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United States General Accounting Office: 
GAO: 

Report to Congressional Committees: 

Federal Housing Assistance: 

Comparing the Characteristics and Costs of Housing Programs: 

GAO-02-76: 

Contents: 
Letter: 

Results in Brief: 

Background: 

Programs Provide a Wide Range of Housing and Services Production 
Programs Cost More Than Vouchers: 

The Federal Government and Tenants Pay the Largest Shares of Total 
Costs: 

Housing Policy Issues: 

Federal Agency and State Association Comments and Our Evaluation: 

Scope and Methodology: 

Appendixes: 

Appendix I: Methodology for Estimating Per-Unit Costs of Federally 
Assisted Housing Programs: 
Previous Studies; 
Conceptual Framework; 
Estimating Program Costs; 
Comparing Program Costs; 
Cost Shares; 
Sources of Data Used in the Analysis. 

Appendix II: Sensitivity Analysis: 

Appendix III: Evolution of Federal Housing Assistance Programs: 

Appendix IV: Federal Expenditures on Housing Programs: 
Defining Budgetary Outlays; 
Program Outlays for Fiscal Year 1999; 
Problems With Comparing Program Outlays. 

Appendix V: Comments From the Department of Housing and Urban 
Development: 
GAO Comments. 

Appendix VI: Comments From the U.S. Department of Agriculture: 
GAO Comment. 

Appendix VII: Comments From the National Council of State Housing 
Agencies: 
GAO Comments. 

Appendix VIII: GAO Contacts and Staff Acknowledgments: 
GAO Contacts; 
Acknowledgments. 

Tables: 

Table 1: Impact of Contributions From State, Local, and Private 
Sources on the Average First-Year Costs of Two-Bedroom Units for Tax 
Credit Properties in Boston and New York: 

Table 2: Average Total Development Costs Per Unit, by General Location 
and for Seven Metropolitan Areas, in 1999 Dollars: 

Table 3: Average Present Discounted Value of Development Subsidies Per 
Unit, by General Location and for Seven Metropolitan Areas, in 1999 
Dollars: 

Table 4: Average Monthly Rents, by General Location and for Seven 
Metropolitan Areas, in 1999 Dollars: 

Table 5: Average First- and 30-Year Total Costs Per Unit: Housing 
Production Program Costs Compared With Voucher Costs, Adjusted for 
General Location and Unit Size, in 1999 Dollars: 

Table 6: Average First- and 30-Year Total Costs of One- and Two-
Bedroom Units, by General Location, in 1999 Dollars: 

Table 7: Average First- and 30-Year Total Costs of One-Bedroom Units, 
by General Location and for Seven Metropolitan Areas, in 1999 Dollars: 

Table 8: Average First- and 30-Year Total Costs of Two-Bedroom Units, 
by General Location and for Seven Metropolitan Areas, in 1999 Dollars: 

Table 9: Average Share of First- and 30-Year Total Costs of One-
Bedroom Units Paid by the Federal Government, Tenants, and Others, in 
1999 Dollars: 

Table 10: Average Share of First- and 30-Year Total Costs of Two-
Bedroom Units Paid by the Federal Government, Tenants, and Others, in 
1999 Dollars: 

Table 11: Average First- and 30-Year Federal Costs Per Unit: Housing 
Production Program Federal Costs Compared With Voucher Federal Costs 
Adjusted for General Location, Unit Size, and Tenant Contribution, in 
1999 Dollars: 

Table 12: Average First- and 30-Year Federal Costs for One-Bedroom 
Units: Housing Production Program Federal Costs Compared With Voucher 
Federal Costs, Adjusted for General Location and Tenant Contribution, 
in 1999 Dollars: 

Table 13: Average First- and 30-Year Federal Costs for Two-Bedroom 
Units: Housing Production Program Federal Costs Compared With Voucher 
Federal Costs, Adjusted for General Location and Tenant Contribution, 
in 1999 Dollars: 

Table 14: Average 30-Year Total Costs of Housing Programs Per Unit 
Under Different Rates of Inflation, by General Location, in 1999 
Dollars: 

Table 15: Average 30-Year Total Costs Per Unit Under Different Rates 
of Inflation: Housing Production Program Costs Compared With Voucher 
Costs, Adjusted for General Location and Unit Size, in 1999 Dollars: 

Table 16: Average 30-Year Total Costs of One- and Two-Bedroom Units 
Under Different Rates of Inflation, by General Location, in 1999 
Dollars: 

Table 17: Average Federal Share of 30-Year Total Costs Per Unit Under 
Different Rates of Inflation: Housing Production Program Costs 
Compared With Voucher Costs, Adjusted for General Location, Unit Size, 
and Tenant Contribution, in 1999 Dollars: 

Table 18: Average Federal Share of 30-Year Total Costs of One-Bedroom 
Units Under Different Rates of Inflation: Housing Production Program 
Costs Compared With Voucher Costs, Adjusted for General Location and 
Tenant Contribution, in 1999 Dollars: 

Table 19: Average Federal Share of 30-Year Total Costs of Two-Bedroom 
Units Under Different Rates of Inflation: Housing Production Program 
Costs Compared With Voucher Costs, Adjusted for General Location and 
Tenant Contribution, in 1999 Dollars: 

Table 20: Multifamily Housing Programs, by Type of Subsidy, in Order 
of Year Authorized: 

Table 21: Federal Outlays for Major Assisted Housing Programs in 
Fiscal Year 1999: 

Figures: 

Figure 1: Budgetary Outlays and Tax Expenditures for Active and 
Inactive Housing Assistance Programs, Fiscal Year 1999, Dollars in 
Millions: 

Figure 2: Housing Provided Under the Six Active Programs: 

Figure 3: Distribution and Average Size of Units in the Six Active
Housing Programs: 

Figure 4: General Location of Units in the Six Active Housing
Programs: 

Figure 5: Demographic Characteristics of Neighborhoods Where
Assisted Housing Is Located: 

Figure 6: Average Total 30-Year Cost of One-Bedroom Units, by
General Location: 

Figure 7: Average Total 30-Year Cost of Two-Bedroom Units, by
General Location: 

Figure 8: Average Shares of Total 30-Year Costs for One-Bedroom
Units Paid by the Federal Government, Tenants, and Others: 

Figure 9: Average Annual Incomes of Households Served Under the
Six Active Programs: 

Figure 10: Comparison of the Average Federal Cost of One-Bedroom Units 
in Metropolitan Areas for Production Programs and Vouchers, Adjusted 
for Household Income and Rent Burden: 

Figure 11: Comparison of the Average Federal Cost of One-Bedroom Units 
in Nonmetropolitan Areas for Production Programs and Vouchers, 
Adjusted for Household Income and Rent Burden: 

Abbreviations: 
BMIR: below-market interest rate: 

CMT: constant maturity treasuries: 

FHA: Federal Housing Administration: 

HUD: Department of Housing and Urban Development: 

IRS: Internal Revenue Service: 

NCSHA: National Council of State Housing Agencies: 

PDV: present discounted value: 

RAP: rental assistance payment: 

RHS: Rural Housing Service: 

USDA: U.S. Department of Agriculture: 

[End of section] 

United States General Accounting Office: 
Washington, D.C. 20548: 

January 31, 2002: 

Congressional Committees: 

For more than 60 years, the federal government has provided assistance 
to improve the condition and reduce the cost of rental housing for 
low- and very-low-income households.[Footnote 1] In fiscal year 1999, 
about 5.2 million such households received about $28.7 billion in 
federal housing assistance through more than a dozen programs. Despite 
this level of assistance, the Department of Housing and Urban 
Development (HUD) estimates that almost 9 million other very-low-
income households still have serious housing needs. The most 
widespread problem facing these households is a lack of affordable 
housing; many pay more than 30 percent of their income for rent. 
[Footnote 2] To help the Congress and others better understand how 
federal resources are used to respond to these needs, we analyzed the 
characteristics and costs of the housing under various federal 
programs. Our analysis focuses on six active programs that continue to 
increase the number of households assisted by the federal government. 
[Footnote 3] These programs, as described below, include the Housing 
Choice Voucher Program (housing vouchers), which is the largest source 
of federal funds for housing assistance, and five production programs, 
which currently receive federal funds to construct or substantially 
rehabilitate units. 

* Housing Vouchers supplement tenants' rental payments in privately 
owned, moderately priced apartments chosen by the tenants. 

* Low-Income Housing Tax Credits provide tax incentives for private
investment and are often used in conjunction with other federal and 
state subsidies in the production of new and rehabilitated affordable 
housing units consistent with state-determined housing priorities. 

* HOPE VI provides grants—coupled with funds from other federal, 
state, local, and private sources—to revitalize severely distressed 
public housing, support community and social services, and promote 
mixed-income communities.[Footnote 4] 

* Section 202 provides grants to develop supportive housing for the 
elderly. 

* Section 811 provides grants to develop supportive housing for 
persons with disabilities. 

* Section 515 provides below-market loans to support the development 
of housing for families and the elderly in rural areas. 

To obtain information on how federal housing resources could be used 
more effectively, the Congress directed in the Quality Housing and 
Work Responsibility Act of 1998 that we compare the total per-unit 
costs of housing assistance programs, taking into account qualitative 
differences in the programs. In response to the mandate and as agreed 
with your offices, we (1) described characteristics of the housing 
provided under the six active housing assistance programs; (2) 
estimated the per-unit cost of each of these programs; (3) computed 
the portion of each program's per-unit cost paid by the federal 
government, tenants, and others (state, local, and private sources); 
and (4) identified public policy issues raised by our study, taking 
into account tradeoffs between the programs' costs and qualitative 
differences. We developed and presented preliminary responses to these 
questions in an interim report.[Footnote 5] 

To perform our work, we collected and analyzed data on housing costs 
and characteristics and tenant income for the nation as a whole and 
for seven metropolitan areas, three of which we visited to observe 
qualitative differences in representative properties provided under 
each of the programs. We obtained the data for our analysis from HUD 
and other federal agencies, public housing authorities, state housing 
finance agencies, property managers, industry groups, and previous 
studies on tax credits.[Footnote 6] While the average total per-unit 
costs of housing vouchers and the production programs can be estimated 
over any period, we developed 30-year (life-cycle) cost estimates. We 
chose 30 years for our life-cycle estimates because this is generally 
the minimal length of time that properties developed through federal 
housing programs can be expected to serve low-income households. 
Appendixes I and II provide more details on our methodology and cost 
estimates. 

