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LEGISLATIVE OPTIONS FOR PRESERVING 

FEDERALLY- AND STATE-ASSISTED 

AFFORDABLE HOUSING AND PREVENTING 

DISPLACEMENT OF LOW-INCOME, 

ELDERLY, AND DISABLED TENANTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

HOUSING AND COMMUNITY OPPORTUNITY 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

July 15, 2009 

Printed for the use of the Committee on Financial Services 

Serial No. 111–59 

( 

(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: 

July 15, 2009 ..................................................................................................... 1 

Appendix: 

July 15, 2009 ..................................................................................................... 23 

WITNESSES 

WEDNESDAY, JULY 15, 2009 

Alitz, Katie, Vice President, The Council for Affordable and Rural Housing ..... 18 

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

on behalf of The National Preservation Working Group .................................. 10 

Isbitz, Allan, President, National Leased Housing Association (NLHA) ............ 13 

Leung, Ricky, Treasurer, National Alliance of HUD Tenants ............................. 15 

Mehreteab, Ghebre Selassie, Chief Executive Officer, The National Housing 

Partnership Foundation ...................................................................................... 12 

Metherell, Sarah, Vice President, Institute for Responsible Housing Preservation ........................................................................................................................ 21

Myer, Joe, Board Member, National Rural Housing Coalition ............................ 16 

O’Donnell, Vincent F., President, Citizens’ Housing and Planning Association 19 

Trevino, Tammye, Administrator, Rural Housing Service (RHS), U.S. Department of Agriculture (USDA) ................................................................................ 5 

APPENDIX 

Prepared statements: 

Alitz, Katie ........................................................................................................ 24 

Halliday, Toby ................................................................................................... 29 

Isbitz, Allan ....................................................................................................... 40 

Leung, Ricky ..................................................................................................... 45 

Mehreteab, Ghebre Selassie ............................................................................ 58 

Metherell, Sarah ............................................................................................... 63 

Myer, Joe ........................................................................................................... 69 

O’Donnell, Vincent F. ....................................................................................... 76 

Trevino, Tammye .............................................................................................. 85 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Waters, Hon. Maxine: 

Written statement of the American Association of Homes and Services 

for the Aging (AAHSA) ................................................................................. 93 

Written statement of the Housing Assistance Council (HAC) ...................... 99 

Letter from the Institute of Real Estate Management, the National Affordable Housing Management Association, the National Apartment 

Association, the National Association of Home Builders, and the National Multi Housing Council, dated July 14, 2009 ................................... 104 

Written statement of the National Affordable Housing Management Association (NAHMA) .......................................................................................... 107 

Written statement of the National Low Income Housing Coalition ............. 125 

(1) 

LEGISLATIVE OPTIONS FOR PRESERVING 

FEDERALLY- AND STATE-ASSISTED 

AFFORDABLE HOUSING AND PREVENTING 

DISPLACEMENT OF LOW-INCOME, 

ELDERLY, AND DISABLED TENANTS 

Wednesday, July 15, 2009 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HOUSING AND

COMMUNITY OPPORTUNITY, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:15 p.m., in room 

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

Members present: Representatives Waters, Cleaver, Green, Clay, 

Ellison; Capito, and Jenkins. 

Also present: Representative Castle. 

Chairwoman WATERS. This hearing of the Subcommittee on 

Housing and Community Opportunity will come to order. But before we start with any opening statements from our witnesses, one 

of our members wanted very much to be here today to introduce 

someone who is very important to him and his work and his community, and I would like to ask the Honorable Michael Castle to 

please go ahead and make your introduction. 

Mr. CASTLE. Thank you very much, Madam Chairwoman. And let 

me also thank you for this hearing. Although I cannot be here for 

the hearing, I think it is a very important subject, and I am glad 

that you are delving into it. 

I would like to thank you for the opportunity of introducing a 

witness in the next panel, Joe Myer, who serves as a board member of the National Rural Housing Coalition and the past president 

of the Coalition. Joe and I have worked together for many, many 

years now. 

In addition to his duties on behalf of the Coalition, Joe Myer 

serves as executive director of NCALL, the National Council on Agricultural Life and Labor, which is a nonprofit located in my home 

State of Delaware that specializes in affordable housing development, education, and lending. Mr. Myer worked in the nonprofit 

housing development for 37 years. He helped found NCALL in 1976 

and went on to become NCALL’s executive director in 1981. 

During this time, NCALL has reached 6,500 first-time home 

buyer mortgage closings in Delaware, has been particularly responsive with their foreclosure prevention counseling service, and has 

2 

achieved an exemplary rating as a chartered NeighborWorks America organization as a top 10 affordable housing producer nationwide 

within the network. 

NCALL has also provided development assistance for 45 affordable apartment communities serving rural families, elderly, and 

farm workers throughout the Delmarva Peninsula. 

Mr. Myer is the founding president and current board member 

of the Delaware Housing Coalition. He has received the Housing 

Ambassador Award from Delaware, NADO, the National Association of Housing and Community Development Officials, and also 

served on the Governor’s Council on Housing as well as the Delaware Housing Trust Fund Study Commission. 

Prior to his work with NCALL, Mr. Myer worked for Freedom 

Village, Inc., as a Church of the Brethren volunteer and Delta 

Housing Development Corporation in the Mississippi Delta. 

He received his Bachelor’s in business administration from Elizabethtown College and his master’s degree in business administration from Delaware State University. 

Mr. Myer clearly brings a great deal of experience to the table, 

and the committee should look forward to his testimony today. 

And if I could ask him just to stand for a moment after all that 

fancy introduction, this is Joe Myer, ladies and gentlemen. 

[applause] 

Mr. CASTLE. I yield back, Madam Chairwoman. Thank you very 

much for the privilege. 

Chairwoman WATERS. Thank you very much. And I would like 

to note that without objection, Representative Castle will be considered a member of the subcommittee for the duration of the hearing 

even though he cannot stay. Thank you very much. 

Good afternoon ladies and gentlemen. I would like to thank our 

ranking member, Shelley Moore Capito, and the other members of 

the Subcommittee on Housing and Community Opportunity for 

joining me for our second hearing on legislative options for preserving federally- and State-assisted affordable housing and preventing displacement of low-income, elderly, and disabled tenants. 

At our first hearing, we were joined by HUD Secretary Shaun 

Donovan who testified about the need for this legislation and its 

importance in preserving federally-assisted housing and protecting 

the residents of that housing. 

At this hearing, we will hear from Rural Housing Service Administrator Tammye Trevino about the preservation issues facing rural 

America. We will also hear from residents of assisted housing, 

housing developers, housing advocates, and others. 

From 1995 to 2003, our Nation lost 300,000 subsidized affordable 

apartments through conversion to market-rate housing or physical 

deterioration. Over the next 5 years, contracts on more than 

900,000 project-based Section 8 units will expire. Moreover, the Affordable Housing Incentive Programs, like Section 236 and Section 

221D, are essentially a thing of the past and 200,000 units in these 

programs are at risk of conversion to market rate over the next 10 

years. 

