File No. 112

Senate, March 23, 2006

The Committee on Planning and Development reported through SEN. COLEMAN of the 2nd Dist., Chairperson of the Committee on the part of the Senate, that the bill ought to pass.

AN ACT CONCERNING HOUSING PRESERVATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective July 1, 2006, and applicable to any termination of subsidy for the rental housing development occurring on or after July 1, 2007) As used in sections 2 and 3 of this act:

(1) "Development" means a rental housing development that receives government assistance under any covered program, including any property whose mortgage is held by the United States Department of Housing and Urban Development and was formerly insured under any covered program but excluding the foreclosure of a development by an applicable agency.

(2) "Covered program" means:

(A) New construction, substantial rehabilitation, moderate rehabilitation, property disposition and loan management set-aside programs or any other program providing project-based assistance under Section 8 of the United States Housing Act of 1937, as from time to time amended;

(B) The Below Market Interest Rate Program under Section 221(d)(3) of the National Housing Act, 12 USC 1715l(d)(3), (5);

(C) Section 236 of the National Housing Act, 12 USC 1715z-1;

(D) Section 202 of the Housing Act of 1959, 12 USC 1701q;

(E) Programs for rent supplement assistance under Section 101 of the Housing and Urban Development Act of 1965, 12 USC 1701s;

(F) Programs under Section 515 of the Housing Act of 1949, 42 USC 1485;

(G) Programs under Section 521 of the Housing Act of 1949, 42 USC 1490a; or

(H) The Low Income Housing Tax Credit program, 26 USC 42.

(3) "Applicable agency" means any governmental agency that administers a covered program.

(4) "Assisted unit" means a dwelling unit in a development, including a cooperative, that is receiving assistance pursuant to a covered program.

(5) "Owner" means an individual, partnership, corporation, association, joint venture or business entity that owns or controls a development or any successor in interest of such individual, partnership, corporation, association, joint venture or business entity.

(6) "Tenant" means a tenant, subtenant, lessee, sublessee or other person entitled to possession, occupancy or benefits of a rental unit within the development.

(7) "Tenant association" means an association, organization or other entity that represents tenants in a development, including, but not limited to, an association that is incorporated as a nonprofit corporation or a cooperative.

(8) "Cooperative" shall have the same meaning as in subdivision (10) of section 47-202 of the general statutes. For purposes of sections 2 and 3 of this act, a cooperative shall be deemed to be a rental housing development, and the terms "rent" and "rental" shall include occupancy payments made by a member of a cooperative, and the term "tenants" shall include residents of a cooperative.

(9) "Low and moderate income household" means any household with an adjusted gross income that satisfies the occupancy requirements for income-restricted units in the development existing before termination of subsidy for the development.

(10) "Termination of subsidy for the development" or "termination of subsidy" means: (A) Any sale, transfer of title, lease or prepayment of a loan that was made pursuant to a covered program with respect to a development that would result in the cessation or reduction of the financial assistance or regulatory requirements designed to make the assisted unit affordable to low and moderate income households; (B) an owner's decision not to extend or renew its contractual participation in a covered program, either at or prior to the scheduled date of the expiration of the contract; or (C) the expiration of restrictions for a development that may result in an increase in tenant rent or a change in the form of the subsidy from project-based to tenant-based.

(11) "Affordability preservation transaction" means a transaction described in section 3 of this act.

Sec. 2. (NEW) (Effective July 1, 2006, and applicable to any termination of subsidy for the rental housing development occurring on or after July 1, 2007) On and after July 1, 2006, any owner of a development shall, not later than one year before the termination of subsidy for the development, provide written notice of the owner's intent to terminate the subsidy. Such notice shall be sent by first class mail or hand-delivered to (1) each tenant residing in the development, (2) each tenant association representing tenants in the development, (3) the executive director of any housing authority of the municipality in which the development is located, (4) the chief executive officer of the municipality in which the development is located, (5) the executive director of the Connecticut Housing Finance Authority, (6) the Commissioner of Economic and Community Development, and (7) the executive director of the Connecticut Housing Coalition. The notice shall be posted in a conspicuous common area of the development accessible to the tenants. A copy of the notice shall be filed in the land records of the municipality in which the development is located.

Sec. 3. (NEW) (Effective July 1, 2006, and applicable to any termination of subsidy for the development occurring on or after July 1, 2007) The provisions of sections 1 to 3, inclusive, of this act shall not apply to an affordability preservation transaction undertaken by the owner in connection with the refinancing of such a development's governmental program mortgage, or undertaken by a buyer in connection with the sale, transfer or other disposition of such a development by contract or agreement with a proposed new mortgage lender or equity investor, or with the United States Department of Housing and Urban Development, the Connecticut Housing Finance Authority, the Department of Economic and Community Development or any other governmental agency or body, provided the contract or agreement requires the owner or buyer and owner's or buyer's respective successors and assigns to comply with all of the following affordability preservation criteria contained in a regulatory agreement that has been recorded against the property:

(1) To maintain the development as low and moderate income housing on terms at least as advantageous to existing and future tenants as the terms required by the affected development's governmental program in effect before the date of notice required by section 2 of this act for a period of time at least as long as what the remaining term of the governmental program would have been but for the termination of subsidy or for a period of time not less than twenty years after the date of the termination of subsidy, whichever is greater;

(2) To maintain at least as many dwelling units as low and moderate income housing as were required to be affordable to such households under the governmental program in effect prior to the termination of subsidy for a period of time not less than twenty years after the date of the termination of subsidy; and

(3) To maintain as rental subsidy program units such number of units as were required to be subsidy program units under the contract for the rental subsidy program in effect prior to the termination of subsidy for a period of time not less than twenty years after the date of the termination of subsidy, subject to the existence of a rental subsidy program.

