CUOMO AND RUBIN PROPOSE BILL
TO END "OUT OF WHACK" RENT SUBSIDIES

WASHINGTON -- HUD Secretary Andrew Cuomo and Treasury Secretary Robert Rubin today proposed joint legislation that will end excessive taxpayer subsidies to landlords and bring back into line "out of whack" rents for assisted housing that are often more than twice as high as fair market rates.

Cuomo said Rubin's active participation in the development of the legislation, entitled Housing 2020: Multifamily Management Reform, represents the first time that HUD and Treasury have proposed joint legislation on housing and tax policy.

"This legislation will bring the out-of-whack rents that Uncle Sam pays in line with what everybody else pays. With the support of President Clinton and the help of Secretary Rubin, taxpayers will no longer have to pay $820 for a subsidized apartment that normally rents for $380 in the private market.

"I commend Secretary Rubin's willingness to take on this very tough issue to address a very real concern: providing and protecting affordable housing for families," said Cuomo, standing with Rubin and housing and community development representatives at a press conference to announce the legislation.

Secretary Rubin said, "This proposed legislation contributes to fiscal responsibility and maintains and extends the commitment by this Administration to provide affordable housing for hundreds of thousands of low-income families."

At the press conference, the following housing and community development advocates expressed their support of the legislation: Tom Cochran, Executive Director, U.S. Conference of Mayors; Paul Grogan, President & Chief Executive Officer, Local Initiatives Support Corporation; Cushing N. Dolbeare, long-time housing/public policy consultant; Larry E. Naake, Executive Director, National Association of Counties; and Bart Harvey, Chairman and Chief Executive Officer, Enterprise Foundation.

Differences between the rents on federally-assisted and non-assisted properties can be, in some cases, more than twice as much. In Las Vegas, the average federally-assisted apartment is $820, while the private market rate is $380. In Pittsburgh, the comparison is $773 to $397. In Detroit, it's $751 to $479. (See press packet for more comparisons.)

Housing 2020 ends these excessive rent subsidies by renegotiating and reducing HUD- insured mortgages with owners of housing developments and helping them manage adverse tax consequences as a result of the mortgage restructuring. At the same time, the legislation ensures affordable housing for families and generates a savings to taxpayers of $1.4 billion over five years.

The need for the legislation results from a housing policy, initiated under the Nixon Administration, that provided 20-year contracts with housing developers to encourage them to build subsidized housing for low-income people. Housing 2020 acknowledges that the federal government can no longer afford to subsidize housing developments in excess of market rates, as it has in the past.

At the same time, the legislation recognizes that renegotiated mortgages resulting in lower subsidies could force owners into defaults, harming the families and elderly who live in federally-assisted housing. As a result, the legislation includes tax provisions to allow owners to stretch out their tax bills that result from mortgage restructuring over a period of up to 10 years. This part of the legislation provides an incentive for owners to renegotiate their mortgages with lower rent subsidies. In exchange, owners will agree to keep 40 percent of their units affordable for families earning 60 percent of the median income for a period of 15 years.

The legislation also provides necessary housing rehabilitation financed through the mortgage renegotiations and greater flexibility for HUD to design housing solutions. (See the press packet for a detailed summary of the legislation.)

The number of over-subsidized, HUD-insured rental apartments totals about 500,000, housing about 850,000 low-to-moderate income people nationwide.

Comments on the legislation follow:

"The Enterprise Foundation supports the Clinton Administration's proposal for a rational and reasonable approach to addressing Section 8 properties," said Enterprise Chairman and CEO Bart Harvey. "A plan that flexibly uses project-based rental assistance and provides tax relief in return for transfer of properties to community-based nonprofit organizations will attract new capital to the industry and provide a prescription for success."

"The HUD/Treasury proposal is a major step toward resolving the most critical low income housing issue facing the nation," said Housing and Public Policy Consultant Cushing Dolbeare. "Every year that goes by without resolving this issue exacerbates the problems facing residents and their neighborhoods, and moves us further from the national goal of decent, affordable housing."

"We applaud HUD and the Department of the Treasury for carefully drafting legislation that aims to preserve the federal government's substantial investment in affordable multifamily rental housing while reducing excessive costs," said Larry E. Naake, Executive Director, National Association of Counties.