Multifamily Housing:

Issues Related to Mark-to-Market Program Reauthorization

GAO-01-800: Published: Jul 11, 2001. Publicly Released: Jul 11, 2001.

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The Office of Multifamily Housing Assistance Restructuring (OMHAR) administers the mark-to-market program, which was created to preserve the affordability of low-income rental housing while reducing the long-term costs of Section 8 project-based assistance. Legislative authorization for both the mark-to-market program and OMHAR is scheduled to terminate on September 30, 2001. If the legislative authority for the mark-to-market program provided for in Subtitle A of the Multifamily Assisted Housing Reform and Affordability Act of 1997 is allowed to expire, the Department of Housing and Urban Development (HUD) estimates it will have to reduce the rents to market levels of well over 1,000 properties without having the tools to mitigate the potential effects of such reductions. If the reduced rents do not provide sufficient revenues to cover the properties' operating expenses, mortgage payments, and repair needs, owners may be forced to reduce expenditures for maintenance or other operating expenses or may default on their mortgages. Such action could result in deteriorating property conditions and substantial claims against the Federal Housing Administration insurance fund, which, in turn, could adversely affect property residents and lead to a decrease in the supply of affordable housing. Transferring authority for the mark-to-market program to HUD's Office of Housing could potentially help facilitate the handling of some mark-to-market related functions that have required coordination between OMHAR and the Office of Housing. While the mark-to-market program has brought about successful and restructurings resulting in Section 8 savings at a number of properties, the requirement that rents be reduced to market has increased the risk of physical and financial problems at other properties.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: To permit continued restructuring of Section 8 properties with above-market rents, Congress should extend Subtitle A of the Multifamily Assisted Housing Reform and Affordability Act beyond September 30, 2001.

    Status: Closed - Implemented

    Comments: Legislation extending the mark-to-market program (H.R. 3061, Title VI--Extension of Mark-to-Market Program for Multifamily Housing) was enacted on January 10, 2002, but was retroactive to October 1, 2001. The program received a five year extension and will now expire on September 30, 2006.

    Matter: To ensure that restructurings are completed expeditiously and in accordance with legislative and regulatory requirements, and that the federal government's interests are protected, Congress should extend legislative requirements placing the mark-to-market program under a separate office headed by a director who is responsible for administering the program. Regardless of whether the program responsibility continues within OMHAR or is transferred to a separate office elsewhere in HUD, the office should have a sufficient number of trained staff dedicated to program administration.

    Status: Closed - Implemented

    Comments: The mark-to-market extension legislation (H.R. 3061, Title VI, Subtitle B) enacted on January 10, 2002, and retroactive to October 1, 2001, continues the Office of Multifamily Housing Assistance Restructuring (OMHAR) as a separate office headed by a director who is responsible for administering the mark-to-market program. The legislation transfers authority and responsibilities from the Secretary of HUD to the Federal Housing Commissioner.

    Recommendation for Executive Action

    Recommendation: To minimize the risks to properties and tenants' living conditions associated with reducing rents to market at those properties for which mortgage restructurings are needed but have not been completed because of owner resistance or other problems, the Secretary of Housing and Urban Development should direct the Assistant Secretary, Office of Housing to revise the guidance for monitoring potentially troubled mark-to-market properties to specifically include all properties that may be at risk of physical and financial problems.

    Agency Affected: Department of Housing and Urban Development

    Status: Closed - Implemented

    Comments: HUD's Office of Housing and the Office of Multifamily Housing Assistance Restructuring issued revised guidance in September 2001 for monitoring properties that have not completed the mark-to-market restructuring process and are therefore at risk of developing physical and financial problems.

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