II 

110TH CONGRESS 

2D SESSION S. 3275 

To establish a pilot program to preserve affordable housing options for lowincome individuals. 

IN THE SENATE OF THE UNITED STATES 

JULY 16, 2008 

Mr. SMITH (for himself and Mr. WYDEN) introduced the following bill; which 

was read twice and referred to the Committee on Banking, Housing, and 

Urban Affairs 

A BILL 

To establish a pilot program to preserve affordable housing 

options for low-income individuals. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Affordable Housing 

5 Preservation Act of 2008’’. 

6 SEC. 2. AFFORDABLE HOUSING PRESERVATION PILOT PRO7 GRAM. 

8 (a) ESTABLISHMENT.—The Secretary of Housing 

9 and Urban Development shall establish a pilot program 

10 under which funds in the residual receipts account of an 


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1 eligible multifamily housing property are transferred, at 

2 the time of a qualified sale or exchange, to a preservation 

3 entity. 

4 (b) PURPOSE.—The purpose of the pilot program es5 tablished under this section is to facilitate the transfer of 

6 multifamily housing projects with expiring section 8 hous7 ing assistance payments contracts to preservation entities 

8 that are committed to maintaining the affordability and 

9 preservation of such projects by allowing expanded access 

10 to existing residual receipts to assist with the acquisition 

11 and rehabilitation of the project. 

12 (c) USE OF FUNDS.—A preservation entity that ac13 quires an eligible multifamily housing property through a 

14 qualified sale or exchange shall use the funds in the resid15 ual receipts account transferred to it— 

16 (1) to pay for rehabilitation costs approved by 

17 the housing agency; 

18 (2) to deposit funds into the replacement re19 serve account of the property; 

20 (3) to pay for social and other services that di21 rectly benefit the tenants of such property, but in 

22 any 1 year such payments may not exceed 10 per23 cent of the balance of the residual receipts account 

24 of the property at the end of the prior fiscal year; 


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1 (4) to pay for costs associated with the acquisi2 tion of the property, but such payments may not ex3 ceed 50 percent of the amount in the residual re4 ceipts account of the property at the time of acquisi5 tion; and 

6 (5) to pay for any other costs that have been 

7 approved by the housing agency and will directly 

8 benefit the tenants of the property. 

9 (d) RESPONSIBILITIES OF THE SECRETARY.—The 

10 Secretary of Housing and Urban Development, or his or 

11 her designee, shall— 

12 (1) determine whether the plan for rehabilita13 tion and operation of a preservation entity— 

14 (A) maintains and restores the decent, 

15 safe, and sanitary condition of the eligible mul16 tifamily housing property; and 

17 (B) is viable for not less than 30 years; 

18 and 

19 (2) monitor the affordability and use restric20 tions for the eligible multifamily housing property. 

21 (e) PENALTY FOR NONCOMPLIANCE.—If the Sec22 retary of Housing and Urban Development determines 

23 that all or a portion of an eligible multifamily housing 

24 property acquired by a preservation entity under this sec25 tion is not in compliance with the requirements of this 


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1 section, the preservation entity shall reimburse the Sec2 retary an amount equal to the amount originally trans3 ferred from the residual receipts account at the time of 

4 acquisition, less the product of 3.33 percent of such 

5 amount, multiplied by the number of years after the quali6 fied sale or exchange that the property was in compliance 

7 with the requirements of this section. 

8 (f) DESIGNATION.—The Secretary shall, not later 

9 than 6 months after the date of enactment of this Act, 

10 designate not less than 3 States in which the program es11 tablished under this section shall be carried out. In select12 ing the States in which to carry out the program, the Sec13 retary shall— 

14 (1) consider States with the greatest number of 

15 units receiving project-based housing assistance pay16 ments under section 8 of the United States Housing 

17 Act of 1937 (42 U.S.C. 1437f) where such units are 

18 located in active multifamily housing projects whose 

19 section 8 housing assistance payments contracts are 

20 set to expire between fiscal years 2009 and fiscal 

21 years 2011; 

22 (2) consider States with eligible multifamily 

23 housing properties that have residual receipt account 

24 balances that can provide a meaningful preservation 

25 resource; 


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1 (3) aim for a regionally diverse sample of 

2 States; and 

3 (4) consider the extent to which market forces 

4 may drive the conversion of eligible low-income hous5 ing to market-based rents. 