The housing provided under the six active federal programs varies 
widely in certain characteristics, such as age, building type, unit 
size, location, and services, both across and within programs. Housing 
vouchers are used almost exclusively in existing, older multifamily 
and single-family properties in the private housing market. The 
housing voucher, tax credit, and HOPE VI programs make available a 
broad range of building types and unit sizes. By contrast, the Section 
202, Section 811, and Section 515 programs typically deliver a 
narrower range of building types and provide smaller units. Most of 
the assisted housing are located in suburbs and central cities, except 
for Section 515 developments, which are situated in rural areas. 
Compared with the neighborhoods where other program properties are 
located, HOPE VI neighborhoods are poorer, with higher percentages of 
minority households and lower percentages of homeowners. The HOPE VI 
program offers a broad array of services and amenities to residents, 
including employment and child care services. The Section 202 and 
Section 811 programs provide specific services and amenities that are 
targeted to the special needs of the elderly and persons with 
disabilities, respectively. For the remaining programs, the level of 
specific services and amenities varies from property to property. 

We estimated that, for units with the same number of bedrooms in the 
same general location, the production programs cost more than housing 
vouchers. According to our estimates, in metropolitan areas, the 
average total 30-year costs of the production programs range from 8 
percent greater for one-bedroom units under the Section 811 program to 
19 percent greater under the tax credit program. For two-bedroom 
units, the average total 30- year costs range from 6 percent greater 
under the Section 811 program to 14 percent greater under the tax 
credit program. Although data were not available to present total 
costs by unit size for the HOPE VI program, the total cost of a HOPE 
VI unit with an average size of 2.4 bedrooms is about 27 percent more 
expensive than vouchers. These differences in costs between the 
production programs and vouchers are greater in nonmetropolitan areas 
than in metropolitan areas. Across the production programs, the total 
costs of one- and two-bedroom units are generally similar. Despite 
these programwide averages, the costs of individual properties vary 
substantially, primarily because of differences in rents and total 
development costs. 

Across the six active programs, the federal government and tenants pay 
the majority of the programs' total costs. For all of the programs 
except tax credits, the federal government pays the largest percentage 
of the average total per-unit costs (from 65 percent for vouchers to 
71 percent for HOPE VI over 30 years). Under the tax credit program, 
the tenants pay the largest share of the total cost (54 percent over 
30 years); however, they have higher incomes, on average, and pay a 
larger percentage of their income for rent than other assisted 
households. If the incomes and rent burdens of voucher households 
equaled those for each of the production programs, the federal 
government would pay more for one- and two-bedroom units under the 
production programs than under the voucher program. Contributions from 
state, local, and private sources are generally small as a percentage 
of total costs (from 2 percent for Section 202 to 7 percent for HOPE 
VI over 30 years); however, larger-than-average contributions in 
certain locations can reduce rents paid by tenants and the federal 
cost of rental assistance. 

Our work raises a number of housing policy issues, including the 
relative costs and benefits of the voucher and production programs and 
whether there are opportunities for controlling costs to stretch 
federal housing dollars as far as possible. The absence of 
comprehensive and consistent data is an impediment to monitoring and 
evaluating housing programs. While production programs cost more than 
vouchers, all housing programs provide benefits in addition to housing 
the poor. Production programs have other goals, such as increasing the 
supply of affordable housing, accommodating special needs, or 
revitalizing distressed communities. Housing vouchers also have other 
goals, such as promoting mobility and neighborhood choice. 
Accordingly, the benefits derived from achieving these goals must be 
weighed against the programs' costs. Increasing contributions from 
nonfederal subsidy providers could free federal funding to serve 
additional households, and further research might identify 
opportunities to better contain development costs. Additionally, cost 
control strategies must take into account the costs to the federal 
government of setting aside sufficient reserves to meet future capital 
needs. To evaluate the relative effectiveness of the six housing 
programs in meeting national housing policy objectives and to identify 
opportunities for controlling costs, further research is needed. 
However, the comprehensive, consistent data required for such research 
are not always readily available. For example, for tax credits, the 
largest housing production program, there is no centralized national 
database that includes information on costs. 

Background: 

The federal government has helped to provide affordable housing to low-
income households since the passage of the United States Housing Act 
of 1937. Since then, federal housing programs have either subsidized 
the construction of housing for the poor or provided rental assistance 
to tenants in existing privately owned housing. Until 1974, federal 
housing programs primarily supported the construction of affordable 
housing. Then, in 1974, the Congress added Section 8 of the 1937 Act, 
which established a new certificate program that relied on existing, 
privately owned rental housing. The certificate program was merged in 
1998 with a similar program and renamed the Housing Choice Voucher 
Program. Under the voucher program, the subsidy is tied to the 
household (tenant-based). The household can choose to use the subsidy 
at any available unit that meets the program's standards, and, if the 
household chooses to move, the subsidy continues as long as the new 
unit also meets the program's standards. Since the early 1980s, 
housing vouchers have been the centerpiece of federal housing 
assistance. Conversely, under the production programs, the subsidy is 
tied to the unit (project-based), and the household can benefit from 
the subsidy only while living in the subsidized unit. (See appendix 
III for more information on the evolution of federal housing 
assistance programs.) 

Of the approximately 5.2 million renter households assisted by the 
federal government in 1999, about 2.7 million were assisted by 
programs that no longer receive appropriations to produce additional 
units. We refer to these programs as "inactive." Appropriations are, 
however, provided to fund project-based rental assistance, interest 
reduction payments, and operating subsidies for the units developed 
under these programs in previous years. The remaining 2.5 million 
units are subsidized under the six active programs that receive 
appropriations both to add new units and to subsidize units funded in 
previous years. In addition, households in some units benefit from 
overlapping subsidies. For example, about 6 percent of voucher 
households rent units developed under the production programs, 
particularly under tax credits. 

In fiscal year 1999, the federal government spent about $28.7 billion, 
including $3.5 billion in tax credits, for both the active and 
inactive housing programs. Of this combined amount, about $15.1 
billion supported units funded under the inactive programs, and about 
$13.6 billion in budgetary outlays and tax credits supported the 
active programs. As shown in figure 1, the voucher program is the 
largest of the active programs, accounting for about 52 percent of the 
federal funding for them. The tax credit program accounts for about 26 
percent of the federal funding for active programs, the HOME program 
about 10 percent, the Section 202 and Section 811 programs about 5 
percent, the Section 515 program about 5 percent,[Footnote 7] and the 
HOPE VI program about 2 percent. Appendix IV contains detailed 
information on the federal expenditures on housing programs, including 
the number of units and the costs associated with each of the active 
and inactive programs in fiscal year 1999. 

Figure 1: Budgetary Outlays and Tax Expenditures for Active and 
Inactive Housing Assistance Programs, Fiscal Year 1999: 

[Refer to PDF for image: pie-chart] 

Total: $28.7 billion. 

Active programs: 
Section 8 project-based: 29%; $8.2 billion; 
Public housing: 24%; $6.9 billion. 

Inactive programs: 
Vouchers: 24%; $7.0 billion; 
Tax credits: 12%; $3.5 billion; 
Other: 6%; $1.7 billion; 
HOME: 5%; $1.4 billion. 

Note: Total equals $28.7 billion in budgetary outlays and tax 
expenditures. Outlays for Section 8 project-based include New 
Construction/Substantial Rehabilitation, Loan Management Set-Aside, 
Property Disposition, Section 236, and Rent Supplement. Outlays for 
"other" include Section 202, Section 811, Section 515, Section 521, 
and HOPE VI. As previously stated, we identify HOME as an active 
program, but our analysis does not treat it as a separate program 
because HOME grants are often used in conjunction with other housing 
programs. 

[End of figure] 

In the private rental housing market, the rent covers the total cost 
of providing a housing unit, including the operating expenses (e.g., 
administrative expenses, utilities, routine maintenance, and property 
taxes); debt service; deposits to a replacement reserve for major 
capital improvements over time; and a market return to equity 
investors. Under the voucher program, the rent also covers the total 
cost of providing a housing unit. The assisted household generally 
pays 30 percent of its income for rent, and the voucher makes up the 
difference between the household's contribution and the market rent. 
In addition, the federal government pays a fee, equal to about 7 to 8 
percent of the rent, to the public housing authority that administers 
the voucher program locally on HUD's behalf. Thus, under the voucher 
program, the following formula applies: 

Total Costs = Rents + Administrative Fee. 

In this formula, rents include contributions by the voucher program 
and assisted household. 

Under the production programs, the federal government provides 
development subsidies for new construction or substantial 
rehabilitation and frequently provides rental assistance. State and 
local governments or private entities may provide additional 
development subsidies. These federal and nonfederal subsidies can take 
various forms, including grants, low-interest-rate loans, and tax 
credits. The subsidies can lower the rents, provide additional 
services or amenities, or both. When the federal government provides 
rental assistance, the assisted household generally pays 30 percent of 
its income toward rent, and the government makes up the difference. 
[Footnote 8] Thus, under the production programs, the following 
formula applies: 

Total Costs = Rents + Development Subsidies. 

Rents also include contributions by the housing program and assisted 
household.[Footnote 9] 

For both vouchers and the production programs, our estimates of total 
costs recognize that rents are paid over many years and development 
subsidies are paid either up front or over many years. Appendix I 
provides further details on the conceptual framework for our 
methodology. 

Vouchers and the production programs are subject to and insulated from 
different cost risks over time. Whereas vouchers are vulnerable to 
inflation in market rents, the production programs are less vulnerable 
because of federal regulations or limits on rents associated with 
development subsidies. However, the production programs can pose 
substantial cost risks if capital reserves are underfunded, as they 
often have been in the past. Vouchers pose no such risk because the 
federal government has no commitment to specific units. 

Both the voucher and the production programs are subject to cost-
containment guidelines. For the voucher program, HUD sets payment 
standards that are based on fair market rents for over 2,700 market 
areas, taking into account unit size (number of bedrooms). These 
payment standards are intended to give assisted households a selection 
of units and neighborhoods while containing costs. Public housing 
authorities can ask HUD to increase local rent ceilings if they 
believe increases are warranted. For the production programs, the cost-
containment guidelines are intended to provide properties of modest 
design. These guidelines may establish cost limits that vary by 
location, type of building (e.g., elevator or garden-style), and unit 
size, or they may simply require assurances that the costs of proposed 
properties are reasonable. 

