Wyden and Merkley Ask HUD SecretaryTo Help Preserve Affordable Housing
Senators Put Forward Innovative Financing Strategy to Help Residents Stay in Their Homes
Washington, D.C. - In a letter to the new U.S. Secretary of Housing and Urban Development Shaun Donovan, U.S. Senators Ron Wyden (D-Ore.) and Jeff Merkley (D-Ore.) asked that he help Americans at this time of economic hardship by preserving affordable housing across the country through an innovative use of "Residual Receipts." Residual Receipts accounts consist of the accumulated net earnings that are not distributed to project owners. With hundreds of thousands of affordable housing contracts set to expire between now and 2013, Wyden and Merkley urged Secretary Donovan to permit the use of Residual Receipts to help keep these properties affordable.
"During these tough economic times when so many Americans are losing their homes, it would be tragic if we didn't do everything we could to save affordable housing," wrote Wyden and Merkley. "…In Oregon alone, projects have Residual Receipts that amount to approximately $12 million. If that kind of funding could be used to shore up affordable housing in our state and others, it could be a lifeline for many people who have been hit by the country's current tidal wave of economic troubles."
Wyden and Merkley's letter to Secretary Donovan is below:
February 2, 2009
The Honorable Shaun Donovan
Department of Housing and Urban Development
Dear Secretary Donovan:
Congratulations on your confirmation as United States Secretary of Housing and Urban Development. As you mentioned during your testimony, preservation of America's existing affordable housing stock is absolutely essential to our citizens' quality of life. During these tough economic times when so many Americans are losing their homes, it would be tragic if we didn't do everything we could to save affordable housing. Hundreds of thousands of units will reach their contract expiration dates between now and 2013, and with financial markets in disarray, we believe the Department of Housing and Urban Development (HUD) should make use of existing "Residual Receipts" accounts to help preserve these properties.
As you know, many of the "new reg" deals executed after 1980 have contract provisions limiting cash distributions to six percent of the original equity investment. Many of these limited distribution projects were well managed and generated earnings larger than six percent. Those extra funds were sequestered at the property or project level because the earnings exceeded the limited distribution permitted under new reg rules. In many cases, these Residual Receipts have accumulated for nearly three decades and represent a substantial asset that could be used to help preserve affordable housing projects with expiring contracts.
In Oregon alone, projects have Residual Receipts that amount to approximately $12 million. If that kind of funding could be used to shore up affordable housing in our state and others, it could be a lifeline for many people who have been hit by the country's current tidal wave of economic troubles. While Oregon's housing finance agency leveraged $6 million to preserve nearly 1,000 units of housing last year, the use of existing Residual Receipts would allow for rehabilitation and preservation of well over 1,000 additional units. We propose that HUD allow Residual Receipts to be used or transferred when affordable housing properties are sold or conveyed to a new owner who intends to keep the property affordable for residents. During the 110th Congress, Senator Wyden coauthored a bill -- the Affordable Housing Preservation Act -- to initiate this model on a pilot basis. However, it is our understanding that, in your new role as the country's leader on housing and urban development, you could achieve the same outcome administratively.
As HUD Secretary, we hope you would support the use of existing Residual Receipts accounts to preserve existing federally funded properties. We would appreciate your thoughts on this important issue. If you have questions, we would be happy to put you in touch with our staffs, and with housing officials in the State of Oregon and City of Portland.
Ron Wyden Jeff Merkley
United States Senator United States Senator