SENIOR CITIZEN HOUSING On September 27, 1999, the House passed H.R. 202, "Preserving Affordable Housing for Seniors and Families into the 21" Century," by a vote of 405 to 5. H.R. 202 had two primary focuses: increasing flexibility to providers of elderly and disabled housing, both in the financing of that housing and in the types of facilities they can provide, and preserving affordable housing. The Committee is pleased that the "FY 2000 VA, HUD and Independent Agencies Appropriations Act," which the President signed on October 20, 1999, included significant provisions from H.R. 202 addressing housing for seniors and individuals with disabilities. In the area of affordable housing preservation, the FY 2000 appropriations bill incorporated a number of H.R. 202's critical provisions, including those that target the problem of Section 8 opt-outs, with authorization for enhanced vouchers to protect tenants in developments with owners who opt out. It also included provisions that give HUD renewal authority for "Low Income Housing Preservation Homeownership Act" and "Emergency Low Income Housing Preservation Act" properties and that allow refinanced Section 236 projects to keep interest reduction payment subsidies, contingent on a five-year affordable housing commitment. Given the inherent limitations in the appropriations process, consideration of some significant provisions of H.R. 202 had to be deferred. Of those that were not included, we believe that Section 303 and Section 323, which would authorize the use of other federal funds in Section 202 developments and Section 811 developments respectively, are critical for enhancing the flexibility and resources available for the provision of elderly and disabled housing. The Committee intends to conference the outstanding provisions with the Senate later this session. Two other aspects of affordable housing preservation remain unaddressed. First, section 404 of H.R. 202 included provisions authorizing the "Matching Grant Program for Affordable Housing Preservation." This program would augment scarce housing preservation resources by providing federal matches to states that are funding low-income housing preservation, while giving states considerable flexibility in determining how to use funds to best further the goal of affordable housing preservation. Further, the appropriations bill amended the mark-up-to-market provisions in H.R. 202 regarding Section 8 moderate rehabilitation projects. The effect of those changes was to continue the prohibition on using the Low-Income Housing Tax Credit (LIHTC) for mod rehab projects and to continue the less favorable terms (provided in current law) under which moderate rehabilitation contracts are renewed. The Committee believes it is important to eliminate the differential treatment for mod rehab contracts. Congress imposed the prohibition on combining the LIHTC with mod rehab contract subsidies in 1989, in response to the HUD scandals of the 1980s, to prevent future abuses of the mod rehab program. The prohibition continues, notwithstanding the fact that the owners who may have at least 10 years old and badly in need of capital and rehabilitation. The prohibition on the use of LIHTC tax credit for these projects imposes a further obstacle to their remaining a part of the low-income affordable housing stock. To eliminate this unnecessary prohibition, H.R. 202 included a rule of construction, providing that upon the expiration of a mod rehab contract, it shall be renewed as a Section 8 contract, subject to the terms imposed on all other Section 8 contracts. The appropriations bill did not include this rule of construction, and the Committee hopes to revisit the issue this session during conference with the Senate. H.R. 202 made clear that Section 8 mod rehab contracts were to be renewed on the same terms as other Section 8 contracts. With respect to mod rehab contracts, the appropriations bill reinstated the renewal provisions of Section 524(a)(2) of the Multifamily Assisted Housing Reform and Affordability Act. These less favorable renewal provisions will affect all mod rehab contracts that have comparable or fair market rents below their existing subsidy levels, including FHA-insured projects held by state and local agencies and nonFHA-insured projects, and will result in loan defaults, including defaults on loans held by state and local finance agencies. In addition, H.R. 202 addressed another longstanding Congressional concern to assure affordable, quality healthcare services for frail and elderly Americans. For over three decades, Sections 232 and 242 of the National Housing Act have assured communities, particularly those lacking access to affordable capital, with greater access to quality healthcare and related services, ranging from assisted living and nursing facilities to tertiary hospital care. Unfortunately these provisions were adopted in the 1960s and no longer adequately respond to emerging, modern forms of healthcare delivery. Sections 501, 502 and 503 of H.R. 202 would update provisions of the National Housing Act to meet more effectively the needs for the capital development of healthcare facilities in a competitive healthcare environment. RENEWING AMERICAN COMMUNITIES The Committee notes that although the Administration has proposed America's Private Investment Companies (APIC) to foster economic development in areas left behind by the American economy, others have put forward similar legislation in the past. One such bill, H.R. 815, the "American Community Renewal Act" creates "renewal communities" which encourage entrepreneurship, job creation, and homeownership efforts through the energy of nonprofit organizations. H.R. 1776 contains provisions from H.R. 815 designed to increase the participation of local non-profits in HUD's property disposition programs. The Committee intends to work with the Administration to ensure that the best aspects of both approaches are incorporated into legislation. PREPARING FOR FUTURE DISASTERS Homeowners living in coastal states and earthquake-prone regions are finding it difficult to obtain adequate or affordable catastrophe insurance protection for their homes. In the aftermath of major natural disasters in the early 1990s, the private homeowners' insurance market collapsed in disaster-prone areas. The prospect of thousands of uninsured homeowners remains particularly distressing in light of meteorological forecasts that the U.S. has entered an extended period of greater hurricane activity. Experts predict that multi-billion dollar losses may become increasingly frequent, and that it may only be a matter of time before a single storm exceeds $50 billion in damages. As a result of these developments, three states have established state-operated insurance programs to offer protection