, in part. 

Chairwoman WATERS. Thank you. 

Mr. Leung, I am aware that you prefer to see a right of first purchase instead of the right of first refusal that is currently in the 

bill. However, if the right of first refusal stays in this bill, in what 

ways can it be improved so that it actually results in the preservation of affordable housing units? 

Mr. LEUNG. I am sorry. 

Chairwoman WATERS. That is okay. It is all right to say, ‘‘I just 

like first purchase. I prefer the right of first purchase. I don’t entertain the other at all.’’ It is okay. 

Mr. LEUNG. I do. I am just a regular kind of guy, who got the 

chance to represent the voices of tenants all across the Nation. And 

frankly, this is quite over my head. I have to thank everyone all 

across the Nation and the local organizations who help us, working 

on this issue. 

Chairwoman WATERS. Well, you have done a great job representing this morning. And I think it is Cherry Street, you said, 

should be very proud of you. So thank you for coming here today. 

I think I have one more question for Mr. James. It is my understanding that language was added to the bill at the suggestion of 

some to provide safeguards to prevent the release of personal and 

proprietary information. 

Based on your testimony, it appears that there are still concerns 

that this language would lead to such information being disclosed, 

and we would thus welcome the submission of specific language to 

address these concerns. 

How can this section of the bill be improved to address your concerns? 

Mr. JAMES. Well, I think there are certain types of information 

that have traditionally been considered confidential, such as the financial reports of housing projects. And I think that is still required to be disclosed publicly in this bill. 

There are a lot of items that are already being disclosed, and we 

have no problem with that. But the very personal items, financial 

items, HUD has traditionally not disclosed those. And we would 

continue to object to a requirement that they be disclosed. 

Chairwoman WATERS. And you will be specific about what you 

have concerns about? 

Mr. JAMES. Yes. Yes, Madam Chairwoman. We are particularly 

concerned about financial and personal information. 

Chairwoman WATERS. Thank you very much. 

Ms. Capito? 

Mrs. CAPITO. Thank you, Madam Chairwoman. 

I would like to kind of get a little slice of life here from maybe 

Mr. Caruso and Mr. Shumaker because you both manage properties and have properties. 

How many units do you have currently, approximately, in your 

portfolio, Mr. Caruso? Is that higher and lower? What is the state 

of disrepair of some of these? Do you move in and out of these properties every year? 

28 

Mr. CARUSO. Thank you, Ms. Capito. We manage roughly 26,000 

units in about 15 States. The bulk— 

Mrs. CAPITO. Do you own those units? 

Mr. CARUSO. No, ma’am. We— 

Mrs. CAPITO. So you manage for the property owner? 

Mr. CARUSO. We manage for the property owners. Edgewood 

Management does not own any units. I personally have a limited 

partnership interest in certain of our properties, but we do not— 

Edgewood Management does not actually own any of the units that 

we manage. 

Mrs. CAPITO. Do you own units, Mr. Shumaker, your company? 

Mr. SHUMAKER. Yes. Our company has 78 apartment complexes— 

Mrs. CAPITO. Seventy-eight? 

Mr. SHUMAKER. Seventy-eight apartment complexes, 2,997 units. 

We are the general partner in every one of those. 

Mrs. CAPITO. Okay. So if I had asked you that question 5 years 

ago, or last year, how many apartments would you actually have 

had in your portfolio at that point? 

Mr. SHUMAKER. We would have had the same number. 

Mrs. CAPITO. The same number. So, what are your long-term 

plans here? Do you plan to move more into this market or—I’m trying to get a feel for as people are leaving, we heard on the last 

panel, you know, they are losing thousands of available units. Are 

people moving into this market at the same time, or is it just a net 

loss every year? 

Mr. SHUMAKER. I think there are some people moving into the 

market. There are people out there who are interested in acquiring 

existing affordable housing and rehabbing it using the various resources available. 