With two exceptions, federal housing assistance programs are 
administered by HUD. The exceptions are the Section 515 program, which 
is administered by the U.S. Department of Agriculture's (USDA) Rural 
Housing Service (RHS), and the low-income housing tax credit program, 
whose administrative responsibilities are shared by state and local 
housing finance agencies and the Internal Revenue Service (IRS) within 
the Department of the Treasury. The state and local agencies allocate 
tax credits to individual properties within their jurisdictions, set 
cost-containment guidelines, and provide general oversight. IRS 
oversees compliance with the Tax Code. 

Programs Provide a Wide Range of Housing and Services: 

Under the six active programs, properties vary in age, type, the 
number of units, the number of bedrooms within units, location, 
neighborhood, amenities, and condition. The emphasis placed on social 
services also varies considerably. Figure 2 illustrates some of the 
many types of housing provided under the six active housing programs. 

Figure 2: Housing Provided Under the Six Active Programs: 

[Refer to PDF for image: 6 photographs] 

Note: The pictures contained in this figure illustrate the following: 
(a) vouchers—-an 80-year-old three-story apartment complex in central 
Boston; (b) tax credits-—a rehabilitated single-room-occupancy 
dwelling for the homeless in a Baltimore suburb; (c) HOPE VI-—a newly 
constructed apartment complex in central Atlanta; (d) Section 202-—a 
newly constructed, elevator high-rise for the elderly in a Baltimore 
suburb; (e) Section 811-—a rehabilitated group home for persons with 
mental disabilities in a Fort Worth suburb; and (f) Section 515-—a 
newly constructed, walk-up apartment for the elderly in rural 
Wachusetts, Mass. 

[End of figure] 

Age, Type, and Size of Program Properties: 

Housing vouchers are used almost exclusively in existing properties 
whose median age nationwide is about 35 years, ranging from about 65 
years in the Northeast to about 30 years in the West. According to HUD 
data, about three-quarters of vouchers are used in multifamily 
dwellings, and the remainder are used in single-family homes. 
Production program properties are either newly constructed or 
substantially rehabilitated. For example, the HOPE VI program replaces 
or renovates severely distressed public housing developments as part 
of a broader community revitalization strategy. The new or 
rehabilitated properties often include special design features that 
are intended to integrate the public housing community with the 
neighborhood. HOPE VI properties, which have an average of nearly 300 
units, span the full range of building types, from detached homes to 
row houses to elevator buildings. 

The tax credit and Section 811 programs also provide newly constructed 
and substantially rehabilitated properties. Most tax credit properties 
are multifamily buildings, including single-room-occupancy dwellings, 
walk-up apartments, town houses and row houses, and elevator 
buildings, and have an average of 77 units. This average does not 
include tax credit properties with Section 515 mortgages.[Footnote 10] 
Section 811 properties are predominantly of two types—independent 
living projects and group homes. Independent living projects generally 
provide separate apartments with individual kitchens and bathrooms, 
while group homes typically include a bedroom for each resident and a 
common kitchen, dining, and living area. Section 811 properties range 
from single-family dwellings to walk-up apartments and have an average 
of about 12 units. Group homes, however, must house no more than six 
persons. 

Finally, the Section 202 and Section 515 programs primarily provide 
newly constructed properties. Section 202 properties are generally 
mid- and high-rise buildings with elevators, averaging 45 units 
nationwide, whereas most Section 515 properties are walk-up apartments 
and often consist of no more than 24 units, which is a size consistent 
with the lower population densities of rural areas. 

Across the six active programs, units vary in their average size (as 
measured by the number of bedrooms) and distribution across size, as 
shown in figure 3. The average number of bedrooms ranges from 1.0 for 
the Section 202 and Section 811 programs to 2.4 for the HOPE VI 
program. Vouchers and tax credits provide higher percentages of larger 
family units, while the Section 515 program includes a mixture of 
larger units for families and smaller units for the elderly. 

Figure 3: Distribution and Average Size of Units in the Six Active 
Housing Programs: 

[Refer to PDF for image: stacked vertical bar graph] 

For each of the following programs, the graph depicts the percentage 
of: 
3+ bedrooms; 
2 bedrooms; 
1 bedroom; 
Efficiency. 

Rental Housing stock (2.0); 
Vouchers (2.2): 
Tax credits (1.9); 
HOPE VI (2.4); 
Section 202 (1.0); 
Section 811 (1.0); 
Section 515 (1.6). 

Note: Average number of bedrooms appears in parentheses. 

[End of figure] 

Location of Program Properties: 

Most assisted housing is located in metropolitan areas—a broad term 
that includes both central cities and suburbs—but the location of 
properties varies somewhat by program. As figure 4 indicates, all HOPE 
VI units are found in metropolitan areas, with about 90 percent in 
central cities. In addition, about 94 percent of tax credit 
units[Footnote 11] and about 80 percent of voucher, Section 202, and 
Section 811 units are located in metropolitan areas. Moreover, for all 
of these programs, the majority of the metropolitan-area units are 
located in central cities. By contrast, nearly 70 percent of Section 
515 units are found in rural nonmetropolitan areas, with the balance 
in the rural parts of metropolitan areas. 

Figure 4: General Location of Units in the Six Active Housing Programs: 

[Refer to PDF for image: stacked vertical bar graph] 

For each of the following programs, the graph depicts the percentage 
of locations: 
Nonmetro; 
Metro - Suburban; 
Metro - Central city. 

Rental Housing stock; 
Vouchers: 
Tax credits; 
HOPE VI; 
Section 202; 
Section 811; 
Section 515. 

[End of figure] 

The neighborhoods where assisted housing is located also vary. 
According to data from the Bureau of the Census, the census tracts 
where HOPE VI units are found are poorer than the census tracts where 
other program units are located. HOPE VI census tracts also have 
higher percentages of minority households and lower percentages of 
homeowners. In general, the demographic characteristics of the census 
tracts where other program properties are located are fairly similar, 
as shown in figure 5. 

Figure 5: Demographic Characteristics of Neighborhoods Where Assisted 
Housing Is Located: 

[Refer to PDF for image: stacked vertical bar graph] 

Characteristic: Poverty; 
Programs: 
HOPE VI: 50%; 
Vouchers: 20%; 
Tax credits: 22%; 
Section 202: 16%; 
Section 811: 15%. 

Characteristic: Minority households; 
Programs: 
HOPE VI: 81%; 
Vouchers: 40%; 
Tax credits: 45%; 
Section 202: 38%; 
Section 811: 28%. 

Characteristic: Homeowners; 
Programs: 
HOPE VI: 14%; 
Vouchers: 51%; 
Tax credits: 43%; 
Section 202: 55%; 
Section 811: 60%. 

Note: The data for poverty indicate the percentage of neighborhood 
households with incomes below a certain threshold adjusted for family 
size as determined by the Bureau of the Census. In addition, the 
figure excludes data for Section 515 units because the addresses of 
Section 515 properties were not readily available. 

[End of figure] 

Services Provided and Amenities: 

Besides providing a range of property types with units of different 
sizes in different locations, the six active programs vary in the 
extent to which they make supportive services[Footnote 12] and 
amenities available to assisted households. In general, supportive 
services are not an integral part of the voucher, tax credit, and 
Section 515 programs. However, when individual tax credit and Section 
515 properties serve households with special needs, such as the 
elderly or persons with disabilities, they may provide services and 
amenities similar to those provided in Section 202 and Section 811 
properties. Section 202 properties typically include congregate dining 
facilities, and both Section 202 and Section 811 properties include 
common rooms and may make transportation, housekeeping, and health 
care services available. The HOPE VI program emphasizes services, 
allowing up to 15 percent of the HOPE VI grant to be used for 
community and supportive services. For example, HOPE VI developments 
often include employment or job training centers as well as facilities 
for children. Production program units are more likely to have modern 
amenities, whereas voucher units typically have amenities 
characteristic of older rental properties. In addition, although it is 
expected that new units under the production programs start out in 
better condition than the older units under the voucher program, over 
time, the condition of these new units, as well as existing units, 
depends on the level of maintenance and reinvestment. 

Production Programs Cost More Than Vouchers: 

We estimate that, in the same general location, it costs more, on 
average, to provide one- and two-bedroom units under each of the 
production programs than it does under the voucher program. The 
differences between production programs and vouchers are greater in 
nonmetropolitan areas than in metropolitan areas. Across the 
production programs, the total costs of one- and two-bedroom units are 
generally similar. Within individual programs, the total per-unit 
costs vary considerably from property to property, even within the 
same metropolitan area, largely because of differences in the 
properties' rents and total development costs. Actual total costs for 
the production programs are higher than our estimates because data on 
local property tax abatements and the possible underfunding of 
reserves to meet future capital needs were not available. 

Production Programs Cost More Than Vouchers in Both Metropolitan and 
Nonmetropolitan Areas: 

In both metropolitan and nonmetropolitan areas, the average total 30-
year cost of each of the production programs exceeds the cost of 
providing a voucher for a unit with the same number of bedrooms. To 
control the impact of unit size on costs, we compared the costs of 
units with the same number of bedrooms across programs. We focused on 
one- and two-bedroom units because they are provided under most of the 
programs and generally account for over 60 percent of each program's 
units. (We could not include HOPE VI, the program with the largest 
average unit size, in this analysis because data were not available to 
present total cost by unit size.) As shown in figure 6, in 
metropolitan areas, the average total cost ranges from $139,520 for 
vouchers to $166,610 for tax credits. Compared with vouchers, the 
production programs cost from 8 percent more for Section 811 units to 
19 percent more for tax credit units.[Footnote 13] In nonmetropolitan 
areas, the average total cost ranges from $95,890 for vouchers to 
$138,060 for tax credits, and, compared with vouchers, the production 
programs cost from 35 percent more for Section 811 units to 44 percent 
more for tax credit units. 

Figure 6: Average Total 30-Year Cost of One-Bedroom Units, by General 
Location: 

[Refer to PDF for image: vertical bar graph] 

Program: Vouchers; 
Metro: $140,000; 
Nonmetro: $96,000. 

Program: Tax credits; 
Metro: $167,000; 
Nonmetro: $138,000. 

Program: Section 202; 
Metro: $157,000; 
Nonmetro: $133,000. 

Program: Section 811; 
Metro: $151,000; 
Nonmetro: $130,000. 

Program: Section 515; 
Nonmetro: $133,000. 

Note: Since Section 515 is a rural program, we present our cost 
estimate of Section 515 for nonmetropolitan areas only. 

[End of figure] 

The drop in average total cost from metropolitan to nonmetropolitan 
areas for one-bedroom units is greatest for the voucher program. 
Vouchers in nonmetropolitan areas cost 31 percent less than vouchers 
in metropolitan areas. For the production programs, nonmetropolitan 
units cost from 14 percent less than metropolitan units under Section 
811 to 17 percent less under tax credits. 