Once these units leave the affordable housing stock, they are not 

replaced. In fact, according to the study by the Joint Center for 

Housing Studies, for every new affordable housing unit conVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
3 

structed, two affordable units are lost. The loss of these units negatively impacts communities and residents, many of whom represent 

our most vulnerable populations. According to HUD, 50 percent of 

people in federally-subsidized housing are elderly or disabled. In 

addition, about 77,000 veterans depend on this critical housing resource. 

The Federal Government’s continued commitment to the preservation of subsidized affordable housing takes on more importance 

in light of the decrease in the number of non-subsidized affordable 

units. According to a recent HUD study, from 2005 to 2007, the 

number of units that are affordable to households at or below 50 

percent of area median income fell by 7 percent for a loss of over 

1.5 million units. During this time period, the number of units that 

are affordable to households with incomes of over 100 percent of 

area median income increased by 34 percent. 

Preservation not only makes sense for residents and communities, it should also make economic sense for owners and developers, because it is significantly more cost-efficient to preserve existing housing than to build new housing. It costs approximately 40 

percent less to preserve an existing unit than to construct a new 

one. 

In addition, it is far more energy-efficient to preserve existing 

housing; renovating an existing building produces less construction 

waste, uses fewer new materials, and requires less energy than 

demolition and new construction. 

The bill before us today would ensure that preservation of affordable housing becomes a reality by providing all tenants of federallyassisted properties with enhanced vouchers, converting rent supplement and rental assistance program properties into project base 

Section 8, providing a first right of purchase to tenants of assisted 

properties, preserving State-financed affordable housing, and preserving rural housing and housing for the elderly. 

I look forward to hearing from our witnesses on this much-needed legislation. And now I would like to recognize Ranking Member 

Capito for her opening statement. 

Mrs. CAPITO. Thank you. I would like to thank the chairwoman 

and thank our witnesses for the hearing today. I would like to also 

welcome Rural Housing Service Administrator Trevino. She paid a 

visit to my office, I certainly appreciate that, and I look forward to 

your first appearance here at the subcommittee. 

One area I would like to discuss—and we talked about this earlier—is the effect of a recent change to the Section 538 Program is 

having on development and rehabilitation of affordable multi-family housing in rural communities. 

The stimulus legislation from earlier this year fundamentally 

changed this program in no longer allowing developers to use the 

interest credit subsidy in tandem with the loan guarantee. I have 

significant concerns as this will lead to fewer units being developed 

in rural areas. 

I also have some concerns about changes in this legislation for 

owners of subsidized housing units, which may cause them to leave 

the program after a property sale or mortgage prepayment. Private 

owners of multi-family housing units are essential to the supply of 

affordable housing and legislation should encourage their participaVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
4 

tion in the government program. HUD programs to incent owners 

to maintain affordable housing units have preserved over 3,500 

projects with about 300,000 units. Those programs could be undermined by this legislation because it requires a 24-hour—excuse me, 

a 24-month notice before a sale, imposes a formula on the owner 

for determining the sales price, forces the owner to sell properties 

on less than favorable terms, and creates a new private right of action for the tenant. 

It is my hope that we can work together on ways to make the 

housing benefits provided by these programs a temporary stop for 

individuals. I think we can all agree that the goal of many of these 

programs is to provide families and individuals with a stable home 

so that they can focus on improving their skills to become self-sufficient. 

I know that extensive work has been done on this draft legislation, and I look forward to working with the chairwoman and the 

witnesses on many of these provisions. 

I yield back. Thank you. 

Chairwoman WATERS. Mr. Cleaver is recognized for 3 minutes. 

Mr. CLEAVER. Thank you, Madam Chairwoman. This is a serious 

issue that we absolutely must address, and we must address it 

now. I left office as mayor of Kansas City in 1999. There has not 

been one single unit of affordable housing constructed since that 

time. 

The problem is exacerbated by the fact that we now have legions 

of men and women who have lost houses due to foreclosure in the 

urban core. So as we are thinking about affordable housing, I think 

one of the things that we must focus on is preserving the affordable 

housing units we currently have because of the decimation of the 

urban core. These houses need to be in some kind of condition that 

might be attractive to developers or builders. 

I am hopeful that we can reverse this negative trend. And it is 

chilling when I think that we could possibly lose almost a million 

units of affordable housing over the next 5 years. So I think a great 

emphasis, and I hope we can get into this after your comments, but 

a great emphasis needs to be placed, I think, on trying to preserve 

every single affordable unit we have presently, particularly in the 

urban core. 

I look forward to talking with you. I yield back the balance of my 

time, Madam Chairwoman. 

Ms. WATERS. Thank you very much. Mr. Green for 3 minutes? 

Mr. GREEN. Thank you, Madam Chairwoman. And I thank all of 

the witnesses for appearing. I would echo what has been said thus 

far. I am concerned about the possibility of losing 900,000 units. I 

am very much concerned that the process of construction appears 

not to be sufficient such that we can maintain. Construction alone 

will probably see us losing ground. It is important that we not lose 

ground, especially in areas where we are talking about those who 

are disabled and those who are seniors. 

This country is unlike many other places in the world because 

of the way it treats people in the twilight of life. We do not just 

allow people to live on the streets in the twilight of life. 

I look forward to hearing from the witnesses so as to get some 

intelligence in terms of how they perceive we should proceed to do 

5 

what we have always done, not nearly to the extent we should have 

done, but that is to take care of those in the twilight of life and 

are disabled. 

I yield back. 

Ms. WATERS. Thank you very much. Our first witness will be Ms. 

Tammye Trevino, Administrator, Rural Housing Service. I would 

like to thank you for appearing before the subcommittee today. And 

without objection, your written statement will be made a part of 

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

your testimony. 

STATEMENT OF TAMMYE TREVINO, ADMINISTRATOR, RURAL 

HOUSING SERVICE (RHS), U.S. DEPARTMENT OF AGRICULTURE (USDA) 

Ms. TREVINO. Thank you, Chairwoman Waters, Ranking Member 

Capito, and members of the subcommittee. Thank you for the opportunity to appear before you to discuss multi-family housing 

preservation in rural America. 

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

in this session of Congress and in previous years, for their hard 

work. 

I am pleased to testify before you today and I look forward to 

working with you and the committee to further the preservation 

agenda. 

At 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 communities. 

During this recess and the foreclosure crisis, RHS-assisted multifamily housing facilities have served as a critical resource for some 

of our most vulnerable rural residents who would otherwise lack 

proper housing alternatives. 

Unfortunately, the foreclosure rates of our RHS-assisted multifamily properties have remained variably unchanged when compared to rates of previous years. As multi-family housing facilities 

age and deteriorate, it is vital that we work together everyday in 

every way to preserve these units for the most vulnerable in our 

communities. 

The benefits of focusing on preserving the existing housing portfolio rather than on building additional units are clear: It is less 

expensive, roughly a third to a quarter of the cost of new construction. It can be accomplished faster with the site and acquisition 

issues already resolved. It presents many opportunities to upgrade 

energy conservation systems and it minimizes the NIMBY effect 

since most communities welcome an upgrade to existing rental 

properties in their neighborhoods. 

