12 U.S.C. § 1701z: Management and disposition of multifamily housing projects

is consistent with the National Housing Act [ 12 U.S.C. 1701 et seq.] and this section; will protect the financial interests of the Federal Government; and preserving certain housing so that it can remain available to and affordable by low-income persons; preserving and revitalizing residential neighborhoods; maintaining existing housing stock in a decent, safe, and sanitary condition; minimizing the involuntary displacement of tenants; maintaining housing for the purpose of providing rental housing, cooperative housing, and homeownership opportunities for low-income persons; minimizing the need to demolish multifamily housing projects; supporting fair housing strategies; and disposing of such projects in a manner consistent with local housing market conditions. The term “multifamily housing project” means any multifamily rental housing project which is, or prior to acquisition by the Secretary was, assisted or insured under the National Housing Act [ 12 U.S.C. 1701 et seq.], or was subject to a loan under section 1701q of this title . Below market interest rate mortgage insurance under the proviso of section 221(d)(5) of the National Housing Act [ 12 U.S.C. 1715 l (d)(5)]. Interest reduction payments made in connection with mortgages insured under section 236 of the National Housing Act [ 12 U.S.C. 1715z–1 ]. Direct loans made under section 1701q of this title . rent supplement payments under section 101 of the Housing and Urban Development Act of 1965 [ 12 U.S.C. 1701s ], additional assistance payments under section 236(f)(2) of the National Housing Act [ 12 U.S.C. 1715z–1(f)(2) ], housing assistance payments made under section 23 of the United States Housing Act of 1937 [ 42 U.S.C. 1421b ] (as in effect before January 1, 1975 ), or housing assistance payments made under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ] (excluding payments made for tenant-based assistance under section 8), The term “formerly subsidized project” means a multifamily housing project owned by the Secretary that was a subsidized project immediately prior to its acquisition by the Secretary. The term “unsubsidized project” means a multifamily housing project owned by the Secretary that is not a subsidized project or a formerly subsidized project. by very low-income families, the rent does not exceed 30 percent of 50 percent of the area median income, as determined by the Secretary, with adjustments for smaller and larger families; and by low-income families other than very low-income families, the rent does not exceed 30 percent of 80 percent of the area median income, as determined by the Secretary, with adjustments for smaller and larger families; or the unit, or the family residing in the unit, is receiving assistance under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ]. The terms “low-income families” and “very low-income families” shall have the meanings given the terms in section 3(b) of the United States Housing Act of 1937 [ 42 U.S.C. 1437a(b) ]. The term “preexisting tenant” means, with respect to a multifamily housing project acquired pursuant to this section by a purchaser other than the Secretary at foreclosure or after sale by the Secretary, a family that resides in a unit in the project immediately before the acquisition of the project by the purchaser. The term “market area” means a market area determined by the Secretary. The term “Secretary” means the Secretary of Housing and Urban Development. satisfying the conditions of the disposition plan developed under paragraph (2) for the project; implementing a sound financial and physical management program that is designed to enable the project to meet anticipated operating and repair expenses to ensure that the project will remain in decent, safe, and sanitary condition and in compliance with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of the housing and any such standards established by the Secretary; responding to the needs of the tenants and working cooperatively with tenant organizations; providing adequate organizational, staff, and financial resources to the project; and meeting such other requirements as the Secretary may determine. Prior to the sale of a multifamily housing project that is owned by the Secretary, the Secretary shall develop an initial disposition plan for the project that specifies the minimum terms and conditions of the Secretary for disposition of the project, the initial sales price that is acceptable to the Secretary, and the assistance that the Secretary plans to make available to a prospective purchaser in accordance with this section. In developing the initial disposition plan under this subsection for a multifamily housing project located in a market area in which at least 1 other multifamily housing project owned by the Secretary is located, the Secretary may coordinate the disposition of all such multifamily housing projects located within the same market area to the extent and in such manner as the Secretary determines appropriate to carry out the goals under subsection (a). The initial sales price shall be reasonably related to the intended use of the project after sale, any rehabilitation requirements for the project, the rents for units in the project that can be supported by the market, the amount of rental assistance available for the project