CARH’S BROADCAST E-MAIL – Legislative & Regulatory Update

July 20, 2015

1)  Senate Appropriations Committee Reports USDA Funding Bill for Fiscal Year (FY) 2016 to Senate

On July 16, 2015, the full Senate Appropriations Committee reported to the full Senate, S. 1800, the Fiscal Year 2016 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, by a vote of 28-2. The Senate bill contains $143.8 billion in discretionary and mandatory funding, $24 billion below the President’s budget request and $3.7 billion below the FY 2015 enacted level. The discretionary funding portion of the bill totals $20.51 billion, $65 million below the FY 2015 enacted level. Required mandatory spending in the bill, which is outside the discretionary funding jurisdiction of the Senate Appropriations Committee, totals $123.3 billion. Click here for the funding chart which compares the budget request, the House Committee’s recommendation (H.R. 3049) and now the Senate Committee.

The House and Senate versions are similar, but not identical. The Senate’s version of the FY 2016 funding bill provides $200 million in budget authority for the Section 538 Guaranteed Rural Rental Housing program, which is the Administration’s budget request and $50 million more than the House. In addition, the Senate would fund the Section 521 Rental Assistance (RA) program at $1.167, the same as the House and $6 million less than the budget request for FY 2016.

What is striking about the Senate bill is that the accompanying report containing strong language (S. Report 114-82) regarding how the department has calculated RA needs:

“The Committee has lost confidence in USDA’s ability to accurately estimate rental assistance needs. The Department has a well-established history of faulty calculations and subsequent ad hoc, informal, requests for additional funds to cover shortfalls. This behavior places very low- and low-income rural households at risk of untenable rent increases, and undermines the credit soundness of Rural Development’s $11,000,000,000 multi-family housing loan portfolio. The Secretary is directed to effect process changes that will result in the fiscal year 2017 budget request revealing the true amount needed to renew all expiring rental assistance contracts. Further, the Secretary is directed to report to the Committee, within 30 days of enactment, on the Department’s path forward regarding that effort. In addition, the Committee has engaged the Government Accountability Office to perform a comprehensive review and to provide recommendations.”

The Senate Report took a decidedly pointed issue with expiring mortgages. As CARH members know from previous broadcast emails, if a Section 515 mortgage expires, Section 521 RA also lapses. Current law does not allow for rural housing vouchers to be used when a mortgage expires. CARH and other housing advocates have been in discussions with the agency and the Hill regarding a long term solution to the expiring mortgages. CARH supported language making available rural housing vouchers to existing residents in maturing properties in FY 2016. At CARH’s Annual Meeting and Legislative Conference, the Owners Committee recommended a special subcommittee to review and address the issue of expiring mortgages. This special CARH subcommittee will begin discussions next month. The Senate Appropriations Committee, however, approached the issue this way:

“Maturing Mortgages.—The Committee is concerned about the increasing number of Section 515 multi-family housing loans that are reaching maturity and being paid off. As these loans mature and the projects leave the affordable housing program, low- and very low-income rural households could face untenable rent increases and possible eviction. The Committee has engaged the Government Accountability Office to analyze the circumstances and provide recommendations to stabilize the situation. In addition, the Secretary is directed to continue efforts to maintain the affordable multi-family housing portfolio and protect low- and very low-income rural residents from unmanageable rent increases.”

Another issue singled out by the Committee involves RD policies complicating preservation:

“Subordinate Debt.—The Committee is aware of USDA’s policy for Section 515 loans that prohibits the utilization of cash-flow debt on its subordinate financings (7 CFR 3560.306). The Committee acknowledges the important role that State agencies play in providing subordinate loans for rural rental housing properties, some of which allow the properties to repay the State loans only if there are surplus funds in the properties’ operating budgets. However, USDA regulations disallow that use for surplus funds, and thereby diminish financing available from State sources. The Committee directs the Secretary to develop a long-term solution to promote the preservation of affordable rural rental housing that allows State agencies to use cash-flow loan financing to fully leverage Federal funding with State dollars and provide affordable housing for rural residents.”

Neither the House nor Senate committees accepted other language requested by the Administration.  Congress did not give the Secretary the ability to decide what RA contracts would be renewed, and did not include a $50.00 minimum rent.

However, like the House, the Senate agreed to the language in the President’s budget prohibiting RD to renew RA contracts more than once during a fiscal year, also called “re-renewal”.  This language was first proposed in the President’s FY 2015 budget and agreed to by the Congress during the FY 2015 budget debates.

As noted above, Congress did not expand vouchers to residents of maturing properties. However, CARH and other advocates will continue to educate Congress on the need to have voucher  language added in Conference, while working to  have the “RA re-renewal language” deleted.  Both undertakings will be difficult in the current legislative environment.  It is unclear when the Senate will consider the USDA funding bill. As reported in the broadcast email dated July 9, 2015, it appears that votes on individual appropriations bills are unlikely prior to the beginning of the new fiscal year (October 1, 2015).  It is likely that there will be an omnibus appropriations bill that may be short-term or long-term based on leadership action.

2)  Update – HUD Funding

The House and Senate Appropriations Committees also reported out appropriations for Transportation and Housing and Urban Development (T-HUD) bill for FY 2016 substantially below the President’s request. The House and Senate each included Sequestration limitations, whereas the Administration seeks appropriations above Sequestration.  The House and Senate bills did not support numbers that CARH supported, as CARH reported in recent broadcast emails (June 23 and July 9).

3)  Follow-up Management Fee Letter sent to RD

On June 25, 2016, CARH sent a broadcast email to our members informing them that RD was approving an increase in management fees for 2016 based on OCAF. A Procedural Notice (PN) which officially allows this OCAF adjustment to go forward is in the clearance process at RD.  As soon as that PN is issued we will advise the membership. CARH, together with the National Affordable Housing Management Association (NAHMA), sent the attached letter to RD.  This letter was a follow-up to RD’s proposal back to the industry regarding additional incentives that should be included for management fees in the future. As CARH members will recall, due to the work of Kevin Flynn and Bill Shumaker, a comprehensive proposal for determining management fees starting with the OCAF was developed and agreed to by CARH other affordable housing advocates.  This proposal was then sent to RD. On May 4, 2015, RD countered with a proposal which incorporated many of the industry’s recommendations.  However, as you can see from the letter additional items need to be addressed by RD.  We will continue to work with RD on a proposal that will provide some certainty and consistency on fees going forward.

If you have any questions, please contact CARH at 703-837-9001 or carh@carh.org.