Congress provides fiscal 1999 funding for housing programs Before closing the books on the 105th Congress, the House and Senate passed bills providing fiscal 1999 funding for federal housing programs.

Funding for the programs of the U.S. Department of Housing and Urban Development (HUD), along with legislative changes to the Section 8 program, were included in the regular HUD appropriations bill, while funds for rural housing were incorporated in an omnibus appropriations bill for several federal departments.

The HUD appropriations bill provides $9.6 billion to renew all expiring Section 8 contracts, along with $283 million for 50,000 incremental Section 8 vouchers to support welfare-to-work programs. These vouchers will help welfare families who need housing assistance to obtain or keep employment.

The bill also provides $1.6 billion for the HOME housing block grant program, which supports locally designed low- and moderate-income housing programs, $4.75 billion for the community development block grant program, which can also be used for housing activities, and $620 million for Indian housing block grants.

The bill also sets limits for activity under FHA mortgage programs and the Government National Mortgage Association mortgage-backed securities program. Commitments to insure FHA mortgages under the General Insurance Fund, which covers multifamily mortgage programs, and the Special Risk Insurance Fund will be limited to $18.1 billion. The FHA multifamily risk-sharing programs for housing finance agencies and for Fannie Mae, Freddie Mac and other lenders will each be increased by 25,000 units for fiscal 1999. Ginnie Mae commitments to guarantee mortgage-backed securities will be limited to $150 billion.

Another provision in the HUD funding bill removes any uncertainty about an owner's right to prepay the mortgage on a Section 221(d)(3) or Section 236 project that would have been subject to prepayment restrictions under the Emergency Low-Income Housing Preservation Act or the Low-Income Housing Preservation and Resident Homeownership Act.

The mortgage can be prepaid, terminating any low-income use restrictions, provided the owner gives notice to HUD, the tenants, and the state or local government between 150 and 270 days prior to the prepayment and agrees not to raise rents for 60 days after prepayment.

Rural housing amendments attached to the HUD bill provide permanent authorization for the Section 515 rural rental housing loan program and the Section 538 multifamily loan guarantee program. They also make clear that the Section 538 program can be used with tax-exempt financing.

The omnibus appropriations bill provides funding for rural housing programs, including $114.3 million for Section 515 loans, $583.4 million for rural rental assistance and $100 million for Section 538 loans.

Section 8 reforms added to HUD appropriations bill In addition to funding for HUD housing programs, the HUD appropriations bill also includes legislation making significant changes to the Section 8 program.

The bill finally completes the merger of the certificate and voucher programs into a single tenant-based assistance program. It also repeals federal admission preferences and, for tenant-based assistance, the endless lease and take-one, take-all requirements. The former provision barred owners from refusing to renew a Section 8 lease when it expired, while the latter required an owner who accepted any tenant with a certificate or voucher to accept all such tenants.

The legislation also establishes targeting requirements for Section 8 assistance. Each year, at least 75% of the new recipients of tenant-based assistance and at least 40% of the new admissions to projects with project-based assistance must be families with incomes no higher than 30% of area median income.

Increase in bond ceiling included in tax legislation The tax provisions of the omnibus appropriations bill include a minor victory for housing advocates - an increase in the volume cap for tax-exempt private activity bonds that will be phased in between 2003 and 2007. State and local governments can issue private activity bonds for a variety of purposes, including low-income housing.

Currently, the amount of bonds that can be issued annually in each state is the greater of $150 million or $50 per capita. The legislation will increase the cap in $5 per capita and $15 million increments over the 2003-2007 period. At the end of that time, the cap will be the greater of $225 million, or $75 per capita.

Housing advocates were seeking an immediate increase in the bond cap to the $225 million/$75 level, along with an increase in the $1.25 per capita limit on low-income housing tax credits. The tax legislation approved by Congress doesn't change the tax credit ceiling.