Foreign Housing Guaranty Program:

Financial Condition Is Poor and Goals Are Not Achieved

NSIAD-95-108: Published: Jun 2, 1995. Publicly Released: Jun 28, 1995.

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Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) use of Housing Guaranty Program funds, focusing on the program's evolution, financial condition, and overall impact.

GAO found that: (1) the profile of participating countries, as well as the types of projects funded have significantly changed since the program was introduced in early 1961; (2) the Housing Guaranty Program has lost millions annually, with a $1-billion total net program cost to the U.S. government; (3) the Housing Guaranty Program has not increased domestic investment capital because local entrepreneurs have failed to see the feasibility of investing in low-income shelter projects; (4) AID relies on unvalidated reports from borrowers to monitor the use of loan funds, and it cannot ensure that these funds actually benefit low-income families; (5) AID has not designed performance indicators to measure the program's progress in stimulating private investments and providing shelter to low-income families; and (6) Congress has authorized new loan guaranties and has appropriated about $50 million to cover probable loan default costs associated with the Housing Guaranty Program.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: This program was not terminated by the Congress, and it is not likely that it will be terminated in the near future. However,its appropriation was reduced significantly. Congress is considering a proposal by AID to establish a Development Credit Facility. According to the proposal, eventually this facility will incorporate the activities implemented under the Housing Guaranty Program (now called the Urban and Environment program).

    Matter: Congress may wish to deauthorize guaranties for undisbursed loans, where feasible, and terminate the Housing Guaranty Program because: (1) the program is now primarily benefitting borrowers in more creditworthy and advanced developing countries that have access to comparable loans from other international lenders; (2) the program annually costs millions of dollars more than anticipated; (3) loans previously guarantied under the pre-1992 legislated ceiling continue to be disbursed, even though AID has not collected over $400 million in defaulted debt; and (4) there is no evidence that the program has measurably increased the availability of private domestic capital for low-income shelter.

  2. Status: Closed - Not Implemented

    Comments: No such plan was ever legislated by Congress, and it is not likely that it will be in the future. It is not likely that such a plan will be required even if Congress acts on AID's proposal to establish a Development Credit Facility.

    Matter: Congress may wish to require AID to submit a comprehensive plan to the appropriate congressional committees on how it plans to achieve the stated program goals, reduce losses, and return the program to a viable financial condition.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: GAO made these recommendations to the agency in case Congress does not act on the report's primary recommendation of program termination. The agency has indicated in its formal comments to the report that it does not consider the conclusion of the report to be valid, and therefore, the agency disregards the recommendations.

    Recommendation: If Congress does not terminate the Housing Guaranty Program, the Administrator, AID, should minimize the financial impact of the Housing Guaranty Program on the foreign assistance budget and the U.S. government budget deficit.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Not Implemented

    Comments: GAO also made these recommendations to the agency in case Congress does not act on the report's primary recommendation of program termination. The agency has indicated in its formal comments to the report that it does not consider the conclusion of the report to be valid, and therefore, the agency disregards the recommendations.

    Recommendation: If Congress does not terminate the Housing Guaranty Program, the Administrator, AID, should bring the program in line with the objectives of the Foreign Assistance Act by: (1) withholding future loan disbursements and related technical assistance from borrowers that have repeatedly rescheduled debt repayments to AID; (2) increasing program revenues by adopting a fee structure designed to offset a larger portion of the program's costs; and (3) ensuring that performance indicators measure the extent to which local investors replicate the program's low-income shelter projects using private sources of long-term financing, and project benefits accrue to the below-median income target

    Agency Affected: United States Agency for International Development

 

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