The House Financial Services Committee has approved a housing preservation bill (H.R. 4868) aimed at maintaining the affordability of the current assisted housing stock.

In addition, the committee approved a public housing revitalization bill (H.R. 5814) that includes authorization of the administration's Choice Neighborhoods initiative.

The preservation bill would establish a preservation exchange program to facilitate the transfer of projects to purchasers who will agree to maintain them as affordable housing.

As incentives for such transfers, the Department of Housing and Urban Development (HUD) could provide grants or loans to the purchaser; streamline approval of requests for prepayment, assignment of Sec. 8 contracts, and transfers of physical assets; and release reserves for replacements or residual receipts to the seller for sales preparation, predevelopment, and transaction costs.

In addition, under an amendment approved during the committee markup, HUD could release reserve for replacement funds to the seller to offset exit taxes if the seller wouldn't receive suffi- cient proceeds from the transaction to cover the taxes. The reserve for replacement funds released under this provision couldn't exceed the gain attributable to depreciation.

The bill also includes a controversial provision for a governmental first right of refusal to purchase a project when the owner decides to terminate affordability restrictions.

In the original bill, HUD would have had the first right of refusal, but for budgetary reasons, the measure was amended to give the right to state housing agencies.

To encourage long-term affordability, HUD could modify Emergency Low-Income Housing Preservation Act or Low-Income Housing Preservation and Resident Homeownership Act use agreements, at the owner's request, to facilitate preservation for an additional 30 years. Modifications could include termination of restrictions on the distributions of surplus cash.

The bill also includes provisions for the preservation of affordable rural housing, making permanent a Sec. 515 recapitalization and preservation demonstration program started in fiscal 2006.

The legislation would also encourage owners participating in the Sec. 8 mark-to-market program to use green building principles in rehabbing their properties, and it would authorize the conversion of Sec. 202 projects to service- enriched housing that makes supportive services available to residents through third-party providers.

The Choice Neighborhoods initiative authorized in the public housing revitalization bill would expand and replace the HOPE VI program. The initiative aims to transform extremely poor neighborhoods into mixed-income communities by revitalizing distressed public and assisted housing, improving access to economic opportunities, and investing in services, education, public assets, transportation, and access to jobs.

The bill would authorize $575 million for the program in fiscal 2011.

The public housing revitalization bill would also amend Sec. 18 of the U.S. Housing Act, which governs public housing demolition and disposition, to require one-for-one replacement of each unit that is demolished, disposed of, or the subject of a taking after Aug. 1, 2008. Replacement housing could be provided through new construction, rehabilitation, acquisition, or conversion.

HUD could waive the replacement requirements for up to 10 percent of a public housing authority's units in a 10-year period if compliance is restricted by a court order or if there is an excess supply of affordable rentals in lowpoverty areas.

House passes fiscal 2011 HUD appropriations bill

The Obama administration will apparently have to wait at least a year to launch its transforming rental assistance initiative for the conversion of public and assisted housing to project-based Sec. 8 contracts.

The full House and the Senate Appropriations Committee have approved fiscal 2011 HUD appropriations bills (H.R. 5850, S. 3644) with no money for the program, and there has been no movement on authorization legislation. HUD's fiscal 2011 budget included $350 million for conversion of about 300,000 units in the first phase of the program.

The administration may have better luck in getting its Choice Neighborhoods initiative off the ground, since there has been positive action on that proposal in both houses.

The Senate committee agreed with the administration's proposal to provide $250 million for Choice Neighborhoods, with no money for HOPE VI. Although the House appropriations bill doesn't fund Choice Neighborhoods, instead providing $200 million to continue HOPE VI, the Financial Services Committee has approved authorizing legislation.

There are relatively small differences in funding for other major HUD programs in the House and Senate bills. For Sec. 8, the House has $19.4 billion for tenant-based assistance, including $17.1 billion for contract renewals, and $9.4 billion for project-based assistance. The Senate measure includes $19.5 billion for the tenant-based program, with $17.2 billion for voucher renewals, and $9.4 billion for project-based assistance.

For public housing, both bills have $4.8 billion for the operating fund and $2.5 billion for the capital fund. The House approved $2.2 billion for homeless assistance compared with $2.1 billion in the Senate bill, while both have about $1.8 billion for HOME, $4 billion for Community Development Block Grants, and $700 million for Indian housing block grants.

Both bills include $825 million for Sec. 202 housing, but the House has $300 million for Sec. 811 housing for the disabled compared with $200 million approved by the Senate committee. The House bill provides $350 million for Housing Opportunities for Persons with AIDS, and the Senate measure has $340 million.

Barry G. Jacobs is editor of Housing and Development Reporter, the nation's premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments,” and an up-to-date compilation of essential documents in the “HDR Reference Files.” Jacobs is also the author of the annually updated HDR Handbook of Housing and Development Law. For more information, call (800) 723-8077.