1971 Housing and Urban Development Legislation, Hearings Before the Subcommittee on Housing and Urban Affairs ..., 92:1- ....

X. PROGRAM LEVELS AMENDMENT THIRTEEN

The proposed bill does not contain adequate advance authorizations for our housing programs. Therefore, we recommend additional authorization for each of the following programs. In addition, it should be noted that the bill actually "drops" existing authorization for the Rent Supplement Program. We have added these existing authorizations to the Section 502 authorizations.

The amount of the authorization which we recommend in Amendment Thirteen are as follows:

(a) Home Ownership Program under Section 402:

On July 1, 1972 (for fiscal 1973) an additional authorization of $250 million.

On July 1, 1973 (for fiscal 1974) an additional authorization of $300 million.

On July 1, 1974 (for fiscal 1975) an additional authorization of $300 million.

(b) Rental and Cooperative Housing Program under Section 502:

On July 1, 1970 (for fiscal 1971) the authorization should be $250 million.* On July 1, 1971 (for fiscal 1972) the authorization should be $240 million.** On July 1, 1972 (for fiscal 1973) an additional authorization of $350 million.

On July 1, 1973 (for fiscal 1974) an additional authorization of $400 million.

On July 1, 1974 (for fiscal 1975) an additional authorization of $400 million.

It should be noted that under the proposed bill, Section 502 would include both the interest assistance (which now includes the Section 202 Elderly Housing Program) and rent supplement programs; accordingly, the proposed authorizations reflect the needs of both programs.

On July 1, 1971 (for fiscal 1972) an additional authorization of $300 million.

On July 1, 1972 (for fiscal 1973) an additional authorization of $350 million.

On July 1, 1973 (for fiscal 1974) an additional authorization of $400 million.

On July 1, 1974 (for fiscal 1975) an additional authorization of $400 million.

STATUTORY AMENDMENT LANGUAGE

AMENDMENT ONE-TO PRECLUDE RENT INCREASES FOR EXISTING TENANTS

Section 202, beginning on page 106 at line 19 and ending on page 107 at line 14, which is entitled "Applicability of Rental Requirements" is hereby deleted and the following is inserted in place thereof:

"Section 202. The rental provisions in Section 9 of the United States Housing Act of 1937 shall only require and permit the establishment of an increased rental charge (due to the amendments in this Act relating to the computation or definition of income or tenant's income contribution) for a tenant who commences occupancy of a low-income housing dwelling unit after the effective date of this title and no such increased rental charges may be applied to tenants who occupied low-income housing dwelling units on or before the effective date of this title." AMENDMENT TWO-TO PROVIDE DEDUCTIONS FROM INCOME CURRENTLY ALLOWED AND FOR APPLICATION OF UNIFORM STANDARDS

I. Section 402 (j) is amended by deleting the entire subparagraph (j) at lines 18-22, on page 29, and including in place thereof the following:

"In determining the income of any family for the purposes of this Section, the Secretary shall consider income from all sources of each member of the family residing in the household who is at least eighteen years of age except that:

(A) income for any family member below the age of eighteen, nonrecurring income, as determined by the Secretary, and the income of full-time students shall be excluded;

In order to include the $100 million previously authorized for the Rent Supplement Program. In order to include the $40 million previously authorized for the Rent Supplement Program.

(B) an amount equal to the sum of (i) $300 for each dependent, (ii) $300 for each secondary wage earner, (iii) 5 percentum of the family's gross income (10 percentum in the case of elderly families) and (iv) those medical expenses of the family properly considered extraordinary shall be deducted; and,

II. Section 502 (k) is amended by deleting the entire subparagraph (k) at lines 8-12, on page 38, and inserting in place thereof the following:

(A) income for any family member below the age of eighteen, nonrecurring income, as determined by the Secretary, and the income of full-time students shall be excluded;

AMENDMENT THREE-TO PROVIDE THAT INCOME LIMITS WILL BE APPLICABLE ONLY TO FAMILIES WHO RECEIVE ASSISTANCE PAYMENTS

I. Section 402 (i) is amended by inserting in the first sentence at line 10. on page 29, between the words "incomes" and "do" the following: "at the time of their acquision of the property."

II. Section 502(j) (2) is amended by inserting in the first sentence at line 1. on page 38, between the words “exceed” and “the”, the following: “at the time of the initial renting of the project."