Our company built its first apartment complex in 1974. We just 

rehabbed it last year. So our company goal is to rehab our existing 

housing stock with what resources we have available. The problem 

is there are not enough resources available. There are not enough 

tax credits. There are not enough HOME funds. There are not 

enough of these resources for us to rehab all the existing apartment complexes we have. 

Mrs. CAPITO. Would you include in that the low-income housing 

tax credit program that people are not accessing at the point? 

Mr. SHUMAKER. Yes. I think in Ohio, it is a 3 or 4 to 1 ratio; for 

every three to four applications they receive, they fund one. In 

Ohio, they do have a provision for Rural Development-funded 

projects that receive some—that can receive funding, from priority 

for tax credits. However, Ohio has over 400 515 projects. If they 

rehab 3 or 4 a year, it is going to take 100 years. 

Mrs. CAPITO. Right. Also, you mentioned, I think, in your testimony a 5-year plan of, I think it was $5 billion, $1 billion a year. 

Was that your testimony? 

Mr. SHUMAKER. Yes. 

Mrs. CAPITO. I guess in the bill, there is a—it requires a 30-year 

capital needs assessment for eligible properties. I guess this is getting to the point that we are talking about. 

29 

What is the real estate industry standard in terms of the capital 

needs assessment? Is 30 years way out there, or is it—you are talking 5 years. 

Mr. SHUMAKER. Yes. Thirty years is quite extensive. We propose 

in our written testimony a 20-year capital needs assessment. When 

we go in and do a capital needs assessment with a 515 project, 

Rural Development is looking at that capital needs and assuring 

that we have all the funds available for the next 20 years. 

When you extend that out 30 years, the need to place all those 

funds in a reserve account is tremendous. And the rents would skyrocket if we had to go to a 30-year. 

Mrs. CAPITO. Ms. Norris, did you have something you wanted to 

say in terms of the numbers of units that you are experiencing? 

Are they replacing? Are they— 

Ms. NORRIS. Sure. Well, to answer the question you asked the 

other gentleman— 

Mrs. CAPITO. Yes. 

Ms. NORRIS. —we also have our own portfolio. We have about 

23,000 units in 28 States. So we do have a very interesting perspective, as well as the other gentleman, about what your ownership interests are. All of our stuff is affordable. Most of our stuff 

is senior, though we do have family and also homeless housing. 

The question of whether—we are looking long-term. Our priority 

as an organization is to do affordable housing in the manner of 

which it is available, so whether that be to use a tax credit, lowincome housing tax credit to build a new facility, or to try to use 

a tax credit to rehab an existing 202, or to build a new one. 

So we try to do all those. I think you have to work on all those 

fronts because we clearly know that there is more need than there 

is stock. In the 202 program alone, there are probably 9 or 10 people for every unit that is out there. 

Mrs. CAPITO. Okay. Mr. James, could you weigh in on that question in terms of whether the amounts in your organization are 

moving up? Down? Are people getting into this market as we are 

losing housing? I understand the rehabbing needs are tremendous. 

I just didn’t know if you had a comment to add here. 

Mr. JAMES. Yes. Of course, I am a lawyer, so I don’t know much 

about what is happening to specific projects. But the provisions 

that are in place in the law now, with a little tweaking once in a 

while, encourage continuation in the programs and recapitalization 

and preservation transactions. 

And the problems we have had in the last 8 years have generally 

been administrative problems with HUD, which is adopted policies 

that made it more difficult— 

Mrs. CAPITO. Right. 

Mr. JAMES. —to preserve the housing. And now those policies are 

being reviewed at HUD and being modified to help the preservation. 

So we have an excellent system in place. The number of opt-outs 

has gone way down. There are always going to be some. 

Mrs. CAPITO. Right. 

Mr. JAMES. But they have gone way down, and everybody is familiar with the current system. And we certainly wouldn’t want to 

see that upset. 

30 

Mrs. CAPITO. I just would like to make one comment concerning—I alluded to this in my opening statement. And I think we 

have seen really conflicting opinions on the Section 107 on the 

right of first refusal. And I think we really need to tread lightly 

here. 

