National Housing Law Project Housing Law Bulletin

The recently enacted public housing legislation, officially called the "Quality Housing and Work Responsibility Act of 1998,"¹ makes a number of changes to the housing programs of the Rural Housing Service (RHS), places certain admission and eviction requirements to all housing programs, including those of RHS, and establishes a HUD Office of Rural Housing and Economic Development. The following is a summary of the changes affecting rural housing programs and interests.

Changes to RHS Programs

Housing programs made permanent. Several of the housing programs set out in the Housing Act of 1949 have heretofore been authorized only on an annual basis. This meant that, in addition to having to secure appropriations annually from the Senate and House Agriculture Appropriations Committees, the Housing and Banking Committees had to reauthorize the programs each year in order for the programs to continue to operate. On several occasions, the lack of timely authorizations has prevented the Rural Housing Service, or its predecessor, the Farmers Home Administration, from operating a program for several months. Moreover, annual authorizations required Congress to revisit annually the question of whether to continue a program. The new legislation removes this requirement with respect to several programs by granting them permanent authorization. The affected programs are the Section 515 Rural Rental Housing program, the Section 538 Guaranteed Rental Housing program, the Section 515 Rural Rental Housing Nonprofit Set-Aside program, and the Section 509 program for Housing in Underserved Areas.²

Authorization for use of tax-exempt bond financing for Section 538 Guaranteed Rental Housing Program. When RHS recently implemented the Section 538 Guaranteed Rental Housing Program, it excluded tax-exempt bond financing from being guaranteed by the agency. The new legislation overrides the exclusion by prohibiting RHS from guaranteeing a loan by virtue of the fact that the interest on such a loan is exempt from income under the Internal Revenue Code.³

Farm labor housing made eligible for Low Income Tax Credit financing. Farm Labor Housing financed, in whole or in part under Section 514, has previously not been eligible for Low Income Tax Credit Financing because entities that typically qualify for such financing — limited partnerships — have not been eligible loan recipients. The legislation removes this barrier by expanding the list of eligible Section 514 borrowers to include limited partnerships in which a nonprofit entity is the general partner.⁴

Farm labor housing made eligible for operating subsidies in lieu of rental assistance. In a far reaching change designed to assist low-income farmworkers, the legislation authorizes RHS to convert rental assistance payments to owners of Section 514 or 516 projects to operating subsidies which can cover up to 90 percent of a project's annual operating costs. The conversion may be made only at the request of the project owner and disqualifies the project from also receiving rental assistance. The assistance level provided to a particular project is an amount that makes units affordable to migrant farmworkers in the project area at rates not exceeding 30 percent of their monthly adjusted income. This change marks the first time that RHS has been given authority to make operating subsidies available to any of its rental housing programs.⁵

FHA loan limits not applicable to Section 502 guaranteed loans. The legislation lifts the applicability of the Federal Housing Administration's (FHA) loan limits to single-family loans guaranteed by RHS under Section 502(h) of the Housing Act of 1949.⁶

Extension to RHS housing of admission and eviction policies relating to drug use and alcohol abuse. The new legislation places new admissions and evictions requirements on all federally assisted rental housing, including that of the RHS. Specifically, the legislation disqualifies for three years any persons who were evicted from assisted housing because of drug-related criminal activity from admission to assisted housing, including RHS rental housing, unless such persons participated in an approved rehabilitation program. It also authorizes landlords to deny admission to households that have a member who is determined to be illegally using a controlled substance or about whom the owner reasonably concludes that such household member's illegal use of a controlled substance, or abuse or pattern of abuse of alcohol, may interfere with the health, safety or right to peaceful enjoyment of the premises by other residents. Such exclusions must be according to standards established by the owner and, in the case of persons believed by the owner to interfere with the quiet enjoyment by other residents, must consider certain prescribed rehabilitation efforts. In addition, the legislation authorizes owners to exclude from admissions, for a reasonable period of time, persons who engaged in any drug-related, violent criminal activity or other criminal activity that would adversely affect the health or safety or right to peaceful enjoyment of the premises by other residents or the owner. After expiration of such reasonable period, the owner may require proof from the applicant that the household member did not engage in any disqualifying activity during the period of exclusion. These same grounds may also be used by owners to evict residents from RHS housing.⁷

The legislation also requires owners to deny admission to RHS housing any individual who is subject to a lifetime registration requirement under a state sex offender registration program. Persons excluded on these grounds must be provided with a copy of the registration information and given an opportunity to dispute its accuracy or relevance.⁸

Office of Rural Housing and Economic Development

The legislation appropriates $25 million for an Office of Rural Housing and Economic Development to be established at HUD, although the function or role of the Office is not specified.⁹

¹  Title V of H.R. 4194, Department of Veterans Affairs and Housing and Urban Development and Independent Agencies Appropriations Act, 1999, Pub. L. No. 105-276 (signed by the President on October 21, 1998). The Conference Report is H.R. REP. NO. 769, 105^th Cong., 2d Sess., 144 CONG. REC. H9359 (Oct. 5, 1998). Unless otherwise indicated, all cites in this article are to the Public Law section in which the change appears.
²  Sections 599C(a), (b) and (c), respectively.
³  Section 599C(c).
⁴  Section 599C(d).
⁵  Section 599C(e).
⁶  Section 599C(f).
⁷  Sections 576 and 577.
⁸  Section 578.
⁹  For appropriation allocations to be made under this Office, see the section "New HUD Rural Housing Initiative" in Fifty Thousand New Vouchers — A Move in the Right Direction, elsewhere in this issue.