Remarks by:
Obediah G. Baker
Deputy Administrator
Multifamily Housing Programs
Rural Housing Service, USDA
Washington, D.C.
RHS NITTY GRITTY
As most of you know, the Rural Rental Housing Program serves the most vulnerable rural Americans, and those rural Americans are the very low-, low-, and moderate-income individuals and families who are in fact in dire need of housing. Most of you know that we have a little over 17,300 complexes out there. We’re not the size of the HUD portfolio, but we have about $11.9 billion in loans outstanding.
These are direct dollars. Together with our 515 loan program, we have our 521 Rental Assistance program, which is quite vital in maintaining the finances of projects. It’s not easy from the owner’s end to continue trying to keep a program together, continue to provide decent, safe and sanitary housing to individuals who would not normally have access to housing of such quality, while having limited resources. That’s the issue.
Most of our 521 Rental Assistance dollars go to Renewals, to keep you as owners and managers in business. By that I mean that with every funding cycle, a great majority of our 521 allocation goes toward Renewals.
515 At the ForkThe 515 program is at a crossroads. We are at a critical juncture. As we look into the future, the program will be substantially different, I can assure you of that. We’re doing everything within our power and within our authorities in the National Office, in fact, to keep the program on track. It is tough.
I’ve been with this organization in excess of 38 years, and I’ve never seen it this way. I’ve never seen it this way. If there has ever been a time that we needed to put our shoulders together to preserve the program, preserve whatever it is we have out there — and I know we have quality housing out there — we should form a very strong alliance. I contend that we’ve always had a strong alliance with CARH, and we don’t want to change that.
We had many stakeholders meetings with staff. For example, on the Rural Housing 3560 regulations about five or six years ago, we’ve been since that time trying to get that reg through the system. It makes me feel very awkward to hear HUD say things were in the Federal Register, and will be in. It’s been six years since I’ve been able to say that. This regulation is very critical and crucial to the 515 program. A lot of the issues that you have as property owners and property managers will be addressed by this regulation.
The regulation has been drafted so long that a lot of what we have in there, we’re going to have to keep in it until it’s published. We don’t dare touch it at this point because if we make any major changes to it, we will lose the ground that we gained over six years and have to go back and start at square one. So we don’t dare touch it.
Right now the proposed regulation is with the Office of Management and Budget. We hit a very severe impediment at the time it went to OMB because of the Farm Bill. OMB declared that Farm Bill regulations have priority — that this was a mandate from the White House. I got word recently from our Office of Budget and Policy Analysis that OMB is now looking at 3560. The only hint they would give us is they will have comments. I said that could be good news or it could be bad news. However, I’m feeling it is good news.
3560 Soon — StillIn terms of a timeline of when we might get it back from OMB, there was no indication. Hopefully, it will be by late February. Their practice in the past has been that when they say they’re looking at something and will make comments, two to three weeks later we get the regulations back. We have a conference with them before it goes out for Proposed Rule. That is the next step. That’s why it is so critical at this point.
If and when we get the regulation approved by OMB, it will be put out as a Proposed Rule. We welcome your comments. We recognize we will receive a lot of comments; I’m certain CARH will in fact look at it for its tracks. A lot of your tracks are in it, I can assure you.
Don’t confuse me as retiring before 3560 is out. That’s definitely not my scheme. As a matter of fact, that was one of my accomplishments I wanted to make prior to retiring. But 3560 beat me out.
The status of the program has a long history of serving rural areas with a high need and limited resources. We know, we all know, that there still exists a dire need for housing in rural America. The Under Secretary has proposed a long term strategy. This strategy basically is to address our preservation issues. As most of you know, we are threatened with a very severe preservation issue.
Yes, we hope to receive additional dollars to address preservation. However, if we are fortunate enough to receive the funding level we received in 2002 (no guarantees), out of that proportion, we want to increase the dollars for preservation. We call it prepayment. We want to convince you that in fact we’re acting in good faith to address the issues.
We recognize a lot of our properties are older; we recognize a lot of the restrictive use provisions are expiring; we recognize that a lot of owners (the principals of borrower entities) are of my vintage and ready to step aside. They should.
Protect TenantsOur primary interest is, yes, we would like to maintain these affordable housing units in the portfolio, but at the same time we would like to protect the interests of the tenants. That is the Administration’s bottom line.
In an effort to do that, we are in the process of developing a vehicle. We’ve already talked to Gerry Benoit. We had a situation regarding preservation, and HUD stepped up to the plate and they were very, very gracious with the Section 8 Vouchers. We’re working with some of our staff in order to develop appropriations language. We also proposed to resurrect our 542 program — Rural Development already has a Voucher program that’s dormant, that’s on the books, but it’s never been funded. The pilot program several years ago worked well. So, hopefully, through those avenues we will get some resources to address preservation issues.
The Agency also wants to refocus our training, our program efforts, to enable the preservation process to work better. When you walk into that area office and indicate that you’d like to prepay your account, we want to be sure that that office knows what to do. I think in the past we’ve been intimidated by the process and were not as knowledgeable as we should have been. That is addressed, and that is the cure. We want that particular process to be much smoother.
What we plan to do is provide training to our field offices, top to bottom, going so far as to designate a person within that state, within that region, to be responsible for handling preservation transactions.
Another issue that crosses my desk: I get quite a few letters from you about insurance costs. Our portfolio has been impacted. We’re going to do all we can to offer relief. What we ought to do is accept letters of request from various offices requesting waivers of existing regulations on the limit on deductions of $5,000. When you send your request in, we’ll issue a blanket exception to allow you to seek insurance coverage at a level of deduction that relates back to premiums that are well within your ability to pay.
Our guarantee program, 538, is thriving. It is going strong. It doesn’t reach the income level of 515, but most of the developers are very high on it, very positive. In 2002 we had $100 million in program authority, in fact we obligated close to $110 million.
Thank you.
[NOTE: Obie Baker is retiring from the Agency after a successful career in public service, including many years in Washington, D.C.]
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