Preserving Affordable Housing

Privately-owned, federally-subsidized housing is home to over 42,000 low-income households in Minnesota (11,000 units in rural areas through USDA’s Rural Development 515 Program; 31,000 units primarily in urban and suburban areas through the project-based Section 8 program).

Today, communities are faced with the challenge of ensuring their affordable homes are not permanently lost through deterioration or when the contracts with private landlords expire. These challenges are made worse because many of the existing tenants waited years to receive assistance. Feeling fortunate to have even gotten help, these residents are often scared to ask their landlords about needed repairs and / or whether the housing they are living in will stay affordable for the long-term.

These problems arose out of a roller-coaster history for the program.  In the 1960’s and 1970’s, HUD encouraged private developers to build affordable housing through low-interest HUD-insured loans. Contracts ranged from 15 years to 40 years. In exchange, the owners were required to keep the rents affordable to low and moderate income people. Generally, tenants pay 30% of their income for rent; HUD pays the rest.

In the mid-1980’s, some owners began paying off their loans which released them from the obligation of providing affordable housing. At the time, there were no protections for residents and nothing to keep these properties affordable. In 1987, Congress became concerned that much of the subsidized housing stock would be lost, so they passed legislation designed to keep the properties affordable. These laws provided incentives for owners to keep buildings affordable and restricted them from prepaying their loans (which would let them leave the program). Congress lifted the prepayment restrictions in 1996 and stopped funding incentives the next year. Many properties converted to market-rate housing.

Concurrently, in 1994, Congress created Outreach and Technical Assistance Grants — or OTAG — to provide individual and groups of tenants OTAG the tools to address any concerns they have with their housing (affordability, repairs, management, overall livability) in HUD-assisted multifamily buildings (particularly those at-risk of converting from being affordable units to becoming market-rate units).  OTAG resulted in preserving the affordability of thousands of units.  However, the program was suspended in the early 2000s.

January 2010:  FY 2010 Funding Wrap-Up:

(Source:  CBPP, 23 December Memo):  On December 16, the President signed into law an omnibus funding bill for fiscal year 2010 that includes funding for affordable housing and community development programs administered by the Department of Housing and Urban Development (HUD).  In the law, $8.55 billion is provided, including an advance appropriation of $394 million for fiscal year 2011. The total includes $8.33 billion for contract renewals, an increase of $1.1 billion, or nearly 15 percent.

Future Policy Needs Update:

A draft preservation bill that may be introduced by Rep. Barney Frank includes substantial overhaul provisions in response to the potential loss of this housing stock, including:  1) the establishment of a national preservation catalog of buildings that are at-risk; 2) increased opportunities for HUD to provide funding upfront for capital improvements; 3) refinancing and preservation relating to rural housing and elderly housing;

Rep. Frank has noted in recent weeks that some of the original tenant-related provisions may be removed, such as: right to purchase, third party beneficiary status, and tenant access to information.

Minnesota’s Financial Service Committee members Paulsen, Bachmann, and Ellison will have first votes on this bill if it is introduced this year.