Rural Rental Housing:

Incentives Maintain Low-Income Housing but Clearer Guidance Needed

RCED-92-150: Published: Jun 23, 1992. Publicly Released: Jul 15, 1992.

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Pursuant to a congressional request, GAO provided information on: (1) financial and other incentives offered by the Farmers Home Administration (FmHA) and their effect on preserving the FmHA rural rental housing inventory; (2) the types of incentives FmHA uses; and (3) the problems FmHA encounters in providing incentives.

GAO found that: (1) 140 FmHA projects either received financial incentives or were sold to nonprofit organizations, as authorized under the Housing and Development Act of 1987, to preserve low-income housing; (2) 5,870, or 4 percent, of the 160,000 eligible units were preserved through incentives totalling about $69 million; (3) 129 of the 140 projects received equity loans, which are most attractive to borrowers because they are unrestricted and can be repaid by project revenues; (4) the increased rental assistance payments and increased rate of return on investment incentives were rarely used without equity loans; and (5) FmHA encountered problems in the appraisal methodology, which resulted in inequities in the distribution of financial incentives.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Regulations were issued along with revised agency guidelines on July 21, 1993, and August 20, 1993, respectively.

    Recommendation: To correct the problems encountered in the FmHA interim regulation and ensure that no further delays occur in implementing the final regulation, the Secretary of Agriculture should direct the Administrator, FmHA, to establish instructions and procedures for implementing the regulation and ensure that these procedures are distributed to FmHA state, district, and county offices as soon as the regulation is issued.

    Agency Affected: Department of Agriculture


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