As shown in figure 7, examining the costs of two-bedroom units yields 
similar results. In metropolitan areas, the average total costs range 
from $161,650 for the voucher program to $184,130 for the tax credit 
program. Compared with vouchers, the production programs cost from 6 
percent more for Section 811 units to 14 percent more for tax credit 
units. In nonmetropolitan areas, the production programs cost from 20 
percent more for Section 515 units to 38 percent more for tax credit 
units.[Footnote 14] Again, the drop in total cost from metropolitan to 
nonmetropolitan areas for two-bedroom units is greatest for the 
voucher program. 

Figure 7: Average Total 30-Year Cost of Two-Bedroom Units, by General 
Location: 

[Refer to PDF for image: vertical bar graph] 

Program: Vouchers; 
Metro: $162,000; 
Nonmetro: $110,000. 

Program: Tax credits; 
Metro: $184,000; 
Nonmetro: $151,000. 

Program: Section 811; 
Metro: $171,000; 
Nonmetro: $139,000. 

Program: Section 515; 
Nonmetro: $133,000. 

Note: Section 202 is not included in this analysis because it produces 
mainly efficiencies and one-bedroom units. Also, since Section 515 is 
a rural program, we present our cost estimate of Section 515 for 
nonmetropolitan areas only. 

[End of figure] 

For units greater than two bedrooms, cost data were available for two 
programs—tax credits and vouchers. We estimate that the average total 
cost of three-bedroom units in metropolitan areas is about $203,510 
for tax credits and $196,470 for vouchers—a difference of about 4 
percent. In nonmetropolitan areas, the average total cost is about 
$179,400 for tax credits and $131,580 for vouchers—a difference of 
about 36 percent. Overall, we find that the cost differentials between 
production programs and vouchers decrease as unit size increases. 

We could not include the HOPE VI program in figures 6 and 7 because, 
again, data were not available to present total costs by unit size. 
However, the total cost of an average HOPE VI unit, with 2.4 bedrooms, 
is $223,190—this figure includes only housing-related construction 
costs. We estimate that the average voucher cost of a 2.4-bedroom 
voucher unit is $175,580. According to these estimates, the HOPE VI 
program is about 27 percent more expensive than the voucher program. 
[Footnote 15] If the costs of remediation, demolition, construction of 
housing and community facilities, relocation, and community-based 
planning and participation—in addition to housing-related construction 
costs—were included, the average total cost of the program would be 
$248,720 or 42 percent more expensive than vouchers. 

Across the production programs, the average total costs are very 
similar to each other. For one-bedroom units in metropolitan areas, 
the average 30-year cost of the most expensive program (tax credits) 
is 10 percent greater than that of the least expensive one (Section 
811). In nonmetropolitan areas, the difference in the average total 
cost for one-bedroom units between the most expensive program (tax 
credits) and the least expensive one (Section 811) is even smaller—
only 6 percent. The average total costs of two-bedroom units are also 
similar across production programs in metropolitan and nonmetropolitan 
areas. 

Total Costs Vary Across Individual Properties: 

The average total costs of the voucher and production programs vary 
across individual properties, even within the same metropolitan area, 
primarily because of variations in the rents charged for the voucher 
program and by the development costs for the production programs. 
[Footnote 16] For example, in the Boston metropolitan area, the market 
rents for two-bedroom voucher units range from about $540 to $1,300 
per month, and the average total development costs of two-bedroom tax 
credit units range from about $44,800 to $293,340 per unit. 

Neighborhood characteristics may influence market rents and total 
development costs (in particular, the value of land). Under the 
voucher program, variations in market rents within a metropolitan area 
for similar-sized units may be influenced by neighborhood differences, 
such as quality of schools, crime rates, and pollution.[Footnote 17] 
Market rents may also be influenced by the quality of the units, 
proximity to jobs and shopping centers, and the amenities and services 
offered. Under the production programs, variations in total 
development costs within a metropolitan area reflect not only 
differences in neighborhoods but also in property and unit amenities, 
project sponsors, program requirements, and a host of other factors. 
[Footnote 18] 

For HOPE VI and tax credits, we find high-cost properties located in 
very poor neighborhoods where market rents would be insufficient to 
generate new construction. Often, production programs, by design, 
build housing in neighborhoods where the market would not. There may 
be additional costs of building in these neighborhoods. Additional 
costs may also result from compliance with federal wage and hiring 
regulations[Footnote 19] and from participation of less experienced 
developers, such as housing authorities or neighborhood groups, that 
may be less efficient than larger developers who have better 
construction management capacity.[Footnote 20] Nonetheless, it is 
doubtful that these factors alone account for the high costs of the 
most expensive projects in our database, some of which exceed $200,000 
per unit. 

Data Were Not Available to Account for Local Property Tax Abatements 
and Underfunding of Capital Reserves: 

Actual total costs for the production programs are somewhat higher 
than our estimates because our estimates do not reflect the value of 
abated property taxes or shortfalls in capital reserves. Under each 
production program, some properties receive tax abatements, and, 
historically, sufficient reserves for capital replacements and 
improvements have not been set aside.[Footnote 21] Indeed, if future 
subsidies are needed to maintain the properties under the production 
programs, our cost estimates understate the actual costs. Although 
data were not available to estimate the additional costs of property 
tax abatements and capital reserve shortfalls for individual 
properties, we estimated, on the basis of industry averages, that 
under a worst-case scenario (i.e., total tax abatements and no 
payments to reserves), the total 30-year costs would be understated by 
nearly 15 percent.[Footnote 22] This scenario is most applicable to 
the HOPE VI program, in which full property taxes are not paid and 
capital reserves are not fully funded. Under the other four production 
programs, many properties fund capital reserves and pay full property 
taxes. For these programs, our cost estimates are likely to be 
understated by less than 15 percent. 

The Federal Government and Tenants Pay the Largest Shares of Total 
Costs: 

Across the six active programs, the federal government and tenants pay 
the majority of the programs' average total costs. For all of the 
programs except tax credits, the federal government pays the largest 
percentage of the average total costs. For tax credits, the tenants 
pay a slightly higher percentage, but they have higher incomes, on 
average, and pay a larger percentage of their income for rent than 
other assisted households. If the incomes and rent burdens of voucher 
households equaled those for each of the production programs, the 
federal government would pay more for one-and two-bedroom units under 
the production programs than under the voucher program. Contributions 
from state, local, and private sources are, on average, small as a 
percentage of total costs, but in certain locations, contributions 
from these sources can reduce rents paid by the tenants and the 
federal cost of rental assistance. 
	
The Federal Government and Tenants Pay Most of the Total Costs of 
Assisted Housing: 

The federal government pays most of the total costs for all of the 
programs with the exception of tax credits, for which tenants pay the 
largest share of total costs. As figure 8 shows, the federal share, as 
a percentage of average total costs, is about 65 percent for vouchers; 
60 percent for Section 515; and 70 percent for HOPE VI, Section 202, 
and Section 811. The federal share is the smallest for tax credits-—
about 40 percent. 

Figure 8: Average Shares of Total 30-Year Costs for One-Bedroom Units 
Paid by the Federal Government, Tenants, and Others: 

[Refer to PDF for image: stacked vertical bar graph] 

The graph depicts the average shares of costs as a percentage for: 
Other; 
Tenant; 
Federal; 

for each of the following programs: 
Vouchers; 
Tax credits; 
HOPE VI; 
Section 202; 
Section 811; 
Section 515. 

Notes: 

1. The cost shares for HOPE VI are for all units, not one-bedroom 
units, because the program does not identify costs by the number of 
bedrooms. 

2. This figure presents data on average cost shares for the nation, 
which are similar to those for metropolitan and nonmetropolitan areas. 

3. "Other" includes state, local, and private funding sources. 

[End of figure] 

As figure 8 shows, tenants contribute between 21 percent (HOPE VI) and 
54 percent (tax credits) of the total housing costs over 30 years. The 
tenant share for each of the programs is dependent on the average 
income of the households served and the average portion of this income 
paid for rent. The more the assisted households pay, the less the 
federal government needs to contribute. 

As figure 9 shows, compared with the other programs, tax credit 
households have the largest average income, about $14,150 (in 1999 
dollars),[Footnote 23] and pay the largest portion of their income for 
rent—-about 35 percent overall-—compared with about 30 percent for 
most of the households assisted through the other programs.[Footnote 
24] As a result, the tenant share of total cost is the largest for the 
tax credit program. The other active housing programs target 
households with lower average incomes, and, therefore, tenants under 
these programs pay a smaller share of the average total per-unit 
costs. Most of these households receive rental assistance and pay 
about 30 percent of their income for rent, leaving the federal 
government and, to a far lesser extent, other subsidy providers to 
cover the remaining costs. Figure 9 displays the average incomes of 
the households assisted through the six active programs. 

Figure 9: Average Annual Incomes of Households Served Under the Six 
Active Programs: 
		
Tax credits: $14,200; 
Vouchers: $9,800; 
Section 202: $9,200; 
HOPE VI: $9,000; 
Section 515: $8,800; 
Section 811: $8,000. 

Sources: GAO's analysis of data from HUD's Multifamily Tenant 
Characteristics System and A Picture of Subsidized Households, RHS 
agency officials, and GAO/GGD/RCED-97-55. 

[End of figure] 

After Adjustments, the Federal Cost of the Production Programs Is 
Greater Than Vouchers: 

If the average incomes of tax credit and voucher households were 
equal[Footnote 25] and if both groups of tenants paid the same 
percentage of their income for rent, it would cost the federal 
government about 30 percent more for the tax credit program than for 
housing vouchers for a one-bedroom unit in metropolitan areas (figure 
10). Similarly, if the average incomes of the other production 
programs and voucher households were equal and if both groups of 
tenants paid the same percentage of their income for rent, it would 
cost the federal government, in metropolitan areas, from 7 percent 
more for Section 811 to 16 percent more for Section 202 for one-
bedroom units over 30 years. For two-bedroom units, it costs the 
federal government, in metropolitan areas, 2 percent more for Section 
811 and 15 percent more for tax credits. The federal cost of an 
average-size HOPE VI unit (2.4 bedrooms) is 24 percent more than 
vouchers, and if all costs, in addition to housing-related expenses, 
were considered, the federal cost of HOPE VI would be 43 percent 
more.[Footnote 26] We also estimated the federal cost of three-bedroom 
units, where data were available, and found that tax credit units in 
metropolitan areas cost the federal government 3 percent less than 
vouchers. 