under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ], the occupancy profile of the project (including family size and income levels for tenant families), and any other factors that the Secretary considers appropriate. to obtain appropriate and timely input into disposition plans from officials of the unit of general local government affected, the community in which the project is situated, and the tenants of the project; and to facilitate, where feasible and appropriate, the sale of multifamily housing projects to existing tenant organizations with demonstrated capacity, to public or nonprofit entities that represent or are affiliated with existing tenant organizations, or to other public or nonprofit entities. To carry out the procedures developed under subparagraph (D), the Secretary may provide technical assistance, directly or indirectly, and may use amounts available for technical assistance under the Emergency Low Income Housing Preservation Act of 1987, subtitle C of the Low-Income Housing Preservation and Resident Homeownership Act of 1990 [ 12 U.S.C. 4141 et seq.], subtitle B of title IV of the Cranston-Gonzalez National Affordable Housing Act [ 42 U.S.C. 12871 et seq.], or this section, for the provision of technical assistance under this paragraph. Recipients of technical assistance funding under the provisions referred to in this subparagraph shall be permitted to provide technical assistance to the extent of such funding under any of such provisions or under this subparagraph, notwithstanding the source of the funding. prior to foreclosing on any mortgage held by the Secretary on any multifamily housing project, notify both the unit of general local government in which the property is located and the tenants of the property of the proposed foreclosure sale; and dispose of a multifamily housing project through a foreclosure sale only to a purchaser that the Secretary determines is capable of implementing a sound financial and physical management program that is designed to enable the project to meet anticipated operating and repair expenses to ensure that the project will remain in decent, safe, and sanitary condition and in compliance with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of the housing and any such standards established by the Secretary. implementing a sound financial and physical management program that is designed to enable the project to meet anticipated operating and maintenance expenses to ensure that the project will remain in decent, safe, and sanitary condition and in compliance with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of the project and any such standards established by the Secretary; responding to the needs of the tenants and working cooperatively with tenant organizations; providing adequate organizational, staff, and financial resources to the project; and meeting such other requirements as the Secretary may determine; and require the owner of a multifamily housing project that is subject to a mortgage held by the Secretary to contract for management services for the project in the manner described in subparagraph (A). to the greatest extent possible, maintain all such occupied projects in a decent, safe, and sanitary condition and in compliance with any standards under applicable State or local laws, rules, ordinances, or regulations relating to the physical condition of the housing and any such standards established by the Secretary; to the greatest extent possible, maintain full occupancy in all such projects; and maintain all such projects for purposes of providing rental or cooperative housing. In the case of any multifamily housing project that is subject to a mortgage held by the Secretary, the Secretary shall require the owner of the project to carry out the requirements of paragraph (2). the contract shall be sufficient to assist at least all units covered by an assistance contract under any of the authorities referred to in subsection (b)(2)(D) before acquisition or foreclosure, unless the Secretary acts pursuant to the provisions of subparagraph (C); the contract shall provide that, when a vacancy occurs in any unit in the project requiring project-based rental assistance pursuant to this subparagraph that is occupied by a family who is not eligible for assistance under such section 8 [ 42 U.S.C. 1437f ], the owner shall lease the available unit to a family eligible for assistance under such section 8; and the Secretary shall take actions to ensure that any unit in any such project that does not otherwise receive project-based assistance under this subparagraph remains available and affordable for the remaining useful life of the project, as defined by the Secretary; to carry out this clause, the Secretary may require purchasers to establish use or rent restrictions maintaining the affordability of such units. the contract shall be sufficient to assist at least all units in the project that are covered, or were covered immediately before foreclosure on or acquisition of the project by the Secretary, by an assistance contract under any of the provisions referred to in such subsection, unless the Secretary acts pursuant to provisions of subparagraph (C); and the contract shall provide that, when a vacancy occurs in any unit in the project requiring project-based rental assistance pursuant to this subparagraph that is occupied by a family who is not eligible for assistance