B-145603, JUNE 6, 1961, 40 COMP. GEN. 656

B-145603: Jun 6, 1961

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WHICH LOANS WILL HAVE THE EFFECT OF RELEASING THE CITY OF NEW YORK FROM ITS PRESENT OBLIGATIONS AND OF INCORPORATING THE PROJECTS WHICH. ARE NOW NOT AVAILABLE TO THE LOWEST INCOME GROUP INTO THE LOW RENT HOUSING PROGRAM UNDER THE 1937 ACT. NOTWITHSTANDING THAT THE OWNERSHIP OF THE PROJECTS IS ALREADY VESTED IN THE NEW YORK CITY HOUSING AUTHORITY. TO MAKE A REFUNDING LOAN TO THE NEW YORK HOUSING AUTHORITY TO BRING THE RENTS FOR TWO PARTIALLY COMPLETED LOW INCOME HOUSING PROJECTS WITHIN REACH OF THE LOWEST INCOME GROUP IS NOT LIMITED BY SECTION 606 OF THE HOUSING ACT OF 1949. THAT THE CONTRACTS FOR FINANCIAL ASSISTANCE MUST HAVE BEEN ENTERED INTO ON OR AFTER JANUARY 1. ARE TO PROVIDE 1470 AND 320 DWELLING UNITS RESPECTIVELY.

B-145603, JUNE 6, 1961, 40 COMP. GEN. 656

HOUSING - INCORPORATION OF CITY HOUSING PROJECT INTO FEDERAL LOW INCOME PROGRAM REFUNDING LOANS BY THE PUBLIC HOUSING ADMINISTRATION TO THE NEW YORK HOUSING AUTHORITY TO ENABLE THE CITY AUTHORITY TO BRING THE RENTS FOR TWO PARTIALLY COMPLETED LOW INCOME HOUSING PROJECTS WITHIN REACH OF FAMILIES IN THE LOWEST INCOME GROUP AS DEFINED IN SECTION 2 (2) OF THE UNITED STATES HOUSING ACT OF 1937, AS AMENDED, 42 U.S.C. 1402 (2), WHICH LOANS WILL HAVE THE EFFECT OF RELEASING THE CITY OF NEW YORK FROM ITS PRESENT OBLIGATIONS AND OF INCORPORATING THE PROJECTS WHICH, BECAUSE OF INSUFFICIENT FINANCING AID, ARE NOW NOT AVAILABLE TO THE LOWEST INCOME GROUP INTO THE LOW RENT HOUSING PROGRAM UNDER THE 1937 ACT, MAY BE REGARDED AS LOANS NECESSARY TO ASSIST THE LOCAL AUTHORITY IN THE ACQUISITION OF LOW RENT HOUSING AS AUTHORIZED IN SECTIONS 9 AND 10 OF THE 1937 ACT, NOTWITHSTANDING THAT THE OWNERSHIP OF THE PROJECTS IS ALREADY VESTED IN THE NEW YORK CITY HOUSING AUTHORITY. THE COST OF DEVELOPMENT OF TWO PARTIALLY COMPLETED CITY LOW INCOME PROJECTS TO BE INCORPORATED INTO THE LOW INCOME HOUSING PROGRAM UNDER THE UNITED STATES HOUSING ACT OF 1937, AS REFLECTED IN A REFUNDING LOAN TO ENABLE THE AUTHORITY TO BRING THE RENTS INTO REACH OF FAMILIES OF THE LOWEST INCOME GROUP AS DEFINED IN THE 1937 ACT, MAY BE INCLUDED IN THE DETERMINATION OF THE ANNUAL CONTRIBUTIONS FOR THE PROJECTS UNDER SECTION 10 OF THE 1937 ACT WHICH PROVIDES THAT IN FIXING THE MAXIMUM ANNUAL CONTRIBUTIONS TO PUBLIC HOUSING AGENCIES TO ASSIST IN THE MAINTENANCE OF THE LOW RENT CHARACTER OF THE PROJECTS, COST, LOCATION, SIZE, AND OTHER FACTORS MAY BE CONSIDERED. THE AUTHORITY OF THE PUBLIC HOUSING ADMINISTRATION UNDER SECTIONS 9 AND 10 OF THE UNITED STATES HOUSING ACT OF 1937, 42 U.S.C. 1409 AND 1410, TO MAKE A REFUNDING LOAN TO THE NEW YORK HOUSING AUTHORITY TO BRING THE RENTS FOR TWO PARTIALLY COMPLETED LOW INCOME HOUSING PROJECTS WITHIN REACH OF THE LOWEST INCOME GROUP IS NOT LIMITED BY SECTION 606 OF THE HOUSING ACT OF 1949, 42 U.S.C. 1433, WHICH SPECIFIES, AS ONE OF THE CONDITIONS FOR PROJECTS COMING WITHIN THE SCOPE OF THAT PARTICULAR SECTION, THAT THE CONTRACTS FOR FINANCIAL ASSISTANCE MUST HAVE BEEN ENTERED INTO ON OR AFTER JANUARY 1, 1948, AND PRIOR TO JANUARY 1, 1950.