AMENDMENT FOUR-TO PROVIDE FOR NECESSARY REPAIRS, IMPROVEMENTS AND OTHER COSTS REQUIRED TO ACHIEVE HOME OWNERSHIP IN PUBLIC OWNERSHIP IN PUBLIC HOUSING

Section 10 of the proposed United States Housing Act of 1937 (as amended in Section 201) is amended as follows:

(a) by inserting at the end of subsection (c)(3) at line 13 on page 103 the following: "Provided that in the case of a sale of a housing project to a cooperative which will operate on a nonprofit basis and restrict permanent occupancy of its dwellings to members, the mortgage or other obligation shall be in a principal amount equal to the unpaid balance on the public housing agency's outstanding obligations relating to the project, including the additional obligation issued to obtain funds to be expended or advanced by the public housing agency for prepaid expenses and closing costs (which includes the costs involved in achieving cooperative ownership) and for necessary repairs and improvements to make the housing suitable for cooperative ownership; and the cooperative shall give preference in membership admissions to tenant families in the low-rent housing project being acquired and to families of low income eligible for low-income housing."

(b) by deleting subsection (b) (4), at lines 19 through 23 on page 101 and inserting the following in place thereof:

"(4) bear interest at the rate or rates on the public housing agency's outstanding obligations relating to the project;"

(c) by inserting the following at line 19 on page 103 at the end of subsection (d): "To assist in achieving the cooperative and other homeownership objectives of this section, the Secretary may make additional annual contributions to public housing agencies to cover the debt service on loans to public housing agencies from the Secretary or others for necessary repairs and improvements, prepaid expenses and closing costs. The Secretary shall include the provisions for such additional annual contributions in a contract guaranteeing their payment. After the sale of projects or properties under this section, the annual contributions paid by the Secretary to public housing agencies will continue to be utilized for the purpose of assisting in achiev

ing and maintaining the low-income housing character of the property." (d) by deleting everything in subsection (c) after the word "utilities" in lines 23 to 24 on page 102 and the end of the sentence in line 10, page 103 and inserting in place thereof the following: "repairs and maintenance as determined by the Secretary on the basis of estimated costs in the area."

AMENDMENT FIVE-TO DEFINE COOPERATIVES IN ACCORDANCE WITH EXISTING LAWS AND PRACTICES

Section 1 is amended by redesignating subsections (i), (j), (k), and (1) as subsections (j), (k), (1), and (m), respectively, and inserting the following subsection (i) at line 10 on page 3:

"(i) The term 'cooperative' means a nonprofit corporation or a nonprofit housing trust organized for the purpose of construction, rehabilitation, or acquisition of housing and related facilities:

(1) when the permanent occupancy of the dwellings will be restricted to members of such a cooperative which will be eligible for mortgage insurance and assistance under the provisions of Section 501 or 502 of this Act or for the purchase of a low-rent housing project under Section 10(a) of the United States Housing Act of 1937; or

(2) when the individual dwelling units, upon completion of the construction or rehabilitation of the project, are to be sold to purchasers eligible for mortgage insurance and assistance under the provisions of Section 401 or 402 of this Act and when the cooperative has consumer-oriented sponsorship and will continue to provide community facilities for the owners of such dwelling units."

AMENDMENT SIX-TO CONTINUE PARTICIPATION BY INVESTOR SPONSOR IN COOPERATIVE

PROGRAM

Section 501 (a)(1) is amended by deleting clause (ii) from lines 10 through 14 on page 30 and inserting the following in place thereof:

"(ii) housing or a housing project which is owned by a cooperative or which is constructed or rehabilitated by an investor-sponsor (who meets such requirements as the Secretary may impose to assure that the consumer interest is protected) and is to be sold to a cooperative eligible for mortgage insurance under the provisions of this title;"

AMENDMENT SEVEN-TO PROVIDE COMPARABLE TREATMENT AS TO $20,000 AMOUNT OF COOPERATIVE MORTGAGES PER UNIT AS COMPARED WITH SINGLE FAMILY HOME

MORTGAGES

Section 501 (d) is amended:

(a) by deleting the parenthetical clause from line 19 on page 31; and (b) by placing a colon ot the end thereof and adding the following: "Provided that in the case of a cooperative mortgagor, the mortgage shall have a principal obligation not in excess of 100 per centum of such replacement cost in evcess of $20,000 per unit."