6 (g) REPORT TO CONGRESS.— 

7 (1) TIMING OF REPORT.—Not later than 3 

8 years after the initiation of the pilot program estab9 lished under this section, the Secretary of Housing 

10 and Urban Development shall submit a report to the 

11 Committee on Banking, Housing, and Urban Affairs 

12 of the Senate and the Committee on Financial Serv13 ices of the House of Representatives. 

14 (2) CONTENT OF REPORT.—The report re15 quired under paragraph (1) shall include an analysis 

16 of— 

17 (A) the effectiveness of expanding the use 

18 of amounts in the residual receipts accounts of 

19 eligible multifamily housing properties to in20 clude preservation activities; and 

21 (B) which States or regions of the United 

22 States could most benefit from the expansion of 

23 such eligible uses. 


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1 (h) EFFECTIVE DATE.—This section shall apply to 

2 qualified sales or exchanges made during the period begin3 ning December 31, 2007 and ending December 31, 2013. 

4 (i) DEFINITIONS.—In this section, the following defi5 nitions shall apply: 

6 (1) AFFORDABILITY AND USE RESTRICTIONS.— 

7 The term ‘‘affordability and use restrictions’’ means 

8 the affordability and use restrictions in connection 

9 with project-based housing assistance payments 

10 made under section 8 of the United States Housing 

11 Act of 1937 (42 U.S.C. 1437f). 

12 (2) EXTENDED USE PERIOD.—The term ‘‘ex13 tended use period’’ means the period beginning on 

14 the date of sale and ending on the earlier of— 

15 (A) 30 years after the close of the sale; or 

16 (B) the date that the property is acquired 

17 by foreclosure (or instrument in lieu of fore18 closure). 

19 (3) ELIGIBLE MULTIFAMILY HOUSING PROP20 ERTY.—The term ‘‘eligible multifamily housing prop21 erty’’ means a project that— 

22 (A) is receiving project-based housing as23 sistance payments under section 8 of the 

24 United States Housing Act of 1937 (42 U.S.C. 

25 1437f); and 


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1 (B) was financed pursuant to part 883 of 

2 title 24, Code of Federal Regulations, on or 

3 after February 29, 1980. 

4 (4) HOUSING AGENCY.—The term ‘‘housing 

5 agency’’ means, with respect to any eligible multi6 family housing property, the housing agency which 

7 administers housing assistance with respect to such 

8 property. 

9 (5) PRESERVATION ENTITY.—The term ‘‘pres10 ervation entity’’ means a housing agency, organiza11 tion, or entity (for profit or nonprofit) approved by 

12 the Secretary of Housing and Urban Development, 

13 or his or her designee, that has the capacity and 

14 commitment to successfully acquire and preserve an 

15 eligible multifamily housing property. 

16 (6) QUALIFIED SALE OR EXCHANGE.— 

17 (A) IN GENERAL.—The term ‘‘qualified 

18 sale or exchange’’ means the sale of an eligible 

19 multifamily housing property to, or an exchange 

20 of such property with, a preservation entity 

21 which agrees to maintain affordability and use 

22 restrictions regarding the property that are— 

23 (i) for a term of not less than the ex24 tended use period; and 

25 (ii) legally enforceable. 


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1 (B) FUTURE APPLICABILITY OF RESTRIC2 TIONS.—The restrictions under subparagraph 

3 (A) shall be— 

4 (i) binding on all successors of the 

5 preservation entity; and 

6 (ii) recorded as a restrictive covenant 

7 on the property pursuant to State law. 

8 (C) CERTIFICATION BY PROGRAM ADMINIS9 TRATOR.—The term ‘‘qualified sale or ex10 change’’ shall not include any sale or exchange 

11 of property unless the housing agency certifies 

12 that— 

13 (i) the transferee with respect to such 

14 property is a preservation entity; 

15 (ii) affordability and use restrictions 

16 will be maintained with respect to such 

17 property during the extended use period; 

18 and 

19 (iii) new capital will be expended 

20 that— 

21 (I) maintains or restores the de22 cent, safe, and sanitary condition of 

23 the property; and 

24 (II) funds adequate reserves. 


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1 (7) RESIDUAL RECEIPTS.—The term ‘‘residual 

2 receipts’’ means funds generated by a property in 

3 excess of the amount needed for operating expenses, 

4 operating reserve requirements, and allowable dis5 tributions to project owners. 

6 (j) RESIDUAL RECEIPTS NOT TREATED AS FEDERAL

7 FUNDS.—For the purposes of section 42 of the Internal 

8 Revenue Code of 1986, residual receipts used pursuant to 

9 the pilot program established under this section shall not 

10 be considered Federal funds. 

Æ 


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