We are still studying the proposed legislation and may have 

questions regarding the implementation of certain aspects. However, the legislation appears to give the Agency a number of revitalization tools that would provide cost-effective preservation options for the existing multi-family rental housing portfolio. 

6 

We look forward to working with the committee to ensure that 

these tools provide the best possible mechanisms to support the revitalization efforts. Currently, our revitalization program is authorized only as a demonstration program, not in permanent authorization legislation. This makes it difficult for the Agency to promulgate permanent program regulations and to address long-term 

issues, including the length of vouchers. 

Further, we must determine the resources needed to accomplish 

the goals we established, and we will develop those estimates during the budget formulation process. But, specifically, we need to examine what types and amounts of resources will be needed to work 

with a larger portfolio level of transactions to assure quality assurance, and to provide for consistent processing throughout the country. 

The proposed legislation contains voucher authority that will provide protection for tenants against rent increases or relocation as 

a result of prepayment or foreclosure, as does the current Rule Development Demonstration Voucher Program. 

The early results of a restructuring demonstration are extremely 

encouraging. When the initial application window closed on April 

17, 2006, approximately 4,000 Section 515 property owners applied 

for debt restructuring. This represents 25 percent of the total portfolio. In the 3 full years of implementation as a demonstration program, USDA has obligated over 300 transactions that will improve 

the housing conditions of 10,000 tenants. These results indicate a 

tremendous interest among the ownership community in seeking a 

resolution to the revitalization challenge. Our goal is to reach 1,000 

preservation transactions processed each year. 

Madam Chairwoman, I was born, raised, and have lived most of 

my life in rural communities. For 25 years, I worked and advocated 

for the development of rural communities. I understand the challenges that rural communities face. I know the struggles that many 

families in rural America see everyday. I feel thrilled and humbled 

by the opportunity that I have been given by President Obama to 

provide housing development on a national level. And I am committed to helping the President and this committee and our private 

and public partners, along with Secretary Vilsack in creating a 

lasting foundation in rural housing in the heart of rural America 

everyday in every way. 

Thank you for allowing me to address the committee. I am available to answer your questions now or at any time in the future. 

[The prepared statement of Ms. Trevino can be found on page 85 

of the appendix.] 

Chairwoman WATERS. Thank you very, very much. We are very 

appreciative for your presence today. I would like to begin by trying to get a little bit better understanding of the ability to assist 

those residents who are in units that are at risk of a conversion 

to market rate. USDA’s 2004 report entitled, ‘‘The Comprehensive 

Property Assessment Portfolio, An Analysis of Rule Rental Housing’’ said that 10 percent of rural housing units are at risk of conversion to market rate. In what ways will this bill ensure that 

those units remain as affordable housing? 

Ms. TREVINO. It will provide us with the funding that is necessary to do the Section 515 Program and to do preservation of a 

7 

portion of that 10 percent. As I said, our goal, in order to meet the 

need that is spelled out in that CPA report, I believe that we 

should be doing about 1,000 transactions on a yearly basis. 

Chairwoman WATERS. All right. Let me just raise one more question with you about Section 515 that you just alluded to, the Rural 

Loan Guarantee Program. One of the criticisms of the Section 515 

Rural Loan Guarantee Program is that most of the loans have been 

provided to for-profit developments, not to nonprofit developers. In 

what ways will this bill increase the participation of nonprofit rural 

housing developers in this program? 

Ms. TREVINO. I do not see that the bill distinguishes between private development and nonprofit development. That may be an issue 

that you may want to take up. I know that some nonprofit developers have problems with initial advance costs to try to do a deal 

but in terms of this legislation, I do not believe there is a factor, 

at least for the rule development portion. I may be wrong. 

Chairwoman WATERS. All right, thank you very much. 

Mrs. CAPITO. Yes, thank you for your testimony. I would like to 

ask just a couple of questions. I am going to go right to the Section 

538 question, since I raised that in my opening statement. Do you 

have a comment about the inability of the developers to use the interest credit subsidy in tandem with the loan guarantee, and what 

kind of impact do you think that this has had on these developers 

in the 538 program? 

Ms. TREVINO. I have seen 538 developments with and without interest credit that work. We do not know what the implications are 

going to be. Certainly, the interest credit subsidy has been a very 

popular option in allowing these deals to go forward. 

So in terms of the impact and what it is going to do, I think it 

is a little early to find out. We know that statutorily it has been 

left out through the appropriations, and so we are not sure what 

is going to happen. I believe that it is a good tool, but obviously 

we are going to implement whatever is in the appropriations bill. 

Mrs. CAPITO. Well, you know that I am interested in restating 

that as an incentive to developers to create housing. I would like 

to ask what is the breakdown, you said you have seen in the 538 

program, there are those who have used the interest credit subsidy 

and those who have not, do you have any idea how that breaks 

down percentage wise? 

Ms. TREVINO. No, I don’t. I could not give you those numbers. I 

am speaking from experience— 

Mrs. CAPITO. Right. 

Ms. TREVINO. —just in Texas. 

Mrs. CAPITO. Right. In your statement and in your letters you 

mentioned, I got the sense that you envisioned some changes of 

some of the provisions of the bill that might be more helpful to you 

in your revitalization and in our revitalization efforts. Can you say 

what types of changes you would make to this bill and are there 

provisions that would make your job harder or easier? And what 

specific additional tools would be helpful to you to further the goal 

of affordable rural housing preservation? 

Ms. TREVINO. Currently, I would like to address one particular 

program and that is the Section 514 and 516 that provides for farm 

labor housing. We believe that portion of the portfolio in rural deVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
8 

velopments is an important component. I would be very interested 

in working with the committee to try to determine the types of resources that would be needed to address that need. 

Mrs. CAPITO. Other than that, you do not see any real stumbling 

blocks in this bill to move forward with your programs, to simplify 

them, to keep the public/private partnerships active and to reach 

the ultimate goal, which is preserving not only housing units but 

also the upgrade of a lot of the housing units? 

Ms. TREVINO. I believe that we are going to have a few concerns 

when it comes to how we implement the voucher, but, again, we 

are willing to work with whatever the committee proposes and try 

to figure out what the best mechanisms are in terms of what is 

available under tools in the bill. 

Mrs. CAPITO. Okay, and can you tell me what the physical state 

of the existing 515 portfolio is? I am curious to know how many of 

those units are in need of repair? How do they break out? I know 

you cannot give me an exact number, but how many of those are 

in need of repair percentage wise so I can get a perspective on 

that? 

Ms. TREVINO. I can only tell you that the CPA report stated that 

about 80 percent would need rehabilitation in the next 6 to 7 years. 

Mrs. CAPITO. That is a large percent. 

Ms. TREVINO. It is. 

Mrs. CAPITO. Yes. 

Ms. TREVINO. A huge portion. 

Mrs. CAPITO. Thank you. 

Ms. TREVINO. Thank you. 