Figure 10: Comparison of the Average Federal Cost of One-Bedroom Units 
in Metropolitan Areas for Production Programs and Vouchers, Adjusted 
for Household Income and Rent Burden: 

[Refer to PDF for image: vertical bar graph] 

Program: Tax credits; 
Adjusted vouchers: $51,000; 
Production program: $66,000. 

Program: HOPE VI: 
Adjusted vouchers: $128,000; 
Production program: $159,000. 

Program: Section 202; 
Adjusted vouchers: $91,000; 
Production program: $106,000. 

Program: Section 811; 
Adjusted vouchers: $98,000; 
Production program: $105,000. 

Note: Since Section 515 properties are located in rural areas, they 
are not included in this figure. Due to data limitations, HOPE VI cost 
data reflect the average for all units, not one-bedroom units. Also, 
it is not appropriate to compare across production programs because 
the assumed tenant rental contribution for housing vouchers is 
different for each of the production programs. 

[End of figure] 

As shown in figure 11, in nonmetropolitan areas, the differences in 
the comparative federal cost of vouchers and production programs are 
greater. For example, the federal cost of one-bedroom tax credit units 
is about 180 percent more than the federal cost of vouchers in 
nonmetropolitan areas, compared with about 30 percent more in 
metropolitan areas. The federal costs for the other production 
programs are from 57 percent (Section 811) to 67 percent (Section 202) 
greater than for vouchers in nonmetropolitan areas. For two-bedroom 
units, it costs the federal government, in nonmetropolitan areas, 103 
percent more for tax credits. For the other programs, the federal 
costs in nonmetropolitan areas are 28 percent for Section 515 and 39 
percent greater for Section 811. Finally, the federal cost of three-
bedroom tax credit units in nonmetropolitan areas is 102 percent more 
than vouchers. Additional data on the federal costs of one-and two-
bedroom units appear in tables 12 and 13 in appendix I. 

Figure 11: Comparison of the Average Federal Cost of One-Bedroom Units 
in Nonmetropolitan Areas for Production Programs and Vouchers, 
Adjusted for Household Income and Rent Burden: 

[Refer to PDF for image: vertical bar graph] 

Program: Tax credits; 
Adjusted vouchers: $20,000; 
Production program: $55,000. 

Program: HOPE VI: 
Adjusted vouchers: $56,000; 
Production program: $93,000. 

Program: Section 202; 
Adjusted vouchers: $57,000; 
Production program: $89,000. 

Program: Section 811; 
Adjusted vouchers: $49,000; 
Production program: $81,000. 

Note: Since HOPE VI properties are located exclusively in metro areas, 
they are not included in this figure. Also, it is not appropriate to 
compare across production programs because the assumed tenant rental 
contribution for housing vouchers is different for each of the 
production programs. 

[End of figure] 

Contributions From Other Sources, While Generally Small, Can Reduce 
Rents or Lower Federal Costs: 

Contributions from state, local, and private sources, as shown in 
figure 8, cover a small share of the total costs of the production 
programs.[Footnote 27] At the national level, these contributions do 
not exceed, on average, 7 percent over 30 years. This percentage, 
however, would be somewhat higher if data were available to account 
for the impact of property tax abatements, as previously discussed in 
this report. 

Even though the share of total costs paid by these sources is, on 
average, small, we identified state and local subsidies that, in 
certain locations, had a significant impact on rents or federal costs. 
For example, a comparison of the subsidies provided to properties in 
the New York and Boston metropolitan areas demonstrates the impact of 
a significant nonfederal subsidy. As shown in table 1, the average 
contribution from state, local, and private sources for a two-bedroom 
tax credit unit is over five times greater in New York than in Boston 
in the first year. At the same time, both the total and federal per-
unit costs were about the same for both cities. Because of the 
difference in subsidies from state, local, and private sources, the 
average monthly rent paid by a tax credit household was about $820 in 
Boston and about $430 in New York—a difference of nearly 90 percent. 
The primary reason for the difference in tax credit rents is that New 
York City provides virtually all of the mortgages for tax credit 
properties, at rates averaging about 1 percent—a very significant 
subsidy. Conversely, in the Boston metropolitan area, the state 
provides about two-thirds of the mortgages at interest rates that are 
very close to market rates. In addition, rent reductions resulting 
from state and local subsidies present opportunities to decrease the 
federal cost of providing rental assistance to these units. 

Table 1: Impact of Contributions From State, Local, and Private 
Sources on the Average First-Year Costs of Two-Bedroom Units for Tax 
Credit Properties in Boston and New York: 

Location: Boston; 
Federal: $5,990; 
State, local, and private: $740; 
Tenant: $7,540; 
Total: $14,270. 

Location: New York; 
Federal: $6,040; 
State, local, and private: $4,250; 
Tenant: $4,010; 
Total: $14,300. 

Note: To illustrate clearly the impact of these subsidies on the 
resulting rents, we chose to present the average total costs in the 
first year, rather than over 30 years. Also, the tenant shares of 
costs for both Boston and New York are less than the average annual 
rents charged for the units because the tenant shares do not include 
the estimated rental assistance payments paid by the federal 
government. 

[End of table] 

After Adjustments, the Total Government Cost of the Production 
Programs Is Greater Than Vouchers: 

Our data also allow us to compare the total government (federal, 
state, and local) cost of production programs and vouchers, while 
making the same assumptions concerning household income and rent 
burdens as in the federal cost comparisons.[Footnote 28] In metro 
areas, the total government costs for a one-bedroom unit under the 
production programs, compared with vouchers, are 12 percent more for 
Section 811, 20 percent more for Section 202, and 53 percent more for 
tax credits. The total government cost for an average-size unit under 
HOPE VI is 37 percent more. In nonmetropolitan areas, the total 
government costs for a one-bedroom unit under the production programs, 
compared with vouchers, are 60 percent more for Section 811, 67 
percent more for Section 202, 75 percent more for Section 515, and 214 
percent more for tax credits. The differentials in total government 
costs are similar for two-bedroom units. 

Housing Policy Issues: 

The overriding goal of the federal housing programs we reviewed is to 
house the poor. However, the housing programs have additional goals—
vouchers provide mobility and neighborhood choice, and production 
programs have additional goals, from creating new affordable units, to 
meeting the needs of the elderly or persons with disabilities, to 
promoting community development. Whether the benefits derived from 
these additional goals justify the programs' additional costs is a 
major housing policy question. For all of the programs, controlling 
costs is important to ensure the efficient use of federal subsidies. 
Increasing contributions from nonfederal sources could stretch federal 
housing dollars for the production programs, and further research 
might suggest opportunities for containing development costs. Cost 
control strategies must include the potential costs to the federal 
government of setting aside sufficient funding for capital reserves. 
Assessing the extent to which the programs are collectively addressing 
the nation's affordable housing needs and controlling costs is 
difficult because detailed data on the various housing programs are 
not consistently available. 

Achieving the Goals of Federal Housing Policy: 

If costs were the only consideration, our estimates would suggest that 
the production programs should be replaced with vouchers. However, 
federal housing programs deliver benefits that must be taken into 
account when addressing costs. Voucher recipients can choose housing 
in neighborhoods that offer better educational and employment 
opportunities, or they can also choose to remain in place while paying 
less for rent. In many markets, production programs are the only 
sources of new affordable rental units, and use restrictions will keep 
these units affordable for decades to come, limiting the impact of 
market forces. These units can be crucial, especially when housing 
markets are tight or landlords are unwilling to rent to voucher 
recipients. Certain housing authorities have found that the fair 
market rents in some metropolitan areas are too low, making it 
difficult for voucher recipients to find housing.[Footnote 29] 

In addition, there are substantial differences in the housing and 
services provided under each of the production programs that must also 
be considered. For example, the Section 202 and Section 811 programs 
make available services that are not readily found in affordable 
housing in the private rental market. These services can be 
particularly important for frail elderly residents or persons with 
disabilities, for whom housing vouchers are probably not a reasonable 
alternative. As the nation's population ages, production programs for 
the elderly may become an even more important part of national housing 
policy. Finally, in many urban areas, the production programs have 
formed an integral part of an overall community development strategy, 
as in the case of the HOPE VI program. As a matter of public policy, 
the benefits of mobility, increasing the supply of affordable units, 
[Footnote 30] providing additional services for special needs 
populations, or revitalizing distressed communities must be weighed 
against the costs of these efforts. 

Controlling Federal Costs: 

Opportunities to control the federal cost of housing assistance are 
limited. Shifting more of the cost to very-low-income households would 
not be practical, given that the federal government and tenants cover 
the majority of costs for all programs and very-low-income tenants can 
contribute only a very small portion of the total cost. Without 
contributions from other sources, the federal cost share inevitably 
increases as tenant income declines. Thus, the bottom line is that 
housing very poor households is expensive for the federal government 
under all programs. To shift more of the cost burden to tenants, the 
programs would have to serve higher income households. 

In some instances, increasing contributions from state and local 
sources may be an option for limiting federal expenditures for some of 
the production programs, as our discussion of New York City's mortgage 
interest subsidy indicated. Substantial subsidies from these sources 
could eliminate or reduce the need for federal rental assistance, 
freeing federal funds to assist other households. However, state and 
local governments vary in their ability and willingness to support 
affordable housing. Federal incentives, such as additional tax credit 
or grant awards for major financial commitments, might promote greater 
nonfederal participation. 

Further research on projects' adherence to cost-containment guidelines 
could identify opportunities for controlling development costs. Our 
data on the production programs show wide variation in the costs of 
projects under the same program in the same metropolitan area. While 
the higher costs of some units reflect the cost differential between 
new construction and rehabilitation or the premiums paid for special 
features, the reasons for the higher costs of other units are less 
obvious. Understanding the considerable variation in per-unit costs 
requires more work on the determinants of development costs and the 
effectiveness of current cost-containment guidelines. To the extent 
that a property's development costs can be contained and a production 
program's objectives still achieved, federal dollars can go further. 

Further research on the adequacy of the production programs' capital 
replacement reserves would put the federal government in a better 
position to manage potential long-term cost risks. As we previously 
noted, the production programs could pose a cost risk to the federal 
government if capital reserves are underfunded. The experience with 
modernization programs for public housing and other production 
programs suggests that this cost risk can be large. It is still too 
early to tell whether tax credit properties will suffer from capital 
shortfalls as they age. However, even if they do suffer, the structure 
of the tax credit program may limit the risk to the federal 
government. The government does not own the units or hold the 
mortgages on most of them. As a result, the potential role of the 
federal government is unclear if these units were to need an infusion 
of capital. It is possible that, as the ownership of tax credit 
properties changes over time, new owners will apply for tax credits to 
rehabilitate the properties, but their applications will have to be 
assessed by the relevant state agencies, which will have no statutory 
obligation to provide the credits. 