under such section 8 [ 42 U.S.C. 1437f ], the owner shall lease the available unit to a family eligible for assistance under such section 8. require use and rent restrictions providing that such units shall be available to and affordable by very low-income families for the remaining useful life of the project (as defined by the Secretary), or provide project-based assistance under section 8 for such units to be occupied by only very low-income persons, upon the disposition of the project otherwise required to be assisted with project-based assistance under subparagraph (A)(i) or (B)(i), the Secretary shall make available tenant-based assistance under section 8 [ 42 U.S.C. 1437f ] to low-income families residing in units otherwise required to be assisted with such project-based assistance; and the number of units subject to use restrictions or provided assistance under clause (i) shall be at least equivalent to the number of units otherwise required to be assisted with project-based assistance under section 8 in accordance with subparagraph (A)(i) or (B)(i). the new construction and substantial rehabilitation program under section 8(b)(2) of the United States Housing Act of 1937 [ 42 U.S.C. 1437f(b)(2) ] (as in effect before October 1, 1983 ); the property disposition program under section 8(b) of such Act; the project-based certificate program under section 8 of such Act; the moderate rehabilitation program under section 8(e)(2) of such Act; section 23 of such Act [ 42 U.S.C. 1421b ] (as in effect before January 1, 1975 ); the rent supplement program under section 101 of the Housing and Urban Development Act of 1965 [ 12 U.S.C. 1701s ]; or section 8 of the United States Housing Act of 1937, following conversion from assistance under section 101 of the Housing and Urban Development Act of 1965; and tenant-based assistance under section 8 of the United States Housing Act of 1937 for families that are preexisting tenants of the project in units that, immediately before foreclosure or acquisition of the project by the Secretary, were covered by an assistance contract under the loan management set-aside program under section 8(b) of the United States Housing Act of 1937. The Secretary may not take action under this paragraph unless the Secretary determines that there is available in the area an adequate supply of habitable, affordable housing for very low-income families and other low-income families using tenant-based assistance. The Secretary may not take actions under this paragraph in connection with units in subsidized or formerly subsidized projects for more than 10 percent of the aggregate number of units in such projects disposed of by the Secretary in any fiscal year. at least the units in the project otherwise required to receive project-based assistance pursuant to subparagraphs (A), (B), or (D) of paragraph (1) are available to and affordable by low-income persons; and for the remaining useful life of the project, as defined by the Secretary, there shall be in force such use or rent restrictions as the Secretary may prescribe. If, as a result of actions taken pursuant to this paragraph, the rents charged to any very low-income families residing in the project who are otherwise required (pursuant to subparagraph (A), (B), or (D) of paragraph (1)) to receive project-based assistance under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ] exceed the amount payable as rent under section 3(a) of the United States Housing Act of 1937 [ 42 U.S.C. 1437a(a) ], the Secretary shall provide tenant-based assistance under section 8 of such Act to such families. In accordance with the authority provided under the National Housing Act [ 12 U.S.C. 1701 et seq.], the Secretary may reduce the selling price of the project. Such reduced sales price shall be reasonably related to the intended use of the property after sale, any rehabilitation requirements for the project, the rents for units in the project that can be supported by the market, the amount of rental assistance available for the project under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ], the occupancy profile of the project (including family size and income levels for tenant families), and any other factors that the Secretary considers appropriate. The Secretary may require certain units in a project to be subject to use or rent restrictions providing that such units will be available to and affordable by low- and very low-income persons for the remaining useful life of the property, as defined by the Secretary. authority for such loans is provided in advance in an appropriation Act; such loan has a term of not more than 5 years; the Secretary determines, based upon documentation provided to the Secretary, that the borrower has obtained a commitment of permanent financing to replace the short-term loan from a lender who meets standards established by the Secretary; and the terms of such loan are consistent with prevailing practices in the marketplace or the provision of such loan results in no cost to the Government, as defined in section 661a of title 2 . If the Secretary determines that action under this paragraph is more cost-effective than establishing rents pursuant to subsection (h)(2), the Secretary may utilize the budget authority provided for contracts issued under this section for project-based assistance under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ] to (in addition to providing project-based section 8 rental assistance) provide up-front grants for the necessary cost of rehabilitation and other related development costs. This paragraph shall be effective during fiscal years 2006 through 2010 only to the extent that such budget authority is made available for use under this paragraph in advance in appropriation Acts. The Secretary may make available tenant-based assistance under section 8 of the United States Housing Act of 1937 to families residing in a multifamily housing project that do not otherwise qualify for project-based assistance. 