GOP offers bill to protect elderly, disabled tenants With contracts beginning to expire on thousands of Section 8 rent subsidy projects, there is mounting concern that many elderly and disabled tenants will be forced out of the only housing they can afford.

While the U.S. Department of Housing and Urban Development (HUD) will provide rental vouchers to tenants whose landlords opt out of the Section 8 program, those vouchers may not be much help if the owners raise rents substantially. Vouchers generally will only cover the difference between 30% of a tenant's income and a "payment standard" tied to Section 8 fair market rents (FMRs). As a result, if the owner raises the rent when the project-based Section 8 contract is terminated, even a tenant with a voucher may have to pay more out of pocket for housing.

To address this problem, three influential Republican legislators have introduced a bill to enable elderly and disabled tenants to stay in their current housing even if their landlords leave the Section 8 program and boost rents sharply. The bill (H.R. 1336), sponsored by House Banking Committee Chairman James A. Leach of Iowa, housing subcommittee chairman Rick A. Lazio of New York, and HUD appropriations subcommittee chairman James T. Walsh of New York, would provide "enhanced" vouchers that would allow elderly and disabled tenants to stay in their units without an increase in rent.

With an enhanced voucher, the new rent for the tenant's unit will be treated as the payment standard, even if it exceeds the regular standard, meaning HUD will absorb any increase. If the tenant moves, however, the regular payment standard will apply.

Leach says the legislation "Will help ease the concerns of hundreds of thousands of vulnerable senior citizens across the country. Many of these families have been living in their homes for more than 20 years. We are going to do everything we can to protect these families and ensure they continue to enjoy their present quality of life."

While aimed primarily at elderly and disabled tenants, the bill would also authorize HUD to provide enhanced vouchers to other low-income tenants in low-vacancy areas. These are areas where HUD finds that there is a short supply of habitable, affordable housing for low-income families with tenant-based rental assistance.

Legislation introduced to accelerate increase in bond cap Bills have been introduced in both houses to accelerate the increase in the private activity tax-exempt bond cap that was enacted by Congress last year. Private activity bonds can be used to finance such projects as multifamily housing.

Currently, the limit on bonds which can be issued in each state is the greater of $50 per capita or $150 million. Last year's legislation will raise the cap to the greater of $75 per capita or $225 million, but because of budgetary considerations, Congress decided to phase in the increase over a five-year period beginning in 2003. The delay and the phase-in would be eliminated under bills sponsored in the House (H.R. 864) by Reps. Amo Houghton (R-N.Y.) and Richard Neal (D-Mass.) and in the Senate (S. 459) by Sens. Orren Hatch (R-Utah) and John Breaux (D-La.). Both bills would raise the cap to the greater of $75 per capita or $225 million in calendar 2000. They would also index the cap for inflation for years after 2000, based on changes in the Consumer Price Index (CPI).

In calling for an immediate increase in the bond cap, Hatch points out that under current law, one-third of the purchasing power of private activity bonds will have been lost by the time the increase is fully effective in 2007. "Bond restoration has strong bipartisan support," Hatch says. "A majority of the Senate and nearly three-quarters of the House co-sponsored full restoration and indexation in the 105th Congress." Noting that the legislation is backed by state and local officials and the public finance community, Hatch called for action so that "States can continue to make vital investments in their citizens and communities."

Freddie Mac establishes multifamily second mortgage program Freddie Mac has established a second mortgage program for multifamily projects on which the corporation also finances the first mortgage. Project owners can obtain a separate second mortgage with a term that matches the term of the first mortgage, a separate noncoterminous second mortgage that exceeds the term of the first mortgage by up to 24 months, or a split mortgage where the first and second mortgages are originated simultaneously.

The second mortgage can range from $1 million to $10 million, subject to a limit of 50% of the original loan balance.

As an example, a family with an annual income of $18,000 pays $450 per month (30% of income) for an apartment at the fair market rent of $600. What would happen if the rent is raised to $750?

Rent Subsidy Tenant Payment

* Regular Voucher $750-$150=$600

* Enhanced Voucher $750-$300=$450