Availability of Housing Cost Data: 

Our analysis for this report, which required detailed, consistent data 
on housing characteristics, services, and costs for the six active 
programs, relied on information collected and centralized by HUD and 
RHS but was hampered by gaps in the data for some programs. For 
example, HUD's centralized data on the Section 202 and Section 811 
programs do not include information on the sources of funds other than 
the capital advance. For the HOPE VI program, data were available on 
total costs and on HUD's portion of the total costs, but information 
on tax credits and state, local, and private funds was limited. 
[Footnote 31] To varying degrees, HUD and RHS have data on tenant 
characteristics and on property revenues and expenses. Cooperation and 
coordination across federal agencies to establish standards for 
collecting data on housing programs would facilitate the development 
of information to further our understanding of federal housing 
programs. 

For the tax credit program, no federal agency is responsible for 
collecting and centralizing data from the state and local housing 
finance agencies that administer the program. While IRS oversees 
compliance with the federal regulations for using tax credits, it does 
not oversee the program's impact on national housing policy, including 
its relationship to other federal housing programs. Recognizing the 
importance of the tax credit program, HUD established a limited 
national database on tax credit properties. This database has 
information, which the housing finance agencies have voluntarily 
reported to HUD, on the properties placed in service through 1998, 
including their location, number of units, number of bedrooms per 
unit, type of construction (new or rehabilitated), and type of sponsor 
(nonprofit or for-profit). However, HUD's database does not include 
information on tenant characteristics, project costs, and property 
operating revenues and expenses. These data, though generally 
available from the housing finance agencies, have not been 
centralized, making analysis and evaluation of the program difficult. 
As a result, for this report, we relied on a database constructed by a 
private research firm. 

Given the size of the tax credit program-—soon to exceed $4 billion 
per year-—it is important to monitor and evaluate the program's impact 
on national housing policy. However, no federal agency has been 
designated to perform this role, and no requirements have been 
established for state finance agencies to report data on project costs 
and households served. Accordingly, there is a need for a national, 
centralized database on the tax credit program to serve as the basis 
for evaluating the program's success in serving various populations, 
assessing how federal funds are being used, determining to what extent 
other sources of funding are being leveraged, gauging projects' 
compliance with cost-containment guidelines, and monitoring projects' 
ongoing and long-term financial viability. To develop this database, a 
federal agency would have to be explicitly designated as responsible 
for collecting the information and establishing reporting requirements 
for the housing finance agencies that manage the program. The costs 
and benefits of designating such an agency and requiring more detailed 
reporting by the housing finance agencies would have to be weighed 
before any action could be taken. 

Federal Agency and State Association Comments and Our Evaluation: 

We provided HUD, USDA, and the National Council of State Housing 
Agencies (NCSHA)[Footnote 32] with a draft of this report for their 
review and comment. HUD commended us for our effort in collecting data 
from various sources to address the "critical question" concerning the 
relative costs of federal rental housing programs. HUD's primary 
concern was that it believes our 30-year cost estimates understate the 
costs of the production programs because the history of previous 
production efforts suggests that capital reserves for future 
replacements and improvements are often underfunded and, as a result, 
substantial amounts of additional subsidies may be necessary in later 
years. We agree in part. While past production programs have received 
additional subsidies to maintain their properties in satisfactory 
condition, the extent to which newer programs, such as tax credits and 
the capital advance programs under Section 202 and Section 811, will 
require additional subsidies to maintain the properties is currently 
unknown. To address these concerns, we include additional information 
on the impact of different amounts of capital reserve shortfalls on 
our 30-year cost estimates. HUD recommended that we shorten our life-
cycle cost period to 15 years to reduce the uncertainties concerning 
these additional future subsidies. We did not, however, shorten our 
cost period because development subsidies are intended to buy low-
income housing for more than 15 years; most production programs today 
require that housing remain affordable for at least 30 years. 

HUD was also concerned that the title of the report, as well as 
certain parts of the draft, suggested that production programs respond 
to broader objectives than the voucher program. HUD believes that 
vouchers provide benefits in addition to affordable housing, including 
mobility. We have changed the title of the report and, where 
appropriate, added discussions about the additional benefits derived 
from vouchers. The complete text of HUD's comments and our response 
are included in appendix V. HUD also provided us with technical 
comments, which we incorporated into the report, as appropriate. 

USDA generally agreed with our comparison of costs across programs and 
stated that further research is needed on the adequacy of production 
programs' capital replacement reserves in order to address long-term 
federal cost risks. In addition, USDA stated that cooperation and 
coordination across federal agencies is needed to establish standards 
for collecting data on housing programs. According to USDA, 
standardized reporting format would greatly reduce the complexity and 
cost of compliance for owners, property managers, and government 
agencies. The complete text of USDA's comments and our response are 
included in appendix VI. 

NCSHA commented that, in its opinion, comparing costs across programs, 
and especially comparing the costs of production programs and housing 
vouchers, is not useful. We disagree. While it is true that each 
program has some unique objectives, fundamentally, housing vouchers 
and housing production programs share a core objective of providing 
housing for low-and very-low-income households. In addition, since 
housing subsidies are not an entitlement and only about one-third of 
eligible households receive assistance, it is imperative that scarce 
subsidies dollars be used as efficiently as possible. NCSHAs comments 
suggest that it believes that the unmeasured benefits of the tax 
credit program exceed those of vouchers and should eliminate the gap 
between the costs of vouchers and of tax credit units. However, NCSHA 
provides no support for this view. The work presented in our report 
provides a starting point for assessing the relative costs of housing 
assistance programs. The cost differentials we present provide an 
estimate of how large the additional benefits would have to be to 
justify the additional costs. As HUD points out in its comments, 
future work should focus on measuring these additional benefits to 
provide a fuller picture of the relative costs of these housing 
assistance programs. 

NCSHA questioned the need for a national database on costs for the tax 
credit program, arguing that the tax credit is one of the most 
exhaustively studied programs. We disagree. There are very few studies 
of the tax credit program that assess the costs of providing housing 
under the program, the financial viability of tax credit projects over 
time, or the households served by the program because such analysis 
requires an exhausting data collection effort. For the two most 
detailed studies on the national costs of tax credits-—ours (1997) and 
that of Cummings and DiPasquale (1999), data collection from a variety 
of disparate sources took well over a year. Cummings and DiPasquale 
have the most recent cost information, and their data end in 1996. Our 
1997 study provides the only description of the characteristics of 
tenants in tax credit developments for the nation, and our data are 
only for developments placed in service between 1992 and 1994. Michael 
A. Stegman, in a 1999 review, argued that we know very little about 
the tax credit program.[Footnote 33] He noted that estimates vary on 
even very basic facts, such as how many units have been developed. The 
tax credit program consumes real taxpayer resources, and as with any 
government program, taxpayers deserve to know what is being purchased 
with their dollars and at what cost. The complete text of NCSHAs 
comments and our response are included in appendix VII. 

Scope and Methodology: 

To accomplish our objectives, we collected and analyzed data on 
housing costs and characteristics and tenant income for the nation as 
a whole and for seven metropolitan areas—Baltimore, Boston, Chicago, 
Dallas/Fort Worth, Denver, Los Angeles, and New York. These locations 
are geographically diverse and representative of both low-cost and 
high-cost housing markets. We obtained the data for our analysis from 
a variety of sources, including HUD, RHS, the Bureau of the Census, 
public housing authorities, state housing finance agencies, property 
managers, industry groups, and previous studies on tax 
credits.[Footnote 34] We also visited representative properties in 
three of the seven metropolitan areas to observe qualitative 
differences in the housing and services provided under each of the 
programs. 

To estimate the cost of each of the six active housing programs, we 
developed a 30-year (life-cycle) cost estimate. We chose 30 years for 
our life-cycle estimates because this period is generally the minimal 
length of time that properties developed through federal housing 
programs can be expected to serve low-income households. We presented 
our cost estimates, as applicable, for metropolitan and 
nonmetropolitan areas to illustrate the impact of location on cost. To 
account for differences in unit size, we determined the cost of one-, 
two-, and three-bedroom units for each of the programs, where 
possible. This approach enabled us to compare costs across programs 
for units of the same size. 

To compute the portion of each program's cost paid by the federal 
government, tenants, and others, we identified the amounts in rents 
and development subsidies paid by these sources. In comparing the 
relative federal cost of production programs and vouchers, we made 
adjustments to account for differences among the programs in tenants' 
rental contributions, which affect the size of the federal rental 
assistance subsidy. As we did for total costs, we accounted for 
differences in unit size by determining the cost of one-, two-, and 
three-bedroom units, where possible. Our methodology is described 
further in appendix I. 

We performed our work from September 1999 through November 2001 in 
accordance with generally accepted government accounting standards. 

As arranged with your offices, we will send copies of this report to 
interested congressional committees and Members of Congress; the 
Secretary of Agriculture; the Secretary of Housing and Urban 
Development; the Director, Office of Management and Budget; the 
Executive Director, Millennial Housing Commission; and other 
interested parties. We will also make copies available to others on 
request. 

If you have any questions about this report, please contact me at 
(202) 5127631. Key contributors to this report are listed in appendix 
VIII. 

Signed by: 

Stanley J. Czerwinski: 
Director, Physical Infrastructure Issues: 

List of Congressional Committees: 

The Honorable Jack Reed: 
Chairman:
The Honorable Wayne Allard: 
Ranking Minority Member: 
Subcommittee on Housing and Transportation:
Committee on Banking, Housing, and Urban Affairs:
United States Senate: 

The Honorable Barbara A. Mikulski: 
Chairwoman:
The Honorable Christopher S. Bond: 
Ranking Minority Member:
Subcommittee on Veteran Affairs, HUD and Independent Agencies:
Committee on Appropriations:
United States Senate: 

The Honorable Marge Roukema:
Chairwoman:
The Honorable Barney Frank:
Ranking Minority Member:
Subcommittee on Housing and Community Opportunity: 
Committee on Financial Services:
House of Representatives: 

The Honorable James T. Walsh:
Chairman:
The Honorable Alan B. Mollohan:
Ranking Minority Member:
Subcommittee on VA, HUD, and Independent Agencies: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Methodology for Estimating Per-Unit Costs of Federally 
Assisted Housing Programs: 

A key objective of this report is to compare the total costs of 
providing housing to low- and very-low-income households under the six 
active federal housing programs. Previous studies on the relative 
costs of housing programs have generally found that vouchers are less 
expensive and more cost-effective than production programs. However, 
most of these studies are over 20 years old, and, as a result, they do 
not provide information on the newer active housing programs. Valid 
cost comparisons require that we compare the costs of providing 
similar units in similar locations. In addition, the structure of the 
subsidies provided under the programs varies in ways that 
significantly affect cost comparisons. Vouchers are short-term 
commitments to provide housing assistance, while production programs 
provide units with certain restrictions to ensure that the units will 
remain affordable in the future, often over 30 years. To account for 
differences in the timing of investments under the various programs, 
we estimated their 30-year life-cycle costs.[Footnote 35] Once we 
determined the cost of each program, we identified how these costs are 
shared by the federal government, assisted households, and other 
sources—state, local, and private entities. Finally, the available 
cost data varied considerably across the six programs, requiring us to 
piece together data from many different public and private sources. 