Chairwoman WATERS. Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. The 515 program, can you help me understand if a tenant moves out, that unit 

is no longer eligible for the 515 program? 

Ms. TREVINO. The 515 program is more project based, and so we 

determine ahead of time, based on the rental assistance that we 

give that project, how many of those are going to be set aside for 

the very low income. So it really does not have to do with the tenant. 

Mr. CLEAVER. Okay. The demonstration program seems to be 

very successful. I think you mentioned 90 percent of the tenants 

choose to remain? 

Ms. TREVINO. Yes, 90 percent of the tenants have chosen to remain. 

Mr. CLEAVER. Do you think that is due to the way the program 

is now working or due to the economic situation in the country 

right now? 

Ms. TREVINO. In rural America, I would—it is my opinion that 

we do not have the housing stock many times that you find in an 

urban community, so many times, there are not better alternatives 

for the families. I believe that is one reason that number is high. 

Mr. CLEAVER. I am curious about what if we compared it with 

Section 8 or even 202, two programs, in terms of—well, maybe not 

202 but certainly Section 8, to draw a comparison to see what the 

percentage would be of individuals who would choose to remain. 

This just seems enormously high, which is good in a way. 

9 

Ms. TREVINO. I would not know what those percentages are, but 

again the population in both the city, in the urban and the rural 

areas, is pretty much the same. So in rural communities we have 

the issue of the housing stock, but you also have the issue that 60 

percent of this population is an elderly population. As you know, 

elderly people are creatures of habit; they do not want to move. 

They do not like change and so that may be part of what contributes to that number. 

Mr. CLEAVER. All right, thank you. I yield back the balance of 

my time, Madam Chairwoman. 

Chairwoman WATERS. Thank you very much. Mr. Green? 

Mr. GREEN. Thank you, Madam Chairwoman. And, again, I 

thank the witness. Ma’am, public housing has been successful to 

the extent that it has in my opinion because we have tried to have 

a collaborative effort. We have tried to inculcate the NGOs into the 

process. We have tried to access our intelligence from a variety of 

sources and sometimes the pipeline to HUD hopefully would go 

through the NGOs. Can you tell me, as we are now looking at the 

various changes that we are making, how you plan to have input 

from NGOs in this process? 

Ms. TREVINO. Okay, we work very closely with our partners. In 

rural America, there are a lot of nonprofit providers. We are willing 

to listen to their ideas and try to determine the best ways to implement these programs. So I do not know how it has been done in 

previous Administrations, but I can tell you that we do have a goal 

within our Administration, within Rural Housing, to continue that 

very important work. 

Mr. GREEN. Thank you. This is very encouraging. Let me just go 

a step further, however, and indicate that much time and energy 

is necessary from persons who are familiar with communities to acquire the intelligence that you need. It is beneficial to have a 

means by which NGOs can have the assets, the resources necessary to acquire this intelligence. Funding for NGOs, in my opinion, is quite beneficial to HUD in acquiring intelligence. We have 

from time to time provided funding for NGOs. Chairwoman Waters 

had a piece of legislation that we amended, H.R. 3965, this was the 

Mark-to-Market Extension and Enhancement Act of 2007. And 

with assistance we were able to—her assistance, we were able to 

add $10 million in grants to tenant groups and not-for-profits. Are 

you predisposed to continuing this type of relationship so that we 

can have NGOs that are not only willing but also able to perform 

the function? 

Ms. TREVINO. Yes, sir, I believe that we are. And, in fact, across 

the country we have rural development offices, about 400 in the 

field, so that is quite a longer reach than perhaps HUD in a rural 

area. So we are very amenable to working and trying to see what— 

how our local offices can integrate with what the NGOs are doing. 

Mr. GREEN. Thank you very much. Madam Chairwoman, I will 

yield back the balance of my time. 

Chairwoman WATERS. There are no more questions. The Chair 

notes that some members may have additional questions for this 

witness, which they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members 

10 

to submit written questions to this witness and to place her responses in the record. 

This panel is now dismissed. Thank you very much for coming. 

Ms. TREVINO. Thank you. 

Chairwoman WATERS. I would like to welcome our second panel. 

And I am going to announce each of you, but prior to speaking, I 

would like you to give me your name, because I am sure I am not 

going to pronounce some of these names correctly. 

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

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

Preservation Working Group. 

Our second witness will be Mr. Ghebre Selassie Mehreteab, executive officer, The National Housing Partnership Foundation. 

Our third witness will be Mr. Allan Isbitz, president, National 

Leased Housing Association. 

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

Alliances of HUD Tenants. 

And, of course, you heard the introduction of our fifth witness by 

Mr. Castle, Mr. Joe Myer, board member, National Rural Housing 

Coalition. 

Our sixth witness will be Ms. Katie Alitz, vice president, The 

Council of Affordable and Rural Housing. 

Then we will have Mr. Vincent O’Donnell, president, Citizens’ 

Housing and Planning Association. 

And our final witness will be Ms. Sarah Metherell, vice president, Institute for Responsible Housing Preservation. 

Thank you again for appearing before the subcommittee today. 

And 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. 

Okay, Mr. 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 very much, Chairwoman Waters, 

Ranking Member Capito, and members of the subcommittee. My 

name is Toby Halliday, and I am the vice president for public policy of the National Housing Trust. Thank you for inviting me to 

testify today in support of this important draft legislation. 

Over the past decade, the National Housing Trust has helped 

save and improve more than 20,000 apartments in over 40 States. 

The vast majority of these apartments have HUD-subsidized mortgages or project-based rental assistance contracts. 

Today, I am also testifying on behalf of the National Preservation 

Working Group, a coalition of 25 national nonprofit organizations 

supporting affordable rental housing. The members of the Preservation Working Group strongly support a balanced housing policy 

that includes the option of quality affordable rental housing and 

endorses this proposed legislation to protect low-income urban, suburban, rural, and elderly households whose homes are at risk of 

loss or conversion. 

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er than ever. Continuing home foreclosures will shift many families 

from homeownership to rental in a market where there is already 

a shortage of affordable rental housing for the poorest households. 

Many of the affected families will experience sharp declines in 

household assets and credit scores, but the increased demand for 

rental housing at the lowest end of the market is actually leading 

to higher rents and tighter credit screening in some markets despite falling incomes and rising unemployment. 

At the same time, many cash-strapped States and local governments are reducing assistance to needy families. All of this leads 

to a heightened risk of homelessness. Addressing this challenge begins with preserving existing affordable rental housing. 

Federally-subsidized housing serves nearly every community in 

the Nation. The Trust’s analysis has identified nearly 170,000 units 

of federally-assisted apartments with contracts that expire over the 

next decade located in the districts of members of this committee, 

as shown in Attachment A of my testimony. 

At the heart of this legislation are new tools to protect residents 

and preserve affordability when apartments are refinanced or recapitalized or when the underlying HUD-subsidized mortgages mature. Unlike other assisted properties, there are currently no provisions to preserve the affordability of these units or to protect residents when thousands of these mortgages expire over the next several years. 

