You asked for a summary SB 545, the names of the housing programs identified, the current opt out options (i. e. , removal of federal restrictions options) under those programs, and how the bill compares to CGS § 8-68c.

We have attached a copy of the bill analysis for SB 545 (File No. 112), from which much of the information for this report was taken.

SUMMARY

By law, owners of housing projects with federally insured mortgages must notify tenants and other parties before they prepay the mortgage, which could remove restrictions that make some or all of the units affordable to low- and moderate-income people. SB 545 (1) broadens the types of federal programs subject to the requirement, (2) expands the range of events subject to this notification 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.

The bill repeals the statute requiring owners to give notice before prepaying federally guaranteed mortgages, but still requires them to do so in the new provision that broadens the range of programs subject to the bill's notification requirement.

SB 545, AAC HOUSING PRESERVATION

Federal Projects Affected and Program Names

Current law (CGS § 8-68c) requires a project owner, at least one year before prepaying a mortgage, to notify in writing the DECD commissioner, the chief executive officer of the municipality where the housing is located, and to all tenants living in the housing of his intent to prepay, if the 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).

SB 545 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).

Opt Out Options

Under current law, an owner at least one year before prepaying an insured mortgage must notify in writing the DECD commissioner, the chief executive officer of the municipality where the housing is located, and to all tenants living in the housing of his intent.

Under the bill, 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. )

Parties to Receive Notice

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 (DECD) (CGS § 8-68c). 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 Under SB 545

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.

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