Sec. 4. Section 8-68c of the general statutes is repealed. (Effective July 1, 2006, and applicable to any termination of subsidy for the development occurring on or after July 1, 2007)

The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either House thereof for any purpose:

OFA Fiscal Note

State Impact: None

Municipal Impact: None

Explanation

The bill expands notice provisions to certain property owners and has no fiscal impact to the state or municipalities.

The Out Years

None



OLR BILL ANALYSIS

SB 545

AN ACT CONCERNING HOUSING PRESERVATION.

SUMMARY:

By law, owners of federally subsidized housing projects must notify tenants and other parties before they prepay the project's mortgage, which could remove restrictions making some or all of the units affordable to low- and moderate-income people. This bill (1) expands the range of events subject to this notification requirement, (2) broadens the types of federal programs subject to the requirement, and (3) requires owners to notify more parties. But it also exempts owners from giving notice for certain transactions if the project remains affordable to low- and moderate-income people.

EFFECTIVE DATE: July 1, 2006 and applicable to any action terminating a housing project's subsidy occurring on or after July 1, 2007

EVENTS REQUIRING NOTIFICATION

An owner must notify the specified parties at least one year before an event that could end the project's federal subsidy if:


1. he decides to sell or lease the project, transfer its title, or prepay a federally insured loan if the outcome ends or reduces federal requirements intended to make the units affordable to low- and moderate-income people;

2. he decides not to extend or renew the contract under which the federal program subsidizes the project, including decisions made at or before the contract's expiration date; or

3. federal rent restrictions expire, which could lead to rent increases. The owner must also give notice if the subsidy changes from a “project-based subsidy” to a “tenant-based subsidy.” (Project-based subsidies are those that keep rents down by reducing the owner's cost of developing and operating the project. Tenant-based subsidies are those that go pay a portion of the tenant's rent.)

FEDERAL PROJECTS AFFECTED

The bill increases the types of federally subsidized rental and cooperative housing projects whose owners must notify tenants and other parties before an event that could remove federal restrictions. Under current law, an owner must give notice if the project's mortgage was guaranteed under the following programs:

1. Below Market Interest Rate Program (12 USC § 1715l (d) (3), (5));

2. rental and cooperative housing for lower-income families (12 USC 1715z-1); and

3. housing and related facilities for elderly, handicapped, low- and moderate-income people and families, or other low-income people and families in rural areas (42 USC § 1485).

The bill extends the notice requirement to projects that were subsidized under the following programs:

1. project-based subsidies under Section 8 of the 1937 U.S. Housing Act (42 USC § 1437 et seq.);

2. supportive housing for the elderly (12 USC § 1701q);

3. rent supplement programs for qualified lower-income families (12 USC § 1701s);

4. rural rental assistance payments (42 USC 1490a); and

5. Low Income Housing Tax Credit Program (26 USC § 42).

PARTIES TO BE NOTICED

The bill requires owners to notify more parties. Current law requires them to give written notice to the tenants of the affected project, the chief executive officer of the town where it is located, and the economic and community development commissioner. The bill also requires owners to notify each tenant association in the project, the executive director of the town's housing authority, and the executive directors of the Connecticut Housing Finance Authority and the Connecticut Housing Coalition. He must hand the notice to each party or send it to them by first-class mail.

ACTIONS EXEMPTED FROM NOTIFICATION

The bill exempts owners from the notification requirement for transactions under which the project remains affordable to low- and moderate-income people (i.e., “affordability preservation transactions”). An owner does not have to give notice when he refinances a project's federally subsidized mortgage. Nor does he have to give notice if a party acquires the project under a contract or agreement with a new mortgage lender, equity investor, U.S. Department of Housing and Urban Development, Connecticut Housing Finance Authority, Department of Economic and Community Development, and any other government agency.

In both cases, the exemption applies only if the contract governing the transaction requires the owner or buyer and their respective successors and assigns to comply with the certain assurances, which must be specified in a regulatory agreement recorded against the property. The agreement must stipulate these requirements:

1. It must require the owner or buyer to maintain the project as low- and moderate-income housing. The terms under which they must do so must be at least as advantageous to the current and future tenants as those that were imposed by the program that subsidized the project and that were still in effect one year before the subsidy ended. The terms must remain in effect for the greater of two time periods: the period that is at least as long as the period remaining under the program if it continued subsidizing the project, or 20 years after the subsidy's termination date.

2. The owner or buyer must maintain at least the same number of low- and moderate-income units that the program required before the subsidy ended.

3. If the project receives a rent subsidy, the number of subsidized units must at least equal the number of units that were subsidized under the program before the project's initial subsidy expired. The owner or buyer must maintain that number for at least 20 years from the date after the subsidy ended.

COMMITTEE ACTION

Planning and Development Committee

Joint Favorable