TO THE ADMINISTRATOR, HOUSING AND HOME FINANCE AGENCY, JUNE 6, 1961:

YOUR LETTER OF APRIL 13, 1961, CONCERNS A REQUEST BY THE NEW YORK CITY HOUSING AUTHORITY TO INCORPORATE INTO THE LOW-RENT HOUSING PROGRAM UNDER THE UNITED STATES HOUSING ACT OF 1937, 42 U.S.C. 1401 (HEREINAFTER REFERRED TO AS THE USHACT) CERTAIN PROJECTS PREVIOUSLY UNDERTAKEN BY THE AUTHORITY WITH ASSISTANCE OF THE CITY OF NEW YORK. THESE PROJECTS AS DESIGNATED AS SENATOR ROBERT A. TAFT HOUSES, NYC-28, AND MARTIN VAN BUREN HOUSES, NYC-30, AND ARE TO PROVIDE 1470 AND 320 DWELLING UNITS RESPECTIVELY. YOU STATE THAT THE BACKGROUND OF THESE PROJECTS AND REASON FOR THIS PROPOSAL HAVE BEEN DESCRIBED BY THE AUTHORITY SUBSTANTIALLY AS FOLLOWS:

THE PROJECTS WERE ORIGINALLY UNDERTAKEN AS PART OF THE AUTHORITY'S CITY- AIDED PART IV PROGRAM TO PROVIDE HOUSING FOR FACILITIES WHOSE INCOMES, WHILE ABOVE THE LIMITS FOR FULLY SUBSIDIZED PUBLIC HOUSING, ARE INSUFFICIENT TO ENABLE THEM TO PAY THE RENTS FOR AVAILABLE PRIVATE HOUSING. THE PART IV PROGRAM WAS UNDERTAKEN UNDER THE PUBLIC HOUSING LAW OF NEW YORK (CHAPTER 44-A OF THE CONSOLIDATED LAWS), WITH ASSISTANCE BY THE CITY OF NEW YORK THROUGH GUARANTEES OF BONDS SOLD BY THE AUTHORITY TO FINANCE THE DEVELOPMENT OF THE PROJECTS, WITH TAX EXEMPTION, BUT WITHOUT ANY PROVISION FOR CASH SUBSIDIES.

SUBSEQUENT DEVELOPMENTS HAVE LED THE AUTHORITY TO REVISE ITS PLANS WITH RESPECT TO THESE AND OTHER PART IV PROJECTS WHICH HAVE NOT YET BEEN COMPLETED. THE LIMITED PROFIT HOUSING LAW (1ARTICLE XII, PUBLIC HOUSING LAW) WAS ENACTED BY THE NEW YORK LEGISLATURE, AUTHORIZING STATE AND CITY LOANS TO PRIVATE SPONSORS FOR THE ERECTION OF RENTAL AND COOPERATIVE PROJECTS FOR FAMILIES WHOSE INCOMES ARE AT APPROXIMATELY THE SAME LEVELS AS THE INCOMES OF THOSE FAMILIES WHO QUALIFY FOR THE PART IV PROGRAM, AND SUBSTANTIAL PROGRESS IS BEING MADE UNDER THIS LAW. FURTHERMORE, IN 1958, IN CONNECTION WITH LEGISLATION RELATING TO THE AUTHORITY, THE LEGISLATURE MADE A NDING,"THAT PRIVATE ENTERPRISE SHOULD BE ENCOURAGED TO THE GREATEST EXTENT POSSIBLE TO ENTER THE FIELD OF HOUSING IN WHICH THE AUTHORITY NOW OPERATES SO THAT THE AUTHORITY MAY BE ABLE TO CONCENTRATE ITS ACTIVITIES AT THE EARLIEST POSSIBLE MOMENT ON PROVIDING HOUSING EXCLUSIVELY FOR THE LOWER INCOME FAMILIES" (SEC. 402 (1), PUBLIC HOUSING LAW).