for homeowners in cases where the private sector has been unable or unwilling to offer insurance. While both the reserves of primary insurers and the availability of reinsurance have increased since the mid 1990s, there remain concerns that total industry resources may be insufficient to pay catastrophe claims for a major catastrophe loss or a series of smaller disaster events within a single year. With the country experiencing record levels of homeownership, it is imperative that the Committee act to preserve and improve healthy private market conditions for homeownership. The Committee believes that Congress has a responsibility to anticipate the possibility of future catastrophes and to minimize any impact on the taxpayer. With a legacy of $75 billion in federal spending on disaster assistance over the last 15 years, the Committee believes that a more effective strategy would be to complement state efforts and encourage the growth of private sector capacity. Accordingly, the Committee will continue to work closely with the Administration on legislation to increase the availability of homeowners' insurance in disaster-prone areas. HOMELESSNESS The Administration proposes $1.2 billion in funding for homeless programs in FY 2001 of which approximately $1.1 billion is for competitive grants, $105 million is for 18,000 vouchers, and $12 million is for technical assistance and management information systems. This request represents an approximate increase of 17.5 percent from FY 2000 appropriated levels. On April 15, 1999, the Subcommittee on Housing and Community Opportunity reported out, with a unanimous voice-vote, H.R. 1073, the "Homeless Housing Programs Consolidation and Flexibility Act." This legislation would provide greater flexibility to local and state governments, working in collaboration with local nonprofit organizations, to develop recognizes the importance of permanent housing as a significant key to ending the cycle of homelessness for certain populations, particularly the mentally or physically disabled. Also included in this legislation is a provision to authorize Shelter Plus Care contract renewals through the Section 8 program. While the Administration, in the previous Congress, withdrew its support of the homeless bill, the Committee believes that H.R. 1073 provides the best opportunity to consolidate and maximize the efficiencies of one funding stream to allow the greatest possible local flexibility in program design and treatment, while protecting the most vulnerable population. The Committee applauds the Administration's acceptance of H.R. 1073's provision to fund Shelter Plus Care contract renewals through the Section 8 program. Most important, however, the Committee applauds the development of the permanent housing set-aside concept first originated through this Committee and mandated by this Congress in last year's appropriations. -- a The Committee recommends conditioning Congressional support of any increase in federal funding for homeless programs on Administration support for and Congressional enactment of comprehensive reform legislation that would consolidate numerous Title IV McKinney Act programs and provide greater local and state flexibility. RURAL HOUSING The Administration proposes a $6.678 billion rural housing budget for FY2001, approximately 14.5 percent over FY 2000 appropriation levels. The Committee favors housing programs that leverage public and private sector resources and endorses the Administration's attempt to leverage single-family guaranteed loans up to $3.7 billion with $7 million in public funds. On the multifamily side, the Committee commends the Administration's use of the Section 538 guarantee program, developed under the Committee's leadership, to leverage minimal public funds to create $200 million in new rental development with private resources. Finally, the Committee takes note of the Administration's request for increased Section 521 rental assistance funding. As was the case last year, the Administration continues to increase funding -- approximately 16.5 percent in two years -- with little indication of programmatic changes to address the long-term implications of Section 521 funding and project-based assistance. As a result, Section 521 funding may, at some point, encounter problems similar to those experienced with past Section 8 contract renewals. FEDERAL HOUSING ADMINISTRATION Since 1994, the Committee has been particularly interested in integrating private and public sector resources to expand homeownership opportunities for all Americans. For example, the Committee's initiatives to leverage public funds to enable self-help (or sweat-equity) housing among lower-income families is one of many factors increasing the national homeownership rate to historically high levels, currently at 66.9 percent of households (70.1 million households). This year's budget explanation provides the Administration's view of FHA's core mission. It states, in part: ...FHA provides mortgage insurance to encourage lenders to make credit Under current law, FHA loan limits are limited to a floor of $121,296 and ceiling, in cases of high cost areas, to $219,849. The Administration proposes to increase FHA loan limits to a national uniform standard equal to the conforming Fannie Mae/Freddie Mac $252,700 conventional limit. There are advantages to the uniformity and generosity of the proposed new limits, but it is questionable whether it is consistent to raise the limits if FHA's core mission is to serve low and moderate income homebuyers. In its FY2000 Committee budget views, the Committee expressed concern that FHA defaults continued to rise while OMB significantly underestimated FHA liabilities. For 2001, OMB estimates FHA defaults/liabilities at $695 million, compared to FY2000 revised estimates of $3.797 billion and FY1999 actual liabilities of $5.442 billion. Anecdotal information suggests that FHA defaults continue to rise in an economic environment where one would expect a significant decline. In the past year, GAO has issued reports critiquing the agency's lack of oversight in the appraisal process, where, among many factors, HUD/FHA was reluctant to admit that it lacked or sought the appropriate statutory authority to hold lenders accountable for faulty appraisals used as the foundation for a 100 percent government guarantee. In another report last year, GAO noted FHA's inability to monitor the 203(k) program—acquisition and construction program-that accounted for a greater proportion of losses than the standard home purchase (203(b)) mortgage insurance product. GAO commented on a HUD Inspector General report that outlined management and program deficiencies, noting that "although HUD's management has, for the most part agreed with the findings [HUD IG] as reported, it |