The one question that I had originally was if HUD gets into the 

business of purchasing these complexes or these—where is this 

money going to come from and how is it going to be accounted for? 

It is just a whole different view. So I am very interested to see how 

we can work out some of the differences we have heard today. 

Chairwoman WATERS. Thank you. 

Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Mr. Halliday, I just have one question. Maybe there are two inside the one. But HUD apparently, based on your testimony, terminates troubled housing or troubled property owners rather than 

suspend. 

And the two questions are, first, is there a policy that would require termination at a point when a property is determined to be 

troubled? Or is that a decision left to the PHAs as a result of their 

contract with HUD in the cities? 

And the other is your opinion about whether or not we could possibly be losing people who could be actually very good property 

owners for us in the Section 8 program when we just cut them off. 

I mean, a dog generally growls before it bites. So maybe we ought 

to have a growing policy to property owners before we completely 

terminate them. 

Mr. HALLIDAY. Thank you, Congressman. National Housing 

Trust and our affiliate, National Housing Trust Enterprise Development Corporation, actually owns and manages our own portfolio 

of affordable rental housing. And we have quite a bit of experience 

with the situations you are describing. 

The question of termination versus suspension, from HUD’s perspective, in my opinion, is driven by a couple of things. First of all, 

HUD has an obligation to the residents of any building that they 

need to protect them from health and safety violations that may 

put life and safety in danger. So HUD takes a pretty strong view 

that they need to get out of properties that they think are being 

managed so badly that the residents’ health and safety is at risk. 

And of course, we would agree with that. 

The question is: What do you do before you get to that point? 

And I think it is fair to say that through a period of years, the ability of HUD to identify and intervene early in situations where 

properties are not being properly maintained is not as robust as it 

could be or it should be. 

And I know that Deputy Assistant Secretary Galante and others 

at HUD are working on this. They are aware of this. But we and 

other organizations are very interested in working with them to 

come up with a better framework for identifying problem properties 

and intervening in them before they get to this point where you 

simply have to cut off the rental subsidy because of a threat to the 

residents who are there. 

That decision, to answer your other question, is actually made by 

HUD staff. These again—we are talking here about privately 

31 

owned, project-based Section 8 properties. so the contracts in those 

properties are overseen primarily by HUD staff in the field, and 

they are the ones that make those decisions. 

Some HUD field staff are much more interested in trying to prevent the sort of last-minute, falling-off-the-cliff sorts of situations. 

Others are less aggressive about trying to solve the problems before 

they blow up. But in our minds, we could do a lot more to prevent 

properties from being terminated and really becoming drags on the 

entire community by doing more in early intervention. 

Mr. CLEAVER. Thank you. That is exactly what I wanted you to 

say for the record. Thank you. 

I yield back the balance of my time. 

Chairwoman WATERS. Thank you very much. 

Mr. Green? 

Mr. GREEN. Thank you. And I want to associate myself with the 

comments of the Chair and Ranking Member Capito. Ms. Capito 

has indicated some concern about Section 107, and I share her concerns as well, and want to take us back for just a moment to 1965, 

or thereabouts, when we made this commitment try as best as we 

can to help people who were living literally on the streets and in 

places that we found unacceptable. 

Affordable housing was something that we decided was appropriate, both economically and morally—morally, I think, because 

we ought to do what we can to help people who are homeless, but 

we also found that we were spending an inordinate amount of 

money on housing helping people, and that it would be much better 

if we developed affordability programs. Hence, we have many of the 

programs we have today. 

And if we don’t take on this question that we are grappling with 

right now, we are going back to 1965, and we may get back there 

a lot faster than we like. So I think it is important that we do what 

we can to try to retain the affordable housing stock that we have. 

I find myself, Mr.—is it Caruso? 

Mr. CARUSO. Yes, sir. It is. 

