SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Affordable Housing Preservation Act 
of 2008''.

SEC. 2. AFFORDABLE HOUSING PRESERVATION PILOT PROGRAM.

    (a) Establishment.--The Secretary of Housing and Urban Development 
shall establish a pilot program under which funds in the residual 
receipts account of an eligible multifamily housing property are 
transferred, at the time of a qualified sale or exchange, to a 
preservation entity.
    (b) Purpose.--The purpose of the pilot program established under 
this section is to facilitate the transfer of multifamily housing 
projects with expiring section 8 housing assistance payments contracts 
to preservation entities that are committed to maintaining the 
affordability and preservation of such projects by allowing expanded 
access to existing residual receipts to assist with the acquisition and 
rehabilitation of the project.
    (c) Use of Funds.--A preservation entity that acquires an eligible 
multifamily housing property through a qualified sale or exchange shall 
use the funds in the residual receipts account transferred to it--
            (1) to pay for rehabilitation costs approved by the housing 
        agency;
            (2) to deposit funds into the replacement reserve account 
        of the property;
            (3) to pay for social and other services that directly 
        benefit the tenants of such property, but in any 1 year such 
        payments may not exceed 10 percent of the balance of the 
        residual receipts account of the property at the end of the 
        prior fiscal year;
            (4) to pay for costs associated with the acquisition of the 
        property, but such payments may not exceed 50 percent of the 
        amount in the residual receipts account of the property at the 
        time of acquisition; and
            (5) to pay for any other costs that have been approved by 
        the housing agency and will directly benefit the tenants of the 
        property.
    (d) Responsibilities of the Secretary.--The Secretary of Housing 
and Urban Development, or his or her designee, shall--
            (1) determine whether the plan for rehabilitation and 
        operation of a preservation entity--
                    (A) maintains and restores the decent, safe, and 
                sanitary condition of the eligible multifamily housing 
                property; and
                    (B) is viable for not less than 30 years; and
            (2) monitor the affordability and use restrictions for the 
        eligible multifamily housing property.
    (e) Penalty for Noncompliance.--If the Secretary of Housing and 
Urban Development determines that all or a portion of an eligible 
multifamily housing property acquired by a preservation entity under 
this section is not in compliance with the requirements of this 
section, the preservation entity shall reimburse the Secretary an 
amount equal to the amount originally transferred from the residual 
receipts account at the time of acquisition, less the product of 3.33 
percent of such amount, multiplied by the number of years after the 
qualified sale or exchange that the property was in compliance with the 
requirements of this section.
    (f) Designation.--The Secretary shall, not later than 6 months 
after the date of enactment of this Act, designate not less than 3 
States in which the program established under this section shall be 
carried out. In selecting the States in which to carry out the program, 
the Secretary shall--
            (1) consider States with the greatest number of units 
        receiving project-based housing assistance payments under 
        section 8 of the United States Housing Act of 1937 (42 U.S.C. 
        1437f) where such units are located in active multifamily 
        housing projects whose section 8 housing assistance payments 
        contracts are set to expire between fiscal years 2009 and 
        fiscal years 2011;
            (2) consider States with eligible multifamily housing 
        properties that have residual receipt account balances that can 
        provide a meaningful preservation resource;
            (3) aim for a regionally diverse sample of States; and
            (4) consider the extent to which market forces may drive 
        the conversion of eligible low-income housing to market-based 
        rents.
    (g) Report to Congress.--
            (1) Timing of report.--Not later than 3 years after the 
        initiation of the pilot program established under this section, 
        the Secretary of Housing and Urban Development shall submit a 
        report to the Committee on Banking, Housing, and Urban Affairs 
        of the Senate and the Committee on Financial Services of the 
        House of Representatives.
            (2) Content of report.--The report required under paragraph 
        (1) shall include an analysis of--
                    (A) the effectiveness of expanding the use of 
                amounts in the residual receipts accounts of eligible 
                multifamily housing properties to include preservation 
                activities; and
                    (B) which States or regions of the United States 
                could most benefit from the expansion of such eligible 
                uses.
    (h) Effective Date.--This section shall apply to qualified sales or 
exchanges made during the period beginning December 31, 2007 and ending 
December 31, 2013.
    (i) Definitions.--In this section, the following definitions shall 
apply:
            (1) Affordability and use restrictions.--The term 
        ``affordability and use restrictions'' means the affordability 