Section 501 (e) is amended:

(a) by deleting the parenthetical clause from lines 23 and 24 on page 31; and

(b) by placing a colon at the end of the first sentence thereof and adding the following: "Provided that in the case of a cooperative mortgagor the mortgage shall have a principal obligation not in excess of 100 per centum of such estimate of $20,000 per unit and 97 per centum of such estimate in excess of $20,000 per unit."

Section 501 (f) is amended:

(a) by deleting the parenthetical clause from lines 6 and 7 on page 32; and

(b) by placing a colon at the end thereof and adding the following: "Provided that in the case of a cooperative mortgagor the mortgage shall have a principal obligation not in excess of 100 per centum of the appraised value for nonprofit use of $20,000 per unit and 97 per centum of such value in excess of $20,000 per unit; such value of the property for nonprofit use shall be based upon a mortgage amount on which the debt service can be met from the income of the property when operated on a nonprofit basis, after payment of operating expenses, taxes and required reserves."

AMENDMENT EIGHT-TO CONTINUE THE AUTHORIZATION OF COOPERATIVE MORTGAGES WITH SALES OF INDIVIDUAL UNITS UPON COMPLETION

1. Section 402 (h) (1), is amended by adding after clause (1) in line 24 on page 28 the following:

"(2) an individual dwelling unit sold by a cooperative;" and by redesignating clause (2)" as clause "(3)”.

2. Section 501 (a) is amended by inserting in clause (iii) after the word "condominium basis" in line 16 on page 30 the following:

"or by a cooperative."

3. Section 502(b) (2) is amended by deleting the following from line 20 on page 33 after the word "cooperative":

"housing corporation".

AMENDMENT NINE-TO CONTINUE THE 10 PERCENT PROFIT AND RISK ALLOWANCE ON MULTIFAMILY HOUSING PROJECTS INVOLVING 90 PERCENT MORTGAGES AND TO PROVIDE SIMILAR TREATMENT CONCERNING BUILDER'S PROFITS ON OTHER MULTIFAMILY

MORTGAGES

Section 501 (a) (2) is amended by striking the phrase "builders and sponsor's profit and risk allowance," from lines 22 and 23 on page 30 and inserting the following at the end thereof at line 26 on page 30:

"In projects where the mortgage will not exceed 90 per centum of replacement cost, such replacement cost shall include an allowance for developer's profit and risk of 10 per centum of all the foregoing items, except the value of the land. leasehold, or property prior to the beginning of construction, rehabilitation, or development (unless the Secretary, after finding that such allowance is unreasonable, shall by regulation prescribe a lesser percentage). To encourage projects involving cooperatives and other nonprofit mortgagors, the Secretary shall include in the replacement cost thereof an amount for developer's profit and risk which will be fair and uniform as compared with the amount allowed in projects involving profit mortgagors."

AMENDMENT TEN-TO INCLUDE NECESSARY ADDITIONAL PROVISIONS ON COST CERTIFICATION

(1) Section 506(a) on pages 49 and 51 is hereby amended to read as follows: "The Secretary shall adopt such requirements as he determines necessary to assure that the amount of any mortgage or loan finally endorsed for insurance under this Act which involves multifamily housing, land development or a health facility does not exceed the approved percentage of (1) the actual cost of such construction, rehabilitation, or development, plus (2) the amount of allowances for the following:

(A) the Secretary's estimate of the value of the land or property prior to the beginning of construction, rehabilitation, or development; or, in case the land in the property or project is held by the mortgagor under a leasehold or other interest less than a fee, such amount as the mortgagor paid for the acquisition of such leasehold or other interest, but, in no event, in excess of the Secretary's estimate of the fair market value of such leasehold or other interest exclusive of the proposed improvements;

(B) an allowance for profit and risk in the amount prescribed in Section 501 (a) (2) and an allowance representing such allocation of general overhead items as are determined by the Secretary to be acceptable and reasonable, except to the extent that these allowances have been paid by the mortgagor under the construction contract or except where there is a construction contract with a lump-sum price; and

(C) where prefabricated houses or major housing compenents are furnished by a subcontractor or supplier having an identity of interest with the mortgagor or builder, an allowance representing the Secretary's estimate of the value of such prefabricated houses or major housing components. (2) Section 506(c) (2) on page 51 is amended by striking the last sentence thereof.