IN THE LIGHT OF THESE DEVELOPMENTS, THE AUTHORITY UNDERTOOK AN EXTENDED STUDY OF HOW THE PART IV PROJECTS STILL UNDER DEVELOPMENT COULD BEST BE UTILIZED CONSISTENT WITH THE NEEDS OF THE CITY AND COMMUNITIES IN WHICH THE PROJECTS WERE LOCATED. IN THE CASE OF TAFT AND VAN BUREN HOUSES, WHICH ARE LOCATED IN AREAS INHABITED PRINCIPALLY BY FAMILIES OF LOW INCOME, THE AUTHORITY DECIDED THAT THEIR CONVERSION TO SUBSIDIZED PUBLIC HOUSING FOR FAMILIES OF LOWER INCOME WOULD BEST SERVE THE NEEDS OF THE CITY.

YOU STATE THAT ASSUMING, AS YOU ANTICIPATE, THAT THESE PROJECTS ARE IN CONFORMITY WITH THE COST, DESIGN, AND OTHER REQUIREMENTS OF THE USHACT, THE INCLUSION OF THEM IN THE NEW YORK CITY HOUSING AUTHORITY'S LOW-RENT HOUSING PROGRAM UNDER THE USHACT IN LIEU OF BUILDING OTHER DWELLING UNITS WOULD BE A DESIRABLE AND EXPEDITIOUS MANNER OF PROVIDING A SUBSTANTIAL PART OF THE 4800 OR MORE UNITS PLANNED FOR THE CITY UNDER OUR PROGRAM, PARTICULARLY AS THE AUTHORITY HAS ADVISED THAT PROBABLE NEW SITES HAVE BEEN FOUND FOR LESS THAN 800 OF THESE. YOU ADVISE THAT THE TWO CITY-AIDED PROJECTS, WITH A TOTAL OF 1790 UNITS, CONSIST OF VAN BUREN HOUSES (320 UNITS, SCHEDULED FOR COMPLETION ON JUNE 30, 1961) AND TAFT HOUSES (1470 UNITS, SCHEDULED FOR COMPLETION ON MARCH 31, 1962).

TO INCLUDE THESE PROJECTS IN THE USHACT PROGRAM, A CONTRACT FOR LOANS AND ANNUAL CONTRIBUTIONS WOULD BE ENTERED INTO BY THE PUBLIC HOUSING ADMINISTRATION (1PHA) WITH THE NEW YORK CITY HOUSING AUTHORITY. EXPENDITURES TO DATE FOR THESE PROJECTS HAVE BEEN FINANCED BY TEMPORARY LOAN NOTES ON THE AUTHORITY, GUARANTEED BY THE CITY OF NEW YORK. ON VAN BUREN HOUSES THESE NOTES ARE IN THE AMOUNT OF $5,335,000 AND HAVE A MATURITY DATE OF OCTOBER 11, 1961, WHILE ON TAFT HOUSES THE NOTES ARE IN THE AMOUNT OF $24,640,000 AND HAVE A MATURITY DATE OF MAY 10, 1961. YOU STATE THAT TO OBTAIN THE ADVANTAGES OF THE LOWER INTEREST RATE USUALLY INCIDENT TO FEDERALLY SECURED FINANCING, THESE OUTSTANDING AMOUNTS WOULD BE REFINANCED THROUGH THE ISSUANCE OF NOTES OF THE AUTHORITY SECURED BY PHA COMMITMENTS (OR POSSIBLY, IN THE CASE OF THE LATER MATURING AMOUNTS, WITH THE PROCEEDS OF THE BONDS WHICH WILL EVENTUALLY BE SOLD IN THE PERMANENT FINANCING OF THE PROJECTS).

THE ADDITIONAL FUNDS NEEDED TO COMPLETE THE PROJECTS WOULD COME FROM ADDITIONAL NOTES UNDERWRITTEN BY THE PHA (OR FROM THE PROCEEDS OF THE PERMANENT FINANCING BONDS), WHICH ARE THE USUAL AND CONVENTIONAL MEANS BY WHICH PHA-AIDED PROJECTS ARE FINANCED. THE BONDS SOLD IN THE PERMANENT FINANCING WOULD BE SECURED, IN THE USUAL MANNER, BY A PLEDGE OF THE ANNUAL CONTRIBUTIONS PAYABLE BY THE PHA.