Previous Studies: 

The role of production programs has been a central issue in major 
national housing policy reviews of the last four decades—the Kaiser 
Committee in 1968, the President's Commission on Housing in 1982, and 
the National Housing Task Force of 1988. The focus of these reviews 
shifted from increasing the physical quality of the housing stock in 
the Kaiser Committee, to increasing housing affordability in the 
President's Commission on Housing, to addressing housing availability 
and affordability in the National Housing Task Force.[Footnote 36] 
Since the early 1980s, vouchers have been the centerpiece of federal 
housing assistance. With the HOPE VI program and the creation and 
extension of the Low-Income Housing Tax Credit program, the debate 
concerning the role of production programs has continued. In his 
review of the cost effectiveness of alternative housing assistance 
programs, William C. Apgar argues that there is a role for production 
programs in housing policy, concluding that "economic theory and 
recent empirical evidence suggest that [vouchers] are not best at all 
times and under all situations."[Footnote 37] 

In a comprehensive 2001 review of federal housing programs, Edgar 0. 
Olsen argues that the cost-effectiveness of alternative approaches in 
assisting low-income households must be considered if the federal 
government is to assist as many households as possible.[Footnote 38] 
Measuring cost-effectiveness involves comparing the total cost of 
providing the assisted housing and its estimated market rent. The 
study reviews the housing cost literature and finds that these studies 
unanimously conclude that the cost of production programs, such as 
Public Housing, Section 8 New Construction, and Section 236, exceeds 
their market value. Those studies that looked at vouchers found that 
voucher rents were very close to their market rents. According to 
Olsen, the estimates in these studies probably understate the 
inefficiency of construction programs relative to housing vouchers 
because, among other things, all indirect subsidies are not fully 
included, such as the value of donated land and property tax 
exemptions or abatements. The review finds that the small number of 
studies on the cost-effectiveness of housing programs is not 
conclusive in establishing whether subsidized new construction is 
needed in localities with the lowest vacancy rates. The review 
concludes, "whether there are any market conditions under which 
construction programs are more cost-effective than vouchers is surely 
one of the most important unanswered questions in housing policy 
analysis." 

For the most part, the housing programs evaluated in the studies 
reviewed by Olsen are no longer active. While we can still learn a 
great deal from this work, the current active housing programs have 
features that distinguish them from earlier programs. Most of the 
research done on the costs of these programs is over 20 years old. 
Some of the most detailed analyses are based on the housing 
experiments of the 1970s, and we have not had anything close to the 
quality and depth of those data. 

Conceptual Framework: 

We started our analysis by constructing the total costs of a unit 
under each program, regardless of who bears the costs. As discussed in 
this report, in the private rental housing market, rents cover the 
total costs of providing a housing unit. The total costs include 
operating expenses (e.g., administrative expenses, utilities, routine 
maintenance, and property taxes); debt service; deposits to a 
replacement reserve for major capital improvements over time; and a 
market return to equity investors. We defined the total costs of 
vouchers as the sum of the total rent paid by both the federal 
government and the assisted household and the fee paid by the 
Department of Housing and Urban Development (HUD) to the local housing 
authority to administer the program: 

Total Costs = Rents + Administrative Fee. 

For production programs, costs are more complicated because an asset 
with a long useful life is produced. In the private housing market, 
the value of the housing equals the present discounted value (PDV) of 
the net rental income stream over the useful life: 

Value = PDV (Net Rental Income). 

The rental income stream must cover the total costs:[Footnote 39] 

PDV (Rental Income) = Total Costs = Total Development Costs + PDV 
(Operating Costs). 

In the private market, if the present discounted value of market rents 
does not cover total costs, the housing development will not be built. 
Federal production programs generally provide housing at below-market 
rents or provide housing in locations where market rents would be 
insufficient to cover costs. In either case, the difference between 
total rents paid and total costs is covered by development subsidies. 
Therefore, for production programs, the relationship is as follows: 

Total Production Program Costs = PDV (Rental Income) + PDV 
(Development Subsidies). 

Estimating Program Costs: 

Table 2 presents the average total development costs per unit for the 
productions programs by general location and for seven metropolitan 
areas. Information on housing vouchers does not appear in the table 
because the program relies on existing housing. Nationally and in most 
metropolitan areas, the total development costs are considerably 
higher for HOPE VI than for the other production programs. The HOPE VI 
figures for most of our seven metropolitan areas incorporate data for 
only two developments. As a result, the average for a particular 
metropolitan area can be skewed by the presence of large projects with 
high or low development costs. In the New York metropolitan area, for 
example, one very large HOPE VI development involved rehabilitation, 
which can cost much less than new construction, and, consequently, the 
average HOPE VI development cost for New York is unusually low. At the 
same time, three HOPE VI properties in the Baltimore metropolitan area 
involving new construction had development costs very similar to each 
other. 

Table 2: Average Total Development Costs Per Unit, by General Location 
and for Seven Metropolitan Areas, in 1999 Dollars: 

Location: Nation; 
Tax credits: $73,590; 
HOPE VI[A]: Housing-related costs: $117,920; 
HOPE VI[A]: All costs: $143,450; 
Section 202: $73,510; 
Section 811: $70,430; 
Section 515: $58,280. 

Location: Metro; 
Tax credits: $72,690; 
HOPE VI[A]: Housing-related costs: $117,920; 
HOPE VI[A]: All costs: $143,450; 
Section 202: $75,430; 
Section 811: $73,020; 
Section 515: [B]. 

Location: Nonmetro; 
Tax credits: $62,010; 
HOPE VI[A]: Housing-related costs: [B]; 
HOPE VI[A]: All costs: [B]; 
Section 202: $60,270; 
Section 811: $63,120; 
Section 515: $58,280. 

Location: Baltimore metro area; 
Tax credits: $77,360; 
HOPE VI[A]: Housing-related costs: $166,380; 
HOPE VI[A]: All costs: $221,210; 
Section 202: $80,250; 
Section 811: $69,420; 
Section 515: [B]. 

Location: Boston metro area; 
Tax credits: $116,720; 
HOPE VI[A]: Housing-related costs: $197,000; 
HOPE VI[A]: All costs: $261,610; 
Section 202: $94,160; 
Section 811: $96,000; 
Section 515: [B]. 

Location: Chicago metro area; 
Tax credits: $79,340; 
HOPE VI[A]: Housing-related costs: $102,470; 
HOPE VI[A]: All costs: $108,950; 
Section 202: $75,020; 
Section 811: $71,370; 
Section 515: [B]. 

Location: Dallas/Fort Worth metro area; 
Tax credits: $60,100; 
HOPE VI[A]: Housing-related costs: $78,920; 
HOPE VI[A]: All costs: $96,460; 
Section 202: $52,390; 
Section 811: $66,710; 
Section 515: [B]. 

Location: Denver metro area; 
Tax credits: $72,650; 
HOPE VI[A]: Housing-related costs: $102,170; 
HOPE VI[A]: All costs: $126,440; 
Section 202: $72,160; 
Section 811: $74,640; 
Section 515: [B]. 

Location: Los Angeles metro area; 
Tax credits: $104,750; 
HOPE VI[A]: Housing-related costs: $113,060; 
HOPE VI[A]: All costs: $154,310; 
Section 202: $94,360; 
Section 811: $97,520; 
Section 515: [B]. 

Location: New York metro area; 
Tax credits: $111,580; 
HOPE VI[A]: Housing-related costs: $76,710; 
HOPE VI[A]: All costs: $107,010; 
Section 202: $101,730; 
Section 811: $116,180; 
Section 515: [B]. 

[A] The total development costs for HOPE VI reflect mostly planned 
figures. Housing-related costs exclude the costs of remediation, 
demolition, the construction of housing and community facilities, 
relocation, and community-based planning and participation, most of 
which are not applicable to the other housing programs. These other 
expenses are included, along with the housing-related expenses, in the 
"All costs" column. 

[B] Since Section 515 primarily serves nonmetropolitan areas, we do 
not show Section 515 data for metropolitan areas. Also, since HOPE VI 
exclusively serves metropolitan areas, we do not show HOPE VI data for 
nonmetropolitan areas. 

[End of table] 

For some programs, the entire development cost is subsidized with 
upfront grants, while for others, it is subsidized over time with tax 
credits or below-market loans. Table 3 presents our estimates of the 
present discounted value of the average development subsidies per unit 
in 1999 for the five production programs we reviewed, both for the 
nation and for seven metropolitan areas. For HOPE VI, Section 202, and 
Section 811, the federal government pays the total development costs 
up front with grants; as a result, the development subsidies are equal 
to the total development costs. Section 515 provides below-market 
fixed-rate loans of 1 percent with 50-year terms. To estimate the 
subsidy provided through a below-market interest-rate loan, we 
compared the rate on the loan with the rate on 30-year constant 
maturity treasuries (CMT)-which is a very conservative indicator of 
market interest rates. We estimated the value of the subsidy by taking 
the spread between the 30-year CMT and the actual interest on the loan 
and by calculating the forgone interest over the life of the loan. We 
took the present discounted value for the flow of interest subsidies 
over 30 years. We assumed a discount rate of 6 percent, representing 
the government cost of funds according to data published by the Office 
of Management and Budget. We assumed the project would be sold in year 
30. For tax credits, the federal government provides investors with a 
flow of tax credits over 10 years. In addition, state and local 
governments or private entities may provide grants or below-market 
loans. For tax credits, the present discounted value of the 
development subsidies is the sum of (1) the present discounted value 
of the flow of the tax credits, (2) any grants provided, and (3) the 
present discounted value of the flow of the interest subsidies on any 
below-market loans.[Footnote 40] 

Table 3: Average Present Discounted Value of Development Subsidies Per 
Unit, by General Location and for Seven Metropolitan Areas, in 1999 
Dollars: 

Location: Nation; 
Tax credits: $50,350; 
HOPE VI[A]: Housing-related costs: $117,920; 
HOPE VI[A]: All costs: $143,450; 
Section 202[A]: $73,510; 
Section 811[A]: $70,430; 
Section 515: $41,730. 