AMENDMENT ELEVEN-REGULATION OF SETTLEMENT COST

Section 4 is amended by designating the first paragraph at line 24 on page 6 as "(a)" and by adding the following new paragraphs (b) and (c) beginning at line 8 on page 7:

(b) Where a discount is collected in the mortgage transaction by the mortgagee, the mortgagor and the builder or other settler or other person or entity involved in the transaction shall be permitted to negotiate to determine what share each will pay of such discount. The mortgagee shall be required to report to the Secretary the amount of discount collected or withheld from each party to the transaction.

(c) The Secretary shall prescribe standards governing the amounts of settlement costs payable by the mortgagor in connection with the financing of housing constructed, rehabilitated, repaired, or purchased with assistance provided under this Act. Such standards shall be based on the Secretary's estimates of the reasonable charge for necessary services involved in settlements for particular classes of mortgages and loans.

AMENDMENT TWELVE-TO MAKE NECESSARY CHANGES IN STATUTORY REFERENCES TO COVER LOAN OR MORTGAGES INSURED UNDER THE 1971 ACT

Section 102 is amended by designating the first paragraph (a) at line 17 on page 74 and inserting the following new paragraphs (b) and (c), line 26, on page 74:

"STATUTORY REFERENCES TO LOANS OR MORTGAGES INSURED UNDER THIS ACT" Section (b). Loans or mortgages insured under Titles IV and V of the Housing Consolidation and Simplification Act of 1971 shall be deemed to be loans or mortgages insured by FHA under the National Housing Act for purposes of any references in Federal, state or local laws relating to the eligibility or authorizations of such loans or mortgages or purchase or investments thereof by banks, financial institutions, fiduciaries, trusts or otherwise.

(c) The reference in the Tax Reform Act of 1969 to the "Housing and Urban Development Act of 1968" is amended to include the "Housing and Consolidation and Simplification Act of 1971"; the references to a mortgage insured under Section 221 (d)(3) or 236 of the National Housing Act are amended to include "Section 502 of the Housing Consolidation and Simplification Act of 1971"; and the references to an "approved disposition" under Section 221(d)(3) or 236 of the National Housing Act is amended to include “Section 502 of the Housing Consolidation and Simplification Act of 1971".

(d) Section 102(h) of the Housing Amendments of 1955 (Public Law 171, 81st Congress, 63 Stat. 413, 4381) is hereby amended by deleting the following: “Section 213 of the National Housing Act, Section 221(d) (3) of the National Housing Act, and Section 101 of the Housing and Urban Development Act of 1965 (insofar as the provisions of such sections relate to cooperative housing)" and by inserting in place thereof: "the Nation Housing Act and the Housing Consolidation and Simplification Act of 1971 insofar as the provisions thereof relate to cooperative housing."

AMENDMENT 13-TO PROVIDE ADDITIONAL AUTHORIZATIONS AND FUNDING FOR

PROGRAMS

1. Section 402(g) (1) is amended by deleting the phrases "and by such sums as may be necessary thereafter" at page 28 and inserting in place thereof the following: $250,000,000 on July 1, 1972 and by $300,000,000 on July 1, 1973, and by July 1, 1974."

2. Section 502 (h) is amended by deleting the phrase "and by such sums as may be necessary thereafter; at lines 17 and 18 on page 36 and inserting in place thereof the following: "$250,000,000 on July 1, 1970, by $280,000 on July 1, 1971, by $350,000,000 on July 1, 1972 and by $400,000,000 on July 1, 1973," and on July 1, 1974."

3. Section 5(c) of the proposed United States Housing Act of 1937 (as amended in Section 201) is amended as follows:

(a) by deleting lines 3 and 4 on page 84 and inserting in place thereof the following: "by $300,000,000 on July 1, 1971, by $350,000,000 on July 1, 1972 and by $400,000,000 on July 1, 1973 and July 1, 1974, of the aggregate amount of contracts for."

Senator STEVENSON. The next witness is Mr. Paul Davidoff.

Mr. Davidoff is a member of the board of governors of the American Institute of Planners.

86-138 0-71-pt. 2-5

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