YOU STATE THAT IF THESE PROJECTS MAY BE FINANCED WITH ASSISTANCE UNDER THE USHACT, THEY CAN BE CONVERTED INTO YOUR PROGRAM AND WOULD FURTHER THE OBJECTIVE OF THE USHACT BY PROVIDING "DECENT, SAFE AND SANITARY DWELLINGS WITHIN THE FINANCIAL REACH OF FAMILIES OF LOW INCOME.' HOWEVER, YOU ADVISE THAT THE AUTHORIZING LANGUAGE CONTAINED IN SECTIONS 9 AND 10 OF THE USHACT AND SECTION 606 OF THE HOUSING ACT OF 1949, 42 U.S.C. 1433, WHEN CONSIDERED IN CONNECTION WITH THE FACT THAT THE PROJECTS (TO THE EXTENT THAT THEY HAVE BEEN DEVELOPED) ARE ALREADY IN THE OWNERSHIP OF THE NEW YORK CITY HOUSING AUTHORITY, HAS POSTPONED YOUR TAKING FURTHER ADMINISTRATIVE ACTION ON THE PROPOSAL UNTIL YOU HAVE RECEIVED OUR ANSWERS TO THE FOLLOWING QUESTIONS:

1. WOULD A REFUNDING LOAN BY THE PHA TO THE NEW YORK CITY HOUSING AUTHORITY, WHICH WOULD HAVE THE EFFECT OF RELEASING THE CITY OF NEW YORK FROM ITS PRESENT OBLIGATIONS ON THE OUTSTANDING NOTES, BE A LOAN "TO ASSIST THE DEVELOPMENT (OR) ACQUISITION" OF A LOW-RENT PROJECT WITHIN THE AUTHORIZATION OF SECTION 9? IT IS ASSUMED THAT ANY FURTHER LOANS NEEDED TO COMPLETE THE DEVELOPMENT OF THE PROJECTS WOULD COME WITHIN THIS AUTHORIZATION.

2. WOULD THE COST OF DEVELOPMENT HITHERTO COMPLETED, AS REFLECTED IN THE AMOUNT OF SUCH REFUNDING LOAN, BE FOR INCLUSION IN THE "DEVELOPMENT OR ACQUISITION COST" FOR PURPOSES OF DETERMINING THE MAXIMUM ALLOWABLE ANNUAL CONTRIBUTION UNDER SECTIONS 10 (B) AND 10 (C/?

3. ARE THE PROVISIONS OF SECTION 606 OF THE HOUSING ACT OF 1949 LIMITATIONS ON THE AUTHORIZATIONS CONTAINED IN SECTIONS 9 AND 10 OF THE USHACT? IF SO, WOULD THE HOUSING PROJECTS UNDER CONSIDERATION BE SUBJECT TO THE REQUIREMENTS OF THAT SECTION AND RENDERED INELIGIBLE FOR ASSISTANCE BECAUSE THEY CANNOT MEET THE TIME LIMITATIONS?

UNDER SECTION 9 OF THE USHACT OF 1937, AS AMENDED, 42 U.S.C. 1409, PHA IS AUTHORIZED TO MAKE LOANS TO PUBLIC HOUSING AGENCIES TO ASSIST IN THE ACQUISITION OF LOW-RENT OR SLUM-CLEARANCE PROJECTS BY SUCH AGENCIES. THE TERM "LOW-RENT HOUSING" IS DEFINED IN THE ACT (42 U.S.C. 1402 (1) (, IN PART, AS MEANING DECENT, SAFE AND SANITARY DWELLINGS WITHIN THE FINANCIAL REACH OF FAMILIES OF LOW INCOME. THE TERM "FAMILIES OF LOW INCOME" IS DEFINED IN THE ACT (42 U.S.C. 1402 (2) ( AS MEANING FAMILIES WHO ARE IN THE LOWEST INCOME GROUP AND WHO CANNOT AFFORD TO PAY ENOUGH TO CAUSE PRIVATE ENTERPRISE IN THEIR LOCALITY TO BUILD AN ADEQUATE SUPPLY OF DECENT, SAFE AND SANITARY DWELLINGS FOR THEIR USE. WHILE THE PROJECTS IN QUESTION, TO THE EXTENT THAT THEY HAVE BEEN DEVELOPED, ARE ALREADY IN THE OWNERSHIP OF THE NEW YORK CITY HOUSING AUTHORITY, YOUR LETTER INDICATES THAT THE FINANCIAL AID NOW AVAILABLE FOR SUCH PROJECTS IS NOT SUFFICIENT TO BRING THE RENTS WITHIN THE REACH OF FAMILIES IN THE LOWEST INCOME GROUP. THUS, THE PROJECTS HAVE NOT BEEN ACQUIRED BY THE NEW YORK CITY HOUSING AUTHORITY FOR ONE OF THE PURPOSES SET FORTH IN THE USHACT OF 1937, THAT IS, TO FURNISH LOW-RENT HOUSING FOR FAMILIES IN THE LOWEST INCOME GROUP. THEREFORE, ASSUMING THE LOANS ARE OTHERWISE PROPER IF IT IS ADMINISTRATIVELY DETERMINED THAT REFUNDING LOANS--- WHICH WOULD HAVE THE EFFECT OF RELEASING THE CITY OF NEW YORK FROM ITS PRESENT OBLIGATIONS ON THE OUTSTANDING NOTES--- ARE NECESSARY IN ORDER TO ENABLE THE NEW YORK CITY HOUSING TO BRING THE RENTS FOR THE TWO PROJECTS WITHIN THE REACH OF FAMILIES IN THE LOWEST INCOME GROUP, SUCH LOANS MAY REASONABLY BE SAID TO BE NECESSARY TO ASSIST THE LOCAL AUTHORITY IN ACQUISITION OF LOW RENT HOUSING AS THAT TERM IS DEFINED IN THE USHACT OF 1937.