        and use restrictions in connection with project-based housing 
        assistance payments made under section 8 of the United States 
        Housing Act of 1937 (42 U.S.C. 1437f).
            (2) Extended use period.--The term ``extended use period'' 
        means the period beginning on the date of sale and ending on 
        the earlier of--
                    (A) 30 years after the close of the sale; or
                    (B) the date that the property is acquired by 
                foreclosure (or instrument in lieu of foreclosure).
            (3) Eligible multifamily housing property.--The term 
        ``eligible multifamily housing property'' means a project 
        that--
                    (A) is receiving project-based housing assistance 
                payments under section 8 of the United States Housing 
                Act of 1937 (42 U.S.C. 1437f); and
                    (B) was financed pursuant to part 883 of title 24, 
                Code of Federal Regulations, on or after February 29, 
                1980.
            (4) Housing agency.--The term ``housing agency'' means, 
        with respect to any eligible multifamily housing property, the 
        housing agency which administers housing assistance with 
        respect to such property.
            (5) Preservation entity.--The term ``preservation entity'' 
        means a housing agency, organization, or entity (for profit or 
        nonprofit) approved by the Secretary of Housing and Urban 
        Development, or his or her designee, that has the capacity and 
        commitment to successfully acquire and preserve an eligible 
        multifamily housing property.
            (6) Qualified sale or exchange.--
                    (A) In general.--The term ``qualified sale or 
                exchange'' means the sale of an eligible multifamily 
                housing property to, or an exchange of such property 
                with, a preservation entity which agrees to maintain 
                affordability and use restrictions regarding the 
                property that are--
                            (i) for a term of not less than the 
                        extended use period; and
                            (ii) legally enforceable.
                    (B) Future applicability of restrictions.--The 
                restrictions under subparagraph (A) shall be--
                            (i) binding on all successors of the 
                        preservation entity; and
                            (ii) recorded as a restrictive covenant on 
                        the property pursuant to State law.
                    (C) Certification by program administrator.--The 
                term ``qualified sale or exchange'' shall not include 
                any sale or exchange of property unless the housing 
                agency certifies that--
                            (i) the transferee with respect to such 
                        property is a preservation entity;
                            (ii) affordability and use restrictions 
                        will be maintained with respect to such 
                        property during the extended use period; and
                            (iii) new capital will be expended that--
                                    (I) maintains or restores the 
                                decent, safe, and sanitary condition of 
                                the property; and
                                    (II) funds adequate reserves.
            (7) Residual receipts.--The term ``residual receipts'' 
        means funds generated by a property in excess of the amount 
        needed for operating expenses, operating reserve requirements, 
        and allowable distributions to project owners.
    (j) Residual Receipts Not Treated as Federal Funds.--For the 
purposes of section 42 of the Internal Revenue Code of 1986, residual 
receipts used pursuant to the pilot program established under this 
section shall not be considered Federal funds.
Output: Affordable Housing Preservation Act of 2008 - Directs the Secretary of Housing and Urban Development (HUD) to establish a pilot program under which funds in the residual receipts account of an eligible multifamily housing property are transferred, at the time of a qualified sale or exchange, to preservation entities to facilitate the transfer of multifamily housing projects with expiring section 8 housing assistance payments contracts under the United States Housing Act of 1937.

Defines "preservation entity" as a HUD-approved housing agency, organization, or entity (for profit or nonprofit) that has the capacity and commitment to successfully acquire and preserve an eligible multifamily housing property.

Requires the Secretary to: (1) determine whether the preservation entity's plan for rehabilitation and operation maintains and restores the decent, safe, and sanitary condition of the eligible multifamily housing property, and is viable for at least 30 years; and (2) monitor the affordability and use restrictions for the property.

Imposes penalties on preservation entities for noncompliance with this Act.

Requires the Secretary to designate at least three states to participate in the pilot program.

States that grants shall be used to: (1) pay for rehabilitation costs approved by the housing agency; (2) deposit funds into the property's replacement reserve account; and (3) pay for social and other services that directly benefit the tenants of such property, its associated acquisition costs, and any other costs that have been approved by the housing agency and will directly benefit such tenants.