10 percent of the total number of units in multifamily housing projects that are disposed of by the Secretary during any fiscal year to be made available for uses other than rental or cooperative uses, including low-income homeownership opportunities, or in any particular project, community space, office space for tenant or housing-related service providers or security programs, or small business uses, if such uses benefit the tenants of the project; and 5 percent of the total number of units in multifamily housing projects that are disposed of by the Secretary during any fiscal year to be used in any manner, if the Secretary and the unit of general local government or area-wide governing body determine that such use will further fair housing, community development, or neighborhood revitalization goals. tenant-based rental assistance under section 8 of the United States Housing Act of 1937 [ 42 U.S.C. 1437f ] is made available to each eligible family residing in the project that is displaced as a result of such actions; and the Secretary determines that sufficient habitable, affordable rental housing is available in the market area in which the project is located to ensure use of such assistance. to a public housing agency for use of the project as public housing; or to an entity eligible to own or operate housing assisted under section 1701q of this title or under section 811 of the Cranston-Gonzalez National Affordable Housing Act [ 42 U.S.C. 8013 ] for use as supportive housing under either of such sections. contain such terms, conditions, and limitations as the Secretary determines appropriate, including requirements to ensure use of the project as public housing, supportive housing under section 1701q of this title , or supportive housing under section 811 of the Cranston-Gonzalez National Affordable Housing Act [ 42 U.S.C. 8013 ], as applicable; and ensure that no tenant of the project will be displaced as a result of actions taken under this paragraph. the project is not being maintained in a decent, safe, and sanitary condition; rebuilding the project would be less expensive than substantial rehabilitation; the unit of general local government in which the project is located approves the rebuilding and makes a financial contribution or other commitment to the project; and the rebuilding is a part of a local neighborhood revitalization plan approved by the unit of general local government. The Secretary may make arrangements with State agencies and units of general local government of States receiving emergency assistance under part A of title IV of the Social Security Act [ 42 U.S.C. 601 et seq.] for the provision of assistance under such Act [ 42 U.S.C. 301 et seq.] on behalf of eligible families who would reside in any multifamily housing projects. for a period of 2 years beginning upon the date of the acquisition of the project by the purchaser under such disposition, the rent for the unit occupied by the family may not be increased above the rent charged immediately before acquisition; such family shall be considered displaced for purposes of any system of preferences established pursuant to section 6(c)(4)(A), 8(d)(1)(A), or 8( o )(6)(A) of the United States Housing Act of 1937 [ 42 U.S.C. 1437d(c)(4)(A) , 1437f(d)(1)(A), and 1437f( o )(6)(A)]; and of the requirements under paragraphs (1) and (2); and that, after the expiration of the period under paragraph (1), the rent for the unit occupied by the family may be increased. to the extent that the Secretary finds that, based on the rental charges and financing for the multifamily housing project to which the contract relates, the financial viability of the project can be maintained under a contract having such a term; except that the Secretary shall require that the amount of rent payable by tenants of the project for units assisted under such contract shall not exceed the amount payable for rent under section 3(a) of the United States Housing Act of 1937 [ 42 U.S.C. 1437a(a) ] for a period of at least 15 years; or under a contract authorized under section 6 of the HUD Demonstration Act of 1993; and pursuant to a disposition plan under this section for a project that is determined by the Secretary to be otherwise in compliance with this section. The Secretary shall establish the contract rents under such contracts at levels that, together with other resources available to the purchasers, provide sufficient amounts for the necessary costs of rehabilitating and operating the multifamily housing project and do not exceed the percentage of the existing housing fair market rentals for the market area in which the project assisted under the contract is located as determined by the Secretary under section 8(c) of the United States Housing Act of 1937 [ 42 U.S.C. 1437f(c) ]. Not later than 30 