The current draft includes important provisions that would, at 

the owner’s discretion, provide rental assistance for affected apartments, both for the HUD-assisted and the rural development Section 515 properties. Improving preservation tools makes the rehabilitation of these properties easier to finance, leading to the creation of needed construction jobs. 

There will be debate over the proposal to allow new purchasers 

to preserve the affordability of federally-assisted properties when 

current owners no longer wish to operate them as affordable rental 

housing. So long as existing owners are provided market values for 

their properties, we believe that new ownership dedicated to longterm affordability will help ensure affordable rental housing at a 

time when so many families are homeless or at risk of homelessness. 

There will also be debate over the provision to allow residents to 

escrow their rents when properties are in disrepair. All tenants 

must still pay their full rent but funds will go into an escrow account or be used for HUD-approved repairs when the Secretary determines serious violations of housing quality standards or housing 

program requirements. The only parties who have something to 

fear from this provision are owners with serious property violations, which impacts not only residents but the entire community 

surrounding these properties. 

We note that many Members of Congress recently expressed 

their strong view that recipients of housing assistance should be 

American citizens. This is already the law of the land and residents 

are currently required to certify their compliance with this requirement. But such new requirements will have a huge impact on 

many U.S. citizens who do not have birth certificates or passports 

in their possession, who are disproportionately senior citizens, AfriVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
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can Americans, rural residents, or lacking a high school diploma. 

In California, for example, obtaining a birth certificate can take 10 

to 12 weeks and cost $5 to $23 in different jurisdictions. A passport 

can take several additional weeks and cost up to $100. 

Finally, I would like to express our support for the titles for Section 202 elderly housing and for Section 515 rural housing administered by the Department of Agriculture. These proposed changes 

will provide important new tools to protect vital affordable rental 

housing for seniors and in rural States, especially in high-cost 

areas. 

Again, thank you for the opportunity to comment on this draft 

affordable rental housing legislation. The National Housing Trust 

and the Preservation Working Group are looking forward to the 

formal introduction and enactment of this legislation. 

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

29 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Mr. Mehreteab. 

STATEMENT OF GHEBRE SELASSIE MEHRETEAB, CHIEF EXECUTIVE OFFICER, THE NATIONAL HOUSING PARTNERSHIP 

FOUNDATION 

Mr. MEHRETEAB. Chairwoman Waters, Ranking Member Capito, 

Congressman Cleaver, Congressman Green, and Congressman Ellison, I thank for you for the opportunity to testify this afternoon on 

one of the most crucial issues: the preservation and creation of affordable housing, especially in urban areas. 

My name is Ghebre Selassie Mehreteab, but I am mostly known 

as Gabe. I am the chief executive officer of the NHP Foundation, 

a nonprofit housing organization headquartered in New York City. 

At the outset, I want to state that the NHP Foundation is in full 

support of the bill. Thank you, committee members. 

In 1989, the National Housing Partnership was chartered by 

Congress as a private corporation to create and preserve affordable 

housing. The National Housing Partnership created the NHP Foundation as a national nonprofit organization to address America’s affordable housing crisis. Our strategy was to combine the discipline 

of the private real estate sector with a charitable mission. 

Since 1994, the NHP Foundation has preserved or converted 

from market rate to affordable 46 properties, totaling approximately 10,000 units in 14 States. Recently, the NHP Foundation, 

which was created by the corporation that was chartered by Congress, has developed a 5-year strategy plan for the creation or preservation of an additional 5,000 to 10,000 affordable housing units, 

again mostly to be located in urban areas. 

As you are fully aware, the need for affordable housing in our society is a pressing one. Yet, as the committee members noted, we 

are losing much of our affordable housing daily. Against this trend, 

we must preserve the affordable housing that has already been 

built at great expense to the taxpayer. However, for preservation 

efforts to be successful, the nonprofit organization must raise financing from the public sector, obtain investment of private capital 

from banks and other financial institutions, and secure grants and 

loans from the philanthropy community. 

13 

One, this bill will provide new tools, reform existing programs 

and create incentives for financing affordable housing. For example, specifically, the bill will assist large-scale nonprofit organizations in preserving the existing stock of affordable housing. Two, it 

will attract private capital from banks and other institutions. And, 

three, leverage the initiative of philanthropic organizations. 

As you know, the NHP Foundation and other nonprofit owners 

rely on private lenders and investors to create and preserve affordable housing. For example, over the last few years, the NHP Foundation has partnered with Bank of America’s Community Development Group in obtaining debt and tax credit equity financing. However, the glue that binds the public sector with the private capital 

is philanthropic grants. Many nonprofits have received funding 

from the Ford Foundation, the McArthur Foundation, Prudential 

Social Investments, and other philanthropic sources for our preservation work. 

In conclusion, the NHP Foundation looks forward to continuing 

to work with the committee and its staff on those preservation 

issues. 

Thank you again for inviting me to testify today. 

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

58 of the appendix.] 

Chairwoman WATERS. Thank you very much. 

Our next witness will be Mr. Allan Isbitz. 

STATEMENT OF ALLAN ISBITZ, PRESIDENT, NATIONAL 

LEASED HOUSING ASSOCIATION (NLHA) 

Mr. ISBITZ. Chairwoman Waters, Ranking Member Capito, and 

members of the subcommittee, thank you for your invitation to 

speak today and for the opportunity to address some of the issues 

of importance to our affordable housing constituency. 

My name is Allan Isbitz. I am chief financial officer and vice 

president of real estate development for Jewish Community Housing for the Elderly, a nonprofit that owns and operates over 1,000 

apartments for low-income seniors in the Boston area. 

I am here today as president of the National Leased Housing Association. NLHA is pleased to present our concerns related to the 

preservation of federally-assisted affordable housing. NLHA represents a broad cross-section of people and organizations that provide or administer Section 8 and tax credit housing for over 3 million families and elderly. 

We appreciate and applaud the efforts of the committee to 

produce this important bill. 

I would like to spend a few minutes sharing with you to illustrate my experience with a preservation transaction where HUD 

guidance was confusing and inconsistent and unnecessarily impeded our ability to achieve important preservation objectives. This 

is about a refinancing transaction we undertook 3 years ago that 

involved preservation and improvement of a 33-year-old project 

with a Section 236 mortgage that provides 254 apartments for lowincome seniors. 

We had three objectives in this transaction: first, to make the 

necessary capital improvements to the building; second, to build a 

new community center so we can meet the need for essential supVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
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port services for our senior residents that would allow them to continue to live there in spite of increasing frailty as they grow older; 

and third, to use some of the sales proceeds to help finance a new 

150-unit Section 202 mixed-income development for seniors on land 

in Framingham, Massachusetts, that we owned and had zoned for 

that purpose. 

To achieve these objectives, we successfully sought and received tax-exempt bond financing that generated over $10 million in tax 

credit equity and supplemented the proceeds of a new HUD-insured loan used to cover building improvements. We believed the 

$10 million of private investor equity could be used under existing 

HUD guidelines to support the construction of the Resident Services Community Center and the financing of the new construction 

project. 

