Chuck Wehrwein
Deputy Administrator — Multi-Family Housing
Rural Housing Service, USDA
Washington, D.C.
Addressing the Council for Affordable and Rural Housing Seminar:
On behalf of the Administration, our Administrator, Maureen Kennedy, I would like to thank you for inviting us this meeting.
I’d like to talk a little about my initial thoughts regarding my time with the Rural Housing Service and what I see as some of the positives and the challenges we are facing. Then, give you an update on where FY 1996 ended up; and follow up with a discussion of where we see FY 1997 appropriations.
I’ve been here only five weeks; I’ve spent all of those weeks on the road. I have seen a lot of our projects — both the existing and new construction projects. In general, I feel fairly fairly positive about the portfolio, especially when I look back on the numbers for 1993 and 1994. We have come a long way. I think there is a reason to be optimistic. And I think there is a reason to be optimistic as well in regard to recent legislation.
The last several years have been very challenging for the Multi-Family housing development world in general. The program dollars have been dramatically reduced; the available dollars have been used to take care of Health and Safety and needed rehabilitation. At about this time last year, we were getting dollars allocated to us on a biweekly basis by OMB; it was really tough to operate under those circumstances. I am happy to report that for the first time in recent history, we have received a full year’s authority to run the program for both new construction and rehabilitation. That is really a victory. That gives us some reason to be optimistic.
In my travels, I found the development community to be engaged and innovative; project managers are involved with their projects and their tenants; they care about the way their projects look, and take pride in them. The Rural Housing staff, both in the National Office and the field, are very experienced, hard working, and managing to work in an industry to bring about the changes which are necessary.
Of the projects that I have seen, the great majority of them are in very good shape for affordable housing; some of them have been out there for 15 or more years. I think, again, we have turned the corner; we have spent the last two years focusing our attention on dealing with some of the issues and some of the worst projects experiencing great difficulty in the market place. I think those efforts have paid off.
Currently, only 2.5% of our portfolio is delinquent, and that is down considerably from where we were a few years ago. It is down further, actually, because some of our statistics a few years ago were not quite as accurate as we might have liked them to be. I think we are getting a handle on getting the data in.
Reforms were recently enacted by Congress to allow for a more flexible and responsive program. The regulations will be rewritten in 1997 for all the Multi-Family Housing regulations for the 515, 514, 516, and 521 programs, and regulations will be written for the 538 Guaranteed Program. We intend to do this as we have done in the past, taking the information out of the Stakeholder Meetings in the past year.
538 Demonstration Program
The Section 538 Guaranteed Loan Demonstration Program was a resounding success.
So, these, clearly, are reasons to be optimistic. We have specific allocation dollars for rehabilitation only, and we have a specific allocation for new construction. This is the first time in the last few years that there is a significant amount of dollars set aside for 515 new construction.
At this point, almost all of our Multi-Family and Farm Labor Housing dollars have been allocated. We just finished our pooling effort for FY 96. We had about $7.5 million to distribute, and those dollars were allocated last week. We took care of some more Health and Safety and emergency issues, and went ahead and did some priority projects.
The 538 Demonstration Program had 49 applications; in the very short time for responses, we had over 250 inquiries, and we have 10 successful applicants from 9 different states for the total loan amount of nearly $17 million. That is a little less than we had talked about in the requests, but once we looked at all of the costs of the program — subsidization and so forth — that turned out to be a bit more expensive than we had projected. We look forward to carrying this program forward in 1997; there has been an allocation for the 538 program, however, it has not been authorized by Congress. We have been up on the Hill for the last week, and believe that the authorization will be attached to a resolution in this Congress. So, we may have authorization for this Guaranteed Loan Program before Congress goes into recess.
Health and Safety and Rehabilitation in FY 96 has gone a long way in dealing with what we think were critical problems in the portfolio. I am happy to say that the specific allocation in the FY 97 budget for rehabilitation and Health and Safety issues is approximately $58 million. That was under the subsidy rate proposal in the President’s budget; it is likely to be a little bit less than that. We are currently looking at the amount of dollars that will be for new construction.
New Construction in FY 97
I know that your newsletters have discussed RHAP, the Rural Housing Assistance Program; we are trying to get our arms around it as well. RHAP accumulates several programs into one pot of money. The Secretary will determine how those dollars are allocated among the various programs. So, I can’t give you any specifics today about the amount of set-aside for new construction for FY 97, however I can tell you there will be a special allocation; there will be a formulaic approach to putting those dollars out to the states so every state will have an opportunity to produce the first new construction in a number of years. It is very likely it will be more new construction dollars than in the last few years.
You have heard a little about the Fund for Rural America and how that Fund might augment some of the housing programs. However, the Fund for Rural America is specifically addressed in the legislation; the legislation carves out Multi-family housing. The Fund might still be available to support some single-family programs; it will not be available to increase the amount in the budget for the 515 program.
To wrap up, the portfolio is an $11.8 billion portfolio of Multi-Family housing loans. I think we’re much better at making loans than we are at taking care of these assets.
One of the things the Administrator directed me to do, upon bringing me on board, was to take a look at our portfolio management situation and try to determine how we can be a better resource to our field staff and to our Stakeholders.
Clearly, that will be the key objective for me in the next year: to look at what resources we have, how best to allocate them, and provide both leadership and information to our field staff, and, hopefully, to be a partner with the development community in figuring out the best way to tackle the problems that are facing us. This problem is the growing, aging portfolio.
Next: Remarks by Carl Grate, RHS