Mr. GREEN. Mr. Caruso, I want you to know that I understand 

that owners have rights and needs. And I also understand that tenants have rights and needs. It appears that the Chair was—and I 

am talking about Chairman Frank—tried to find that balance in 

Section 107. And you have indicated that with some tweaking, you 

may be able to work with 107. 

Mr. CARUSO. Yes, sir. 

Mr. GREEN. But it appears that he tried to find that balance because there are some of us who think that a right to purchase 

would be a cleaner and easier way to do it because you have a specific amount of time, perhaps, to exercise your right to purchase. 

You don’t do it, then you can move on. And that is one way. And 

then, of course, we have the right of refusal. 

But my point that I would like to make with you is I am really 

sincerely—and I want to make this as clear as I can—I am sincerely interested in finding a solution that is acceptable to tenants, 

Mr.—is it Leung? Mr. Leung—and to the owners. There may be a 

solution. And if there is not, then we will all stand on our principles and move forward. 

32 

But my question to you is: Are you amenable to visiting with me? 

Five minutes in an open hearing is not nearly enough time to understand all of the concerns that the owners have, not nearly 

enough time to understand all of the concerns that the tenants 

have. You need more time to talk to people— 

Mr. CARUSO. Yes, sir. 

Mr. GREEN. —to understand the nuances of the problems because 

one of the things that was called to my attention by Mr. Leung is 

that they are converting these to market and not selling them. 

That brings in another dynamic to have to contend with, if we are 

not having the opportunity to purchase in the first place. 

So I think that it would be helpful if I could ask you to allow 

us to set appointments at different times and visit with you so that 

I can get a much deeper understanding of what we are trying to 

accomplish. Is this something you find acceptable, sir, Mr. Caruso? 

Mr. CARUSO. Absolutely. It happens I live in Fort Washington, so 

the commute is handy. And we at NAHMA and myself personally 

were more than committed to doing that. I think there is a middle 

ground to be found here. Chairman Frank is to be commended for 

the work he has done so far. 

Mr. GREEN. I absolutely agree with you. 

Mr. CARUSO. We have worked with him a lot on it. You know, 

as I sit with owners and we consider—we have in our firm now 

more than 15 properties whose mortgages expire in the next 4 

years. We sit every month and start looking at what we are going 

to do with those properties as they start coming out. 

Mr. GREEN. Well, we want you to work with us and see if we can 

find a way to keep them in the affordable housing stock. 

Mr. CARUSO. It is our commitment to do that, sir. 

Mr. GREEN. And Mr. Leung, would you be amenable to—if you 

can’t meet, perhaps distance may be a problem. Maybe we can talk 

on the phone and I can get a better understanding from you of 

some of the concerns that the tenants have. Having been both a 

tenant and an owner, I understand to some extent where we are. 

And finally, I want to make note of this. Mr. Gutierrez, who has 

done an outstanding job chairing the Financial Institutions Subcommittee, the letter that we sent dealt with the first right of purchase. He is, I believe, the author of the letter, but I concur with 

the language in it. 

He mentions that the Illinois Federally Assisted Housing Preservation Act includes a first right of purchase, and it seems to be 

functioning quite well. Mr. Caruso, are you familiar with that, this 

Act that— 

Mr. CARUSO. I am only dimly familiar with it. I don’t have a precise understanding of it. There is similar legislation in Massachusetts as well. 

Mr. GREEN. Okay. Well, what we will do is talk about it more 

when we meet. 

Thank you, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. I thank you all for 

being here today. 

The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

33 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

This panel is dismissed, and I will make certain submissions a 

part of the record before we adjourn. The written statements of the 

following organizations will be made part of the record of this hearing: the National Rural Housing Coalition; Stewards of Affordable 

Housing for the Future; the National Housing Law Project; and the 

Housing Assistance Council. 

Again, I would like to thank you for your testimony today. This 

panel is adjourned. 

[Whereupon, at 11:59 a.m., the hearing was adjourned.] 

(35) 

A P P E N D I X 

March 24, 2010 

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