days after the Secretary acquires title to a multifamily housing project, the Secretary shall notify the appropriate unit of general local government (including public housing agencies) and State agency or agencies designated by the chief executive officer of the State in which the project is located of such acquisition of title and that, for a period beginning upon such notification that does not exceed 90 days, such unit of general local government and agency or agencies shall have the exclusive right under this subsection to make bona fide offers to purchase the project. During the 90-day period, the Secretary may not sell or offer to sell the multifamily housing project other than to a party notified under paragraph (1), unless the unit of general local government and the designated State agency or agencies notify the Secretary that they will not make an offer to purchase the project. The Secretary shall accept a bona fide offer to purchase the project made during such period if it complies with the terms and conditions of the disposition plan for the project or is otherwise acceptable to the Secretary. The Secretary shall establish any procedures necessary to carry out this subsection. Whenever tenants will be displaced as a result of the demolition of, repairs to, or conversion in the use of, a multifamily housing project that is owned by the Secretary (or for which the Secretary is mortgagee in possession), the Secretary shall identify tenants who will be displaced, and shall notify all such tenants of their pending displacement and of any relocation assistance that may be available. In the case of a multifamily housing project that is subject to a mortgage held by the Secretary, the Secretary shall require the owner of the project to carry out the requirements of this paragraph, if the Secretary has authorized the demolition of, repairs to, or conversion in the use of such multifamily housing project. to return, whenever possible, to a repaired or rebuilt unit; to occupy a unit in another multifamily housing project owned by the Secretary; to obtain housing assistance under the United States Housing Act of 1937 [ 42 U.S.C. 1437 et seq.]; or to receive any other available similar relocation assistance as the Secretary determines to be appropriate. The Secretary may not approve the sale of any loan or mortgage held by the Secretary (including any loan or mortgage owned by the Government National Mortgage Association) on any subsidized project or formerly subsidized project, unless such sale is made as part of a transaction that will ensure that such project will continue to operate at least until the maturity date of such loan or mortgage, in a manner that will provide rental housing on terms at least as advantageous to existing and future tenants as the terms required by the program under which the loan or mortgage was made or insured prior to the assignment of the loan or mortgage on such project to the Secretary. that is subject to a mortgage held by the Secretary, or if the sale transaction involves the provision of any additional subsidy funds by the Secretary or a recasting of the mortgage, the terms of any such sale shall include the agreement of the purchasing agency or unit of local government or State agency to act as mortgagee or owner of a beneficial interest in such mortgages, in a manner consistent with maintaining the projects that are subject to such mortgages for occupancy by the general tenant group intended to be served by the applicable mortgage insurance program, including, to the extent the Secretary determines appropriate, authorizing such unit of local government or State agency to enforce the provisions of any regulatory agreement or other program requirements applicable to the related projects; and the sales prices for such mortgages shall be, in the determination of the Secretary, the best prices that may be obtained for such mortgages from a unit of general local government or State agency, consistent with the expectation and intention that the projects financed will be retained for use under the applicable mortgage insurance program for the life of the initial mortgage insurance contract. Notwithstanding any other provision of law, the Secretary may sell mortgages held on projects that are not subsidized or formerly subsidized projects on such terms and conditions as the Secretary may prescribe. The Secretary may carry out a demonstration to test the feasibility of restructuring and disposing of troubled multifamily mortgages held by the Secretary through the establishment of partnerships with public, private, and nonprofit entities. The Secretary may carry out a demonstration to test the feasibility of disposing of troubled multifamily housing projects that are owned by the Secretary through the establishment of partnerships with public, private, and nonprofit entities. the average and median size of the projects; the geographic locations of the projects, by State and region; the years during which projects were assigned to the Department, and the average and median length of time that projects remain in the HUD-held inventory; the status of HUD-held mortgages; the physical condition of the HUD-held and HUD-owned inventory; the occupancy profile of the projects, including the income, family size, race, and ethnic origin of current tenants, and the rents paid by such tenants; the proportion of units