As an added bonus, the availability of private investor equity al- lowed us to set rents below market and save HUD almost $5 million in Section 8 subsidies over the term of the HUD-insured mortgage. We believed this to be a real win/win situation for us and for 

HUD, and the HUD field office showed strong support for the 

project. 

However, HUD central had to approve the prepayment of the 

mortgage, and they refused to do so claiming that the proceeds— 

the sale proceeds we were realizing were too high. HUD then required us to sign an agreement as a condition of proceeding with 

the refinancing that restricted almost $3 million of these proceeds 

to fund future rent increases instead of using the Section 8 subsidy 

contract that existed for this purpose. 

HUD’s position was incomprehensible because private tax credit 

equity, not HUD rental subsidy, supported the sale proceeds we 

wanted to use for the Resident Services Community Center and for 

a new affordable housing development. 

There is no basis in law or in regulation for HUD’s actions. Its 

actions were inconsistent and amounted to treating nonprofit owners differently than for-profit owners in similar prepayment circumstances when HUD’s written guidance on this subject states 

just the opposite. In the face of adverse market conditions today, 

we have requested HUD to reconsider its position on the use of sale 

proceeds for our new construction project. The project is currently 

shovel ready and will produce $25 million worth of construction activity, plus 259 construction jobs for the Massachusetts economy, 

but has been delayed for about a year now. 

This situation demonstrates that producing tax-credit financed 

housing involves market risk for nonprofit and for-profit developers 

alike. So it is particularly important that both nonprofits and forprofits be given access to the same financial tools, such as sale proceeds, that they need to negotiate with their partners in the marketplace. 

HUD’s action in the recent years regarding sale proceeds remain 

an issue for nonprofits so it is important that Congress clarify this 

matter. The current draft includes language that attempts to address the problem, but it is not retroactive and therefore does not 

provide a remedy for nonprofits that have already been denied access to their rightful sale proceeds, which are necessary to meet 

their current needs. We prefer the language that was included in 

15 

Section 401 of H.R. 2930 that passed the House last year and request that it be substituted for Section 503 of the current draft. 

I thank you again for this opportunity to let you know of our 

need for improvements in Federal preservation programs. I might 

add that we believe that Secretary Donovan and his new team 

share many of these concerns, and we look forward to working with 

the new HUD administration in this regard. 

Thank you. 

[The prepared statement of Mr. Isbitz can be found on page 40 

of the appendix.] 

Mr. CLEAVER. [presiding] Mr. Leung, you are next. Did I mispronounce your name? 

STATEMENT OF RICKY LEUNG, TREASURER, NATIONAL 

ALLIANCE OF HUD TENANTS 

Mr. LEUNG. Thank you, Chairwoman Waters. Thank you, Mr. 

Cleaver. My name is Ricky Leung. I am the treasurer for the National Alliance of HUD Tenants, a national tenant union, the one 

and only in the Nation, for privately-owned HUD-assisted multifamily housing. 

Since the Title 6 Preservation Program ended in 1996, our Nation has lost at least 360,000 units of affordable low-income housing. We commend you and Chairman Frank for including the first 

right of purchase in the draft preservation bill to stop this loss. We 

also thank my own representative, Nydia Velazquez, for filing H.R. 

44, now Title 4 in the bill, to address the related loss of 120,000 

units of HUD’s housing stock and for her leadership in addressing 

the new crisis of private equity. 

For 30 years, I have lived in Cherry Street Apartments in a Section 8 unit with my parents, a secure home for our family. We 

would not survive long in the overheated Manhattan market. The 

488 families at Cherry Street are a diverse mix of working and 

middle class, a microcosm of the City and the Nation. 

In 2003, our project-based Section 8 contract was set to expire in 

the super hot real estate market in Manhattan. Our tenant association persuaded the owner to renew, but he did so for only 5 

years. After I testified a little over a year ago in front of the full 

committee, our building was bought by a predatory investor for 

$177 million, more than $360,000 per unit. And our Section 8 contract was renewed for 5 more years. 

Just 3 years from now, the new owner will again decide what to 

do. Passage of first right of purchase would at least give our tenant 

association and the City a fighting chance to save our homes. By 

itself, a first right purchase would not add to Federal costs. It 

would simply allow a city or nonprofit to purchase an at-risk property using existing programs like markup-to-market. There is 

ample precedent besides Title 6, for 20 years, Congress has provided a Federal right of purchase for rural housing and several 

States have adopted similar laws. 

The need for this measure is urgent in New York City. We are 

losing affordable housing to speculators at an alarming rate. Since 

the 1990’s, more than 32,000 low-cost apartments have already 

been lost, and the rate has spiked dramatically. A national first 

16 

right of purchase will help save 22,000 more apartments like Cherry Street that are at immediate risk. 

In the wake of 9/11, the loss of 54,000 affordable apartments in 

New York City is a tragedy which we can neither bear nor ignore. 

Nationwide, tenants are also challenged by the end of regulation 

in 260,000 apartments reaching an end of the 40-year HUD-subsidized mortgages. The number of expiring mortgages properties 

will skyrocket by more than 600 percent between now and 2012 according to the GAO. Whatever the source of risk, the first right of 

purchase is needed to ensure that owners use voluntary incentives 

in the draft bill to save our homes. 

Congress dismantled Title 6 in 1996 due to concerns about excessive costs. Under Title 6, residents and HUD negotiated major repairs, permanent affordability, and transfers to nonprofit and tenant organizations. Today, the enhanced vouchers are mark-up-tomarket options available to owners are just as costly as the Title 

6, but with none of these benefits. 

A first right of purchase will save money in the long run by removing subsidized housing from the speculated market, lessen 

owner windfalls, and guarantee benefits from the investment from 

any Federal funds. 

Three weeks ago, Secretary Donovan mentioned the State court 

decision that struck down a right of purchase law adopted by the 

City of New York. I was involved in the effort to pass this law to 

help save my home. The court struck down the City law solely due 

to State and Federal preemption concerns, not constitutional questions addressed in our written testimony. In fact, the courts acknowledged the serious rental housing crisis, and they urge action 

by other levels of government. 

We urge the committee to honor the plea of the New York tenants, echoed by the State courts, to adopt a right of purchase at 

the Federal level. Obviously, preemption is not an issue if Congress 

acts. 

The National Alliance of HUD Tenants also supports the tenant 

empowerment provision in the bill. These no-cost measures will 

allow tenants to join as HUD partners to improve and save our 

homes. 

To conclude my testimony today, just like concluding my testimony last year, I would like to pay tribute to the three main languages spoken in my community. I would like to say to everyone 

in this room in English: Thank you very, very much. And in Spanish, especially to my Congresswoman, Nydia Velazquez, Muchas 

Gracias. And in my native language, Chinese: Xie, xie doh je. 

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

of the appendix.] 

Mr. CLEAVER. Thank you. 

Mr. Myer? 

