The Republican-controlled Congress and President Clinton have finally agreed on appropriations legislation (H.R. 3019) funding HUD and other agencies for the remainder of fiscal 1996.
The bill repeals for the current year the so-called "take one, take all" and "endless lease" provisions of the tenant-based Section 8 program. Those provisions prohibit a multifamily housing owner who has accepted one certificate or voucher holder from rejecting others and prohibit owners from terminating program participation simply because a lease has expired.
While these provisions will be restored on Oct. 1 if Congress doesn't take additional action, they are not part of the tenant-based assistance program in the House-passed housing bill (H.R. 2406).
The appropriations bill also provides $624 million for capital grants for the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA) and sets priorities for use of the funds. LIHPRHA assistance is intended to keep Section 236 and Section 221(d)(3) below market interest rate (BMIR) projects in the low-income inventory or to protect the low-income tenants if the mortgages are prepaid and the projects are converted to other uses.
Prior to Aug. 15, funds will be provided only for sales to tenant-sponsored groups, nonprofit organizations and state and local agencies. After Aug. 15, HUD may give priority to projects with approved plans of action (POAs) for low-income use extensions for which the owner submits a modified POA by Aug. 15 to transfer the project; projects with approved POAs subject to a repayment or settlement agreement executed with HUD before Sept. 1, 1995; projects for which submissions were delayed because of their location in a disaster area; and projects with notices of intent filed by Nov. 1, 1993, whose processing was delayed because of differing interpretations of program rules.
The bill also restores an owner's right to prepay the mortgage or request voluntary termination of the Federal Housing Administration mortgage insurance, ending restrictions on project use. In such a case, the owner would have to agree not to raise rents for 60 days.
Also, if a mortgage is prepaid or FHA insurance is terminated, each unassisted low-income family in the project who would have to pay more than 30% of income for rent because of a rent increase would be given tenant-based assistance.
The bill also provides for a demonstration program to reduce the cost of FHA-insured Section 8 projects with rents above fair market rents (FMRs). Under the program, HUD could write down the debt or pay part of the debt service to enable the project to operate with market rents. HUD could renew expiring project-based assistance contracts with rents no higher than 120% of FMR, or it could decline to renew project-based contracts and instead provide tenant-based assistance to subsidized tenants.