HUD Rental Housing Policy, 2011-2012: Answering the Call Housing California April 27, 2011 Margaret Salazar, Senior Hous

1. HUD Rental Housing Policy, 2011-2012: Answering the Call Housing California April 27, 2011 Margaret Salazar, Senior Housing Program Specialist Office of Multifamily Housing

2. A Renewed Focus on Rental Housing Rebalancing HUD Priorities to Rental Housing and Housing Preservation: • Growing Need: “Worst case housing needs” grew by nearly 1.2 million households, or more than 20 percent, from 2007 to 2009 and by 42 percent since 2001. • HUD’s existing Multifamily assisted housing stock totals 1.4 million units. 450,000 units are at risk due to Opt-out, maturity or failure. • Loss of Stock: Over the last 10 years, for every 3 new affordable housing units built in the U.S., we have lost 2 affordable units. • In the last 15 years we have lost nearly 170,000 Section 8 units due to opt-out, foreclosure or abatement.

3. What do we mean by “Preservation”? Preservation refers to maintaining the affordability, rental assistance (if applicable) and physical viability of Multifamily and public housing properties, and protecting tenants from displacement. Major risks include: • Opt-Outs • Other contract terminations (Rent Supplement and RAP) • Maturing mortgages and expiring Use Agreements • Physical deterioration • Financial trouble/default

4. Wave of Maturing Mortgages About to Hit… • 2004 GAO Study highlighted the issue of impending mortgage maturities. 2012 to 2015 are the peak years. California is disproportionately impacted with more than 300 maturing properties. • CHPC Report on Maturing Mortgages in California: http://chpc.net/preservation/documents/Mortgages_HPN_062110.pdf

5. The Multifamily Preservation Agenda Office of Multifamily Housing has a comprehensive administrative and regulatory agenda to preserve properties and address these issues. Major areas include: 1. Facilitating Refinance and Rehab of properties 2. Improve outreach and public awareness of Owners, tenants and stakeholders. 3. Innovative new programs to preserve rental housing, with an emphasis on no or low-cost solutions.

6. Facilitating Refinance and Rehab Goal: to incentivize owners to prepay HUD mortgage before it matures, and refinance and repair the property, or sell to a purchaser who will maintain affordability. Strategies include: • Refinance and subordination of Section 202 Direct Loans to facilitate the preservation of supportive housing for the elderly. • Conversion of units to reduce vacancies (address obsolete housing) and defer “flexible subsidy” debt. • See Housing Notices 10-14, 10-26, 11-03 and 11-05: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/notices/hsg

7. Refinance and Rehab continued… • Tax Credit pilot – streamlined processing of FHA mortgage insurance applications with tax credits, including properties with Section 8 rental assistance. • Section 8 Renewal Guide – forthcoming guide makes changes that make it easier to use Section 8 with Low Income Housing Tax Credits and to secure financing for repairs. • Incentives to sell properties – forthcoming Notice allowing Nonprofits to sell properties to purchasers who will guarantee affordability and have capacity to operate property. • Residual Receipts – changes to Handbook chapter on Residual Receipts to facilitate Owners accessing project resources to make repairs.

8. Building the Toolbox • Training for Multifamily Owners: Comprehensive training for owners on preservation options such as 20 year contracts, refinance and repairs, selling property to preservation purchaser. 8 cities, 3 days per city, kicks off Fall 2011. • Tenant Resource Network: NOFA providing $10 million in grants to nonprofits to outreach, engage and educate tenants on their rights in the event of an Opt-out, prepayment, or mortgage maturity. • Improving communications and data to inform and engage stakeholders. • Setting concrete goals for field offices to track/prevent the loss of assisted units and to encourage 20 year contract renewals.

9. New Initiatives: Rental Assistance Demonstration The President’s FY12 Budget includes $200 million Rental Assistance Demonstration to preserve approximately 100,000 to 150,000 units. • The Demonstration focuses on preserving public housing and orphan programs by allowing PHAs to convert public housing to Section 8 contracts to leverage private capital for rehab. This approach will put public housing on solid financial footing for the long term. • Demonstration would allow PHAs and Rent Supp, RAP and Mod Rehab owners to convert to Project Based Contracts with 20-year terms, or Project Based Vouchers with 15-year terms. • Administrative Reforms/Streamlining. At the same time that it pursues the Demonstration, the Department will advance a number of administrative reforms to its existing programs in support of the larger rental housing preservation agenda.

10. New Initiatives: Choice neighborhoods $65 Million in Choice Neighborhoods Initiative FY2010 grants. 17 planning grants awarded and 6 implementation grant finalists named. Choice Neighborhoods is an innovative approach to preserving the most distressed HUD-assisted and public housing: Supporting local communities to transform neighborhoods Sustainable, mixed-income neighborhoods with affordable housing Safe streets and good schools to meet the needs of families. Choice Neighborhoods builds on the legacy of Hope VI, with key improvements. It is inter-agency, includes assisted housing other than public housing, and is grounded in jobs, education and community participation. FY11 CR allocates $65 million for Choice Neighborhoods, carved from the $100 million appropriated for Hope VI. FY2011 NOFA builds from lessons learned in FY2010 and will be published in the next few months.

11. Section 202 Supportive Housing Reforms • Implementing Supportive Housing for the Elderly Act of 2010 (SB 118) – more flexibilities and resources for prepayment of older 202s: • Use of proceeds: Proceeds from refinance may be used in other HUD-assisted senior properties. • Fewer limitations on use of funds for social services • Creates Senior Preservation Rental Assistance Contract (SPRAC) – first new authority for project based rental assistance in nearly 30 years. • May use existing authority to refinance now, including receipt of Enhanced Vouchers for unassisted residents. • Reforms for Section 202 new construction. NOFA includes reforms such as requiring readiness of projects, incentives for leveraging of funds, and funds allocated to Multifamily Hubs rather than local offices. • Ongoing efforts to modernize Section 202 program to work well with mixed financing and to create efficiencies.

12. Celebrating our Successes • Record number of 20 year HAP Contracts signed • Meeting or exceeding our Department-wide goals for limiting the loss of assisted units • Several Notices issued that facilitate preservation – deferral of flex sub repayment; refinance of 202s; Unit conversions • Funding for Choice Neighborhoods in FY10 and FY11 appropriations bills • S. 118 bill passed, facilitating preservation of Section 202 Senior Housing.

13. Contact Information Margaret Salazar, Senior Program Specialist Office of Multifamily Housing Programs Margaret.s.salazar@hud.gov (202) 402-2423