STATEMENT OF JOE MYER, BOARD MEMBER, NATIONAL 

RURAL HOUSING COALITION 

Mr. MYER. Good afternoon, Chairwoman Waters, and Ranking 

Member Capito. My name is Joe Myer. I am the executive director 

of NCALL. We are based in Dover, Delaware. We serve the midAtlantic region. I received a very nice introduction by Congressman 

17 

Mike Castle, and I want to thank him for that introduction. As a 

two term governor, and now Delaware’s sole Congressman, Mike 

Castle has been an important friend of affordable housing. 

I am also a current board member of the National Rural Housing 

Coalition. NRHC is a national membership organization that advocates for Federal policies which improve housing and community 

facilities in rural America. NRHC has stood for the principle that 

all rural residents have a right to a decent place to live. We have 

testified before this committee previously, and appreciate the opportunity to testify today on rural housing issues and H.R. 2876, 

the Rural Housing Preservation Act of 2009. 

We commend the bipartisan effort of Congressmen Geoff Davis 

and Lincoln Davis. 

It is vital to preserve our current stock of affordable rental housing because of lack of decent apartments in rural America. A disproportionate share of the Nation’s substandard housing is located 

in rural areas. According to the 2000 census, of 106 million housing 

units available in the United States, 18.7 million units, or about 18 

percent, are located in non-metro counties. Thirty-five percent of 

rural renters are cost-burdened, paying more than 30 percent of 

their income for housing costs. Almost one million rural rental 

households suffer from multiple housing problems, 60 percent of 

whom pay more than 70 percent of their income for housing. More 

than 900,000 renters live in moderately or severely inadequate 

housing, and 1.9 million people are rent overburdened. 

Section 515 of the Housing Act of 1949 is the principal source of 

financing for rental housing in rural areas. Under Section 515, nonprofit and for-profit entities can receive one percent loans for acquisition, rehabilitation or construction of rental housing and related 

facilities. Most Section 515 loans have gone to for-profit developers 

who combine the subsidized loan with tax subsidies to finance 

housing. About 75 percent of these properties are further subsidized by the RHS Section 521 rental assistance program, and the 

Department of Housing and Urban Development Section 8 program, both of which provide rent subsidies to ensure that residents 

pay no more than 30 percent of their income towards rent and utilities. 

Section 515 is generally well-managed. The portfolio is financially sound. It has a loan delinquency rate of just 1.6 percent and 

only 8 properties in inventory at the current time. Projects are 

small, sized to the communities that they serve, an average of 28 

units. 

So over 400,000 low-income families and elderly households live 

in rental housing financed under Section 515. For many rural 

areas, Section 515 provides the only decent affordable rental apartments in the community. Although rents are extremely low, averaging a little more than $325 per unit per month, the average resident annual income for the properties is also low, about $9,200. 

Twenty percent of the tenants were nonetheless rent overburdened 

and 7 percent paid more than half of their income towards rent. 

This is due to noticeably lower incomes in rural areas. 

Over the last several years, the Federal Government has virtually stopped financing for new affordable rental units in rural 

America. In 1992, the loan level for Section 515 was $500 million. 

18 

By 1998, that number was less than $200 million. And for Fiscal 

Year 2009, the level of Section 515 was $69 million. 

Over the last 40 years, Congress has debated the best, most appropriate way to preserve the rights of owners and tenants living 

in Section 515 developments. This issue is important because virtually all households living in these apartments are low income, 

many are elderly, and many have disabilities. These are people 

with few other housing options. 

The evolution of the 515 program and prepayment process shows 

how the rural housing services lack of funding for incentives and 

rent subsidy vouchers has hurt both owners and tenants. 

We see that the comprehensive property assessment and portfolio 

analysis indicates that there is a long-term need to ensure adequate operations and long-term rehabilitation of $2.6 billion over 

20 years. 

In response to the USDA report, Congress provided funds for a 

demonstration aimed at preserving rural rental developments. 

From 2006 to 2009, $100 million was provided in multi-family 

restructurings. RHS provided restructurings financing to 105 

projects. The financing mostly in the form of deferred loans preserved 4,500 units. This is an important demonstration and really 

points to what needs to happen in the future. 

The current restructuring program relies heavily on funding from 

other sources, but given the difficult economic climate, raising capital from other sources will prove more difficult. 

[The prepared statement of Mr. Myer can be found on page 69 

of the appendix.] 

Mr. CLEAVER. Mr. Myer, I hate to cut you off, and I am going 

to have to apologize to all of you. As you probably heard, the bell 

just sounded, which means we have votes. We have about 40 minutes of votes. It could be longer if there are some parliamentary 

procedures that we have to deal with. But what I would like to do 

is, if the three of you who have not had made presentations would 

do so, and if you can, I know they are already abbreviated, but give 

us the Reader’s Digest version. And then we will dismiss the panel 

because the most important part is your testimony anyway. And we 

will send out a memo to all the committee members that if there 

are questions, we will send those questions to you. 

So if we can, let’s move with Ms. Alitz. 

Ms. ALITZ. ‘‘Alitz.’’ 

Mr. CLEAVER. Ms. Alitz, I’m sorry. 

STATEMENT OF KATIE ALITZ, VICE PRESIDENT, THE COUNCIL 

FOR AFFORDABLE AND RURAL HOUSING 

Ms. ALITZ. Mr. Cleaver, members of the subcommittee, my name 

is Katie Alitz, and I am the vice president of the Council for Affordable and Rural Housing. On behalf of myself and CARH, I would 

like to thank you for the opportunity today to address issues related to rural affordable housing, and in particular the rural housing legislation under discussion. 

We also very much appreciate this committee’s interest and focus 

on rural housing issues. CARH is an association that includes forprofit, nonprofit, and public agencies that build, own, invest and 

manage in rural and affordable housing. CAR members house hunVerDate Nov 24 2008 18:38 Nov 17, 2009 Jkt 053239 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\53239.TXT TERRIE
19 

dreds of thousands of low-income elderly and disabled residents 

across rural America. 

CARH strongly supports preservation of affordable rural housing, 

and we think it is critical that the preservation efforts include 

Rural Development’s budget being restored. Over the previous 12 

years, Rural Development’s budget has been decimated, especially 

the Section 515 multi-family loan program. This has made preservation of rural housing very difficult. 

Owners have preserved Section 515 properties over the last decade largely by finding other sources of funding, primary low-income 

housing tax credits and also recently Section 538 guaranteed loans. 

However, this has never sufficiently closed the gap. Because of 

their small size, rural properties have always had difficulty competing for tax credits and finding equity providers. Given the recent upheavals in the low-income housing tax credit markets, these 

problems will be further exacerbated. 

In addition, the 538 interest credit subsidy was reduced in the 2009 budget from $20 million to $8 million and eliminated in the 

2010 budget. This subsidy is critical to the preservation of 515 

housing and also for keeping housing affordable for low-income 

residents. Without the subsidy, this program will target more middle-income residents. 

We also support Ms. Capito’s legislation to restore this interest 

credit subsidy, and we thank you for your support. 

