Early Sales of Section 8 Housing

PAD-79-43: Published: Jan 16, 1979. Publicly Released: Jan 16, 1979.

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GAO studied alternative financing mechanisms for subsidized housing production. The alternatives being analyzed include the more traditional Federal Housing Administration (FHA) multifamily insurance programs, state housing financial agencies, and others which utilize private ownership. The policies and procedures governing section 8, which subsidized the bulk of housing assistance were examined. Observations indicate a serious and costly problem in the way the program is administered.

By allowing private investors who own and operate section 8 housing to sell their projects or convert them to condominiums in as little as 5 years, low and moderate income tenants would most likely be displaced. Furthermore, much longer service can be expected from a program such as conventional public housing which should serve subsidized tenants at least 40 years at lower costs. A regulatory agreement has been executed for section 8 projects. However for uninsured projects such as those developed through state housing financial agencies, no regulatory agreement between developer and the Department of Housing and Urban Development (HUD) has been executed and the terms of the Housing Assistance Payments (HAP) contract allows owners to withdraw at the end of any 5 year renewal period. The government goes to considerable effort and expense to get new subsidized housing produced. If projects are refinanced or sold after 5 or 10 years rather than held for the 20 years originally anticipated, then these front-end costs and HUD's energies and administrative expenses are largely lost along with the availability of housing to low and moderate income tenants.

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