YOUR FIRST QUESTION IS ANSWERED ACCORDINGLY.

AS INDICATED IN YOUR LETTER, SECTION 10 OF THE USHACT OF 1937 AUTHORIZES THE MAKING OF ANNUAL CONTRIBUTIONS OF PUBLIC HOUSING AGENCIES TO ASSIST IN ACHIEVING AND MAINTAINING THE LOW-RENT CHARACTER OF THE HOUSING PROJECTS. SECTION 10 (B) OF THE SAME ACT PROVIDES THAT PHA MAY PRESCRIBE REGULATIONS FIXING THE MAXIMUM CONTRIBUTION AVAILABLE UNDER DIFFERENT CIRCUMSTANCES GIVING CONSIDERATION TO COST, LOCATION, SIZE, RENT-PAYING ABILITY OF PROSPECTIVE TENANTS OR OTHER FACTORS BEARING UPON THE AMOUNTS AND PERIODS OF ASSISTANCE NEEDED TO ACHIEVE AND MAINTAIN LOW RENTALS. THE SECTION FURTHER PROVIDES THAT SUCH REGULATIONS MAY PROVIDE FOR RATES OF CONTRIBUTION BASED UPON ACQUISITION COST OF THE PROJECT. THEREFORE, IT IS OUT VIEW THAT, IF OTHERWISE PROPER, THE ANNUAL CONTRIBUTIONS FOR THESE PROJECTS MAY BE BASED ON THE AMOUNT OF THE LOANS NECESSARY TO ENABLE THE NEW YORK CITY HOUSING AUTHORITY TO ACQUIRE THE PROJECTS SO AS TO PERMIT IT TO CHARGE RENTS WITHIN THE REACH OF FAMILIES IN THE LOWEST INCOME GROUP, SUBJECT OF COURSE TO ANY LIMITATIONS IN THE ACT AND REGULATIONS ISSUED THEREUNDER.

QUESTION NO. 2 IS ANSWERED ACCORDINGLY.

CONCERNING YOUR THIRD QUESTION, AS INDICATED IN YOUR LETTER, SECTION 606 OF THE HOUSING ACT OF 1949, 42 U.S.C. 1433, MAKES IT MANDATORY THAT PROJECTS MEETING THE CONDITIONS SPECIFIED THEREIN ,SHALL BE APPROVED AS A LOW-RENT HOUSING PROJECT" BY PHA UNDER THE USHACT OF 1937. ONE OF THE REQUIRED CONDITIONS IS THAT A CONTRACT FOR STATE FINANCIAL ASSISTANCE FOR THE PROJECT MUST HAVE BEEN ENTERED INTO ON OR AFTER JANUARY 1, 1948, AND PRIOR TO JANUARY 1, 1950. HOWEVER, AS FAR AS HOUSING PROJECTS MEETING THE CONDITIONS SET FORTH IN SECTION 606 ARE CONCERNED, THE APPARENT PURPOSE OF THAT SECTION WAS TO REMOVE ANY DISCRETIONARY AUTHORITY VESTED IN THE ADMINISTRATOR TO APPROVE OR DISAPPROVE SUCH PROJECTS AS LOW-RENT HOUSING PROJECTS UNDER THE USHACT. THEREFORE, WE AGREE THAT THE MANDATORY LANGUAGE IN SECTION 606 APPLIES TO PROJECTS FALLING WITHIN THE SCOPE OF THAT SECTION; AND THAT THE SECTION NEED NOT BE CONSTRUED AS LIMITING THE AUTHORITY OF PHA TO GRANT FINANCIAL AID UNDER THE USHACT TO THE INSTANT PROJECTS WHICH DO NOT COME WITHIN THE SCOPE OF SECTION 606.