In addition to funding, providing Rural Development with certain 

tools is critical to their preservation efforts. The preservation legislation that we are seeing today was introduced also in the 109th 

and 110th Congress. CARH has supported this legislation but has 

concerns about three provisions that we believe may impede preservation. 

First, the legislation calls for a 30-year capital needs assessment. 

We think that is too long; the industry standard is an average of 

15 years. Second, while we have no issue with limiting resident 

rents to 30 percent of their income, we are concerned about imposing this limit without including further rental subsidies. We think 

that will take a lot of eligible properties off the table. And finally, 

we are concerned about the restrictions on owners who participated 

in the prepayment settlement. There seems to be some barriers to 

their entry into this program. 

Thank you. 

[The prepared statement of Ms. Alitz can be found on page 24 

of the appendix.] 

Mr. CLEAVER. Mr. O’Donnell? 

STATEMENT OF VINCENT F. O’DONNELL, PRESIDENT, 

CITIZENS’ HOUSING AND PLANNING ASSOCIATION 

Mr. O’DONNELL. Good afternoon. I will try to do the standing on 

one foot version of my written testimony. I want to thank Chairwoman Waters and Ranking Member Capito and Representative 

Cleaver and all the members of the subcommittee for the opportunity to testify. My name is Vincent O’Donnell. I am testifying in 

favor of this urgent and important legislation. I am speaking on behalf of the Citizens’ Housing and Planning Association in Massachusetts, which was created in 1967 as an umbrella organization 

20 

that represents advocates for affordable housing for low- and moderate-income people in the Commonwealth. It really is a broad umbrella of producers and consumers and folks interested in housing 

policy and has been extremely successful. 

In fact, CHAPA’s involvement in preservation goes back to 1978 

when we worked to implement new guidance that was created for 

HUD to deal with distressed properties. I think the most important 

thing I want to say today is that the whole concept of the preservation of affordable housing really goes back to the residents themselves. The preservation issues have always been raised by the tenants who live there. Back in 1978, residents in a gentrifying neighborhood of Boston living in distressed housing went to then-Senator 

Edward Brooke and got some Federal relief that enabled them ultimately to purchase that property as a cooperative. And it is still 

today a successful, 100 percent Section 8 cooperative. The issues 

have always been brought forth by the folks who live there. 

Secondly, it is a changing landscape. Back then, the issue was 

HUD foreclosure of distressed housing. Later, the issue became the 

prepayment of subsidized mortgages. After that, it was the expiration of Section 8 contracts. We now have new emerging issues in 

what is called the Year 40 problem where, after the complete expiration of all obligations, there are no current effective ways to 

make sure that the tenants are protected and the housing is preserved. 

So I think it is important to look at this extremely complex and 

comprehensive bill as something which fundamentally is addressing those basic goals. And if you look at it that way, it is, I think, 

a terrific piece of work that has responded to years of development 

of ideas by the preservation community trying to make this housing safe and affordable for the future for the tenants who live there 

and to contribute positively to the neighborhoods where the housing is located. 

Although it deals with many, many things, I just want to highlight several things which are very important. First, I think it does 

address the new problems which have arisen at the end of 40 

years, the extension of authority for tools like enhanced vouchers, 

and conversion of earlier forms of rental assistance to Section 8 so 

that it can more flexibly support the redevelopment of the property. 

Second, the right of purchase is an extremely important aspect 

of this legislation. It is also extremely complex. And it exemplifies 

the partnership that affordable private housing is based on in this 

country. We have private owners, private financing serving low-income residents. This has to work for everybody. And an important 

tool like this is a very complex one. In my written testimony, I 

have some thoughts about how to make that work the best for all 

stakeholders. 

Third, there are certain State-funded properties that were recognized in LIHPRHA, the earlier preservation legislation dealing 

with prepayment as requiring Federal assistance, and this bill addresses their needs. 

Fourth, elderly housing is a very important element and the 

preservation of that stock is addressed in a comprehensive way in 

this bill, and I want to speak in favor of that as well. 

21 

And I think I better stop there; the rest of my comments are in 

the written testimony. 

[The prepared statement of Mr. O’Donnell can be found on page 

76 of the appendix.] 

Mr. CLEAVER. Thank you. 

Ms. Metherell? 

STATEMENT OF SARAH METHERELL, VICE PRESIDENT, 

INSTITUTE FOR RESPONSIBLE HOUSING PRESERVATION 

Ms. METHERELL. Good afternoon. First of all, thank you very 

much for inviting me here to testify today. My name is Sarah 

Metherell, and I am with Steadfast Residential located in Newport 

Beach, California. We have acquired, rehabilitated, and preserved 

and now own about 15,000 units of federally-assisted low-income 

housing. These units are mostly in California but also in a total of 

18 other States. 

I am here today, however, representing in my capacity as vice 

president of the Institute for Responsible Housing Preservation, the 

IRHP. Since 1989, the IRHP has represented owners and managers 

of federally-assisted multi-family properties on preservation issues, 

including advocating for legislative and regulatory changes for 

preservation policies and providing educational seminars on preserving affordable housing. I would add that the IRHP is primarily 

a group of for-profit developers, however we do have a few nonprofit members and some State agency members. 

I am going to make this very quick. IRHP is generally in favor 

of the bill. There are a few things I would like to point out based 

on personal experience that I have had in acquiring affordable multifamily properties over the last couple of years. One is that the 

Section 236 decoupling program is a wonderful program and has 

been very successful in preserving HUD properties. I think if you 

look at the Section 236 program, you see a higher rate of preservation over other HUD programs because it is easier to preserve 

those properties. The primary reason is the ability to undertake a 

budget-based rent increase, which includes new debt service, something that is not now available for other types of HUD properties. 

Also, there is an increased annual distribution for all preservation 

owners; it applies to both for-profits and nonprofits and it costs 

nothing to HUD. However, these benefits are only available on Section 236 decoupling transactions and not on other types of HUD 

transactions, and I am not quite sure why but the new bill does 

change that. And we approve of that. 

Finally, very briefly, I have a lot more in writing here, but we 

also support the rollover of certain HUD debt. And I think oftentimes when properties are being transferred to new owners, it 

should have certain HUD debt, including flex sub-loans and mark 

to market soft debt cannot be paid off in full— 

Mr. CLEAVER. We have 2 minutes. 

Ms. METHERELL. All right. 

Mr. CLEAVER. No, no, we have 2 minutes. 

Ms. METHERELL. You have 2 minutes? 

Mr. CLEAVER. To get to the Capitol to vote. Voting will close in 

less than 2 minutes now. I apologize, as I did earlier. 

22 

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

63 of the appendix.] 

Mr. CLEAVER. 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. And before we 

adjourn, the written statements of the following organizations will 

be made a part of the hearing: The National Low-Income Housing 

Coalition; the American Association of Homes and Services for the 

Aging; the National Affordable Housing Manager’s Association; the 

Housing Assistance Council; and a statement from the National 

Apartment Association and others. 

If there are no other questions, we are adjourned. 

[Whereupon, at 3:26 p.m., the hearing was adjourned.] 

(23) 

A P P E N D I X 

July 15, 2009 

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