that are vacant; the number of projects for which the Secretary is mortgagee in possession; the number of projects sold in foreclosure sales; the number of HUD-owned projects sold; a description of actions undertaken pursuant to this section, including a description of the effectiveness of such actions and any impediments to the disposition or management of multifamily housing projects; a description of the extent to which the provisions of this section and actions taken under this section have displaced tenants of multifamily housing projects; a description of any of the functions performed in connection with this section that are contracted out to public or private entities or to States; and a description of the activities carried out under subsection (i) during the preceding year. The term ‘affordability requirements’ means any requirements or restrictions imposed by the Secretary, at the time of sale, on a multifamily real property or a multifamily loan, such as use restrictions, rent restrictions, and rehabilitation requirements. The term ‘discount sale’ means the sale of a multifamily real property in a transaction, such as a negotiated sale, in which the sale price is lower than the property market value and is set outside of a competitive bidding process that has no affordability requirements. The term ‘discount loan sale’ means the sale of a multifamily loan in a transaction, such as a negotiated sale, in which the sale price is lower than the loan market value and is set outside of a competitive bidding process that has no affordability requirements. The term ‘loan market value’ means the value of a multifamily loan, without taking into account any affordability requirements. The term ‘multifamily real property’ means any rental or cooperative housing project of 5 or more units owned by the Secretary that prior to acquisition by the Secretary was security for a loan or loans insured under title II of the National Housing Act [ 12 U.S.C. 1707 et seq.]. The term ‘multifamily loan’ means a loan held by the Secretary and secured by a multifamily rental or cooperative housing project of 5 or more units that was formerly insured under title II of the National Housing Act. The term ‘property market value’ means the value of a multifamily real property for its current use, without taking into account any affordability requirements. The term ‘Secretary’ means the Secretary of Housing and Urban Development. Notwithstanding any other provision of law, except for affordability requirements for the elderly and disabled required by statute, disposition by the Secretary of a multifamily real property during fiscal years 2006 through 2010 through a discount sale under sections 207( l ) or 246 of the National Housing Act ( 12 U.S.C. 1713 ( l ), 1715z–11), section 203 of the Housing and Community Development Amendments of 1978 ( 12 U.S.C. 1701z–11 ), or section 204 of the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1997 ( 12 U.S.C. 1715z–11a ), shall be subject to the availability of appropriations to the extent that the property market value exceeds the sale proceeds. If the multifamily real property is sold, during such fiscal years, for an amount equal to or greater than the property market value then the transaction is not subject to the availability of appropriations. Notwithstanding any other provision of law and in accordance with the Federal Credit Reform Act of 1990 ( 2 U.S.C. 661 et seq.), a discount loan sale during fiscal years 2006 through 2010 under section 207(k) of the National Housing Act ( 12 U.S.C. 1713(k) ), section 203(k) of the Housing and Community Development Amendments of 1978 ( 12 U.S.C. 1701z–11(k) ), or section 204(a) of the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1997 ( 12 U.S.C. 1715z–11a(a) ), shall be subject to the availability of appropriations to the extent that the loan market value exceeds the sale proceeds. If the multifamily loan is sold, during such fiscal years, for an amount equal to or greater than the loan market value then the transaction is not subject to the availability of appropriations. This section shall not apply to any transaction that formally commences within one year prior to the enactment of this section [ Feb. 8, 2006 ].” the portfolio of multifamily housing project mortgages insured by the FHA is severely troubled and at risk of default, requiring the Secretary to increase loss reserves from $5,500,000,000 in 1991 to $11,900,000,000 in 1992 to cover estimated future losses; the inventory of multifamily housing projects owned by the Secretary has more than quadrupled since 1989, and, by the end of 1994, may exceed 69,000 units; the cost to the Federal Government of owning and maintaining multifamily housing projects escalated to $288,000,000 in fiscal year 1993; the inventory of multifamily housing projects subject to mortgages held by the Secretary has increased dramatically, to more than 2,400 mortgages, and approximately half of these mortgages, with approximately 219,000 units, are delinquent; the inventory of insured and formerly insured multifamily housing projects is deteriorating, potentially endangering tenants and neighborhoods; and the current statutory framework governing the disposition of multifamily housing projects effectively impedes the Government’s ability to dispose of properties, protect tenants, and ensure that projects are maintained over time.”