Location: Metro; 
Tax credits: $52,790; 
HOPE VI[A]: Housing-related costs: $117,920; 
HOPE VI[A]: All costs: $143,450; 
Section 202[A]: $75,430; 
Section 811[A]: $73,020; 
Section 515: [B]. 

Location: Nonmetro; 
Tax credits: $44,690; 
HOPE VI[A]: Housing-related costs: [B]; 
HOPE VI[A]: All costs: [B]; 
Section 202[A]: $60,270; 
Section 811[A]: $63,120; 
Section 515: $41,730. 

Location: Baltimore metro area; 
Tax credits: $51,780; 
HOPE VI[A]: Housing-related costs: $166,380; 
HOPE VI[A]: All costs: $221,210; 
Section 202[A]: $80,250; 
Section 811[A]: $69,420; 
Section 515: [B]. 

Location: Boston metro area; 
Tax credits: $50,630; 
HOPE VI[A]: Housing-related costs: $197,000; 
HOPE VI[A]: All costs: $261,610; 
Section 202[A]: $94,160; 
Section 811[A]: $96,000; 
Section 515: [B]. 

Location: Chicago metro area; 
Tax credits: $62,190; 
HOPE VI[A]: Housing-related costs: $102,470; 
HOPE VI[A]: All costs: $108,950; 
Section 202[A]: $75,020; 
Section 811[A]: $71,370; 
Section 515: [B]. 

Location: Dallas/Fort Worth metro area; 
Tax credits: $31,470; 
HOPE VI[A]: Housing-related costs: $78,920; 
HOPE VI[A]: All costs: $96,460; 
Section 202[A]: $52,390; 
Section 811[A]: $66,710; 
Section 515: [B]. 

Location: Denver metro area; 
Tax credits: $29,080; 
HOPE VI[A]: Housing-related costs: $102,170; 
HOPE VI[A]: All costs: $126,440; 
Section 202[A]: $72,160; 
Section 811[A]: $74,640; 
Section 515: [B]. 

Location: Los Angeles metro area; 
Tax credits: $81,380; 
HOPE VI[A]: Housing-related costs: $113,060; 
HOPE VI[A]: All costs: $154,310; 
Section 202[A]: $94,360; 
Section 811[A]: $97,520; 
Section 515: [B]. 

Location: New York metro area; 
Tax credits: $111,780; 
HOPE VI[A]: Housing-related costs: $76,710; 
HOPE VI[A]: All costs: $107,010; 
Section 202[A]: $101,730; 
Section 811[A]: $116,180; 
Section 515: [B]. 

[A] For the HOPE VI, Section 202, and Section 811 programs, total 
costs are paid entirely up front and no debt service payments are made 
for these units. As a result, the total development subsidies are 
equal to the total development costs. 

[B] Since Section 515 primarily serves nonmetropolitan areas, we do 
not show Section 515 data for metropolitan areas. Also, since HOPE VI 
exclusively serves metropolitan areas, we do not show HOPE VI data for 
nonmetropolitan areas. 

[End of table] 

As shown in table 3, the development subsidies for the tax credit and 
Section 515 programs are generally lower than for the HOPE VI, Section 
202, and Section 811 programs, whose total development costs are 
covered by federal grants. However, the development subsidies for tax 
credit properties in the New York metropolitan area are quite high. In 
New York, the city provides all first mortgages on tax credit projects 
at steep discounts, substantially increasing the level of development 
subsidies. In the Los Angeles metropolitan area, state and local 
governments have given priority to tax credit proposals for single-
room-occupancy developments and have provided substantial subsidies. 

As shown in table 4, voucher rents, which include both the tenant and 
federal contributions, are higher than rents for the five housing 
production programs. Unlike the production program rents, which are 
reduced by development subsidies, the voucher rents are consistent 
with market rents. Development subsidies can be used to lower rents, 
pay for additional costs, and/or provide additional amenities. For the 
HOPE VI, Section 202, and Section 811 programs, rents need only cover 
operating costs and replacement reserves, since up-front federal 
grants pay the total development costs. For the tax credit and Section 
515 programs, under which portions of the development costs are 
financed and rents must cover debt service payments, rents are 
somewhat higher than for the other production programs but are still 
generally below market rents. 

Table 4: Average Monthly Rents, by General Location and for Seven 
Metropolitan Areas, in 1999 Dollars: 

Location: Nation; 
Housing vouchers[A]: $610; 
Production program: Tax credits: $540; 
Production program: HOPE VI[B]: $430; 
Production program: Section 202: $340; 
Production program: Section 811: $320; 
Production program: Section 515: $380. 

Location: Metro; 
Housing vouchers[A]: $650; 
Production program: Tax credits: $530; 
Production program: HOPE VI[B]: $430; 
Production program: Section 202: $350; 
Production program: Section 811: $240; 
Production program: Section 515: [D]. 

Location: Nonmetro; 
Housing vouchers[A]: $440; 
Production program: Tax credits: $450; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $300; 
Production program: Section 811: $280; 
Production program: Section 515: $380. 

Location: Baltimore metro area; 
Housing vouchers[A]: $630; 
Production program: Tax credits: $510; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $380; 
Production program: Section 811: $250; 
Production program: Section 515: [D]. 

Location: Boston metro area; 
Housing vouchers[A]: $880; 
Production program: Tax credits: $820; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $420; 
Production program: Section 811: $470; 
Production program: Section 515: [D]. 

Location: Chicago metro area; 
Housing vouchers[A]: $640; 
Production program: Tax credits: $500; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $470; 
Production program: Section 811: $450; 
Production program: Section 515: [D]. 

Location: Dallas/Fort Worth metro area; 
Housing vouchers[A]: $650; 
Production program: Tax credits: $670; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $310; 
Production program: Section 811: $310; 
Production program: Section 515: [D]. 

Location: Denver metro area; 
Housing vouchers[A]: $710; 
Production program: Tax credits: $700; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $290; 
Production program: Section 811: $350; 
Production program: Section 515: [D]. 

Location: Los Angeles metro area; 
Housing vouchers[A]: $730; 
Production program: Tax credits: $440; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $380; 
Production program: Section 811: $440; 
Production program: Section 515: [D]. 

Location: New York metro area; 
Housing vouchers[A]: $750; 
Production program: Tax credits: $430; 
Production program: HOPE VI[B]: [C]; 
Production program: Section 202: $490; 
Production program: Section 811: $550; 
Production program: Section 515: [D]. 

[A] For vouchers, the average rent does not include a monthly 
administrative fee, which, at the national level, averages about $48 
per unit and, in the seven metropolitan areas, ranges from $42 per 
unit in Denver to $61 per unit in Los Angeles. 

[B] Our estimate of HOPE VI "rent" is based on the national average 
operating subsidy plus tenant contribution for all public housing 
units. 

[C] For individual metropolitan areas, reliable cost data were not 
available. 

[D] Since Section 515 units are located in rural areas, rent data are 
presented for nonmetropolitan areas only. 

[End of table] 

In this report, we estimated total program costs over 30 years. 
[Footnote 41] In this appendix, we also provide estimates of costs in 
the first year, as reported in our interim report. For vouchers, the 
total life-cycle cost is the present discounted value of a 30-year 
flow of rents plus the present discounted value of the administrative 
fee over 30 years. We assumed an annual rent inflation rate of 3 
percent.[Footnote 42] Furthermore, as discussed in appendix II, we 
tested the sensitivity of our cost estimates to different inflation 
rates. For the production programs, we calculated the present 
discounted value of the rental income stream over 30 years, again 
assuming an annual rent inflation rate of 3 percent, plus the present 
discounted value of the development subsidies.[Footnote 43] For the 
development subsidies, we took the actual payments made over time for 
each of the subsidies and summed the present discounted value of each 
of those flows using the 6-percent government discount rate. For 
example, for tax credits, we took the present discounted value of the 
10-year flow of credits to investors. In estimating the first-year 
cost of vouchers, we simply added the total annual rent in the first 
year and the annual administrative fee. For the production programs, 
we added the total annual rent in the first year and the present value 
of the development subsidies, annualized over 30 years at the 
government discount rate of 6 percent. 

Table 5 shows our estimates of the total average per-unit costs of the 
six active housing programs. Columns 2 and 5 provide the average per-
unit costs of production programs for the first year and 30 years, 
respectively. However, these averages do not reflect adjustments for 
the differences in unit size shown in column 1. 

Table 5: Average First- and 30-Year Total Costs Per Unit: Housing 
Production Program Costs Compared With Voucher Costs, Adjusted for 
General Location and Unit Size, in 1999 Dollars: 

Program/Location: Vouchers/Nation; 
Average number of bedrooms (1): 2.2; 
First year: Total per-unit cost (2): $7,870; 
First year: Adjusted total per-unit cost of voucher (3): [A]; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): [A]; 
30 years: Total per-unit cost (5): $160,580; 
30 years: Adjusted total per-unit cost of voucher (6): [A]; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): [A]. 

Program/Location: Vouchers/Metro; 
Average number of bedrooms (1): 2.2; 
First year: Total per-unit cost (2): $8,350; 
First year: Adjusted total per-unit cost of voucher (3): [A]; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): [A]; 
30 years: Total per-unit cost (5): $170,370; 
30 years: Adjusted total per-unit cost of voucher (6): [A]; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): [A]. 

Program/Location: Vouchers/Nonmetro; 
Average number of bedrooms (1): 2.1; 
First year: Total per-unit cost (2): %5,660; 
First year: Adjusted total per-unit cost of voucher (3): [A]; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): [A]; 
30 years: Total per-unit cost (5): $115,500; 
30 years: Adjusted total per-unit cost of voucher (6): [A]; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): [A]. 

Program/Location: Tax credits/Nation; 
Average number of bedrooms (1): 1.9; 
First year: Total per-unit cost (2): $10,110; 
First year: Adjusted total per-unit cost of voucher (3): $7,380; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 137%; 
30 years: Total per-unit cost (5): $181,870; 
30 years: Adjusted total per-unit cost of voucher (6): $150,470; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 121%. 

Program/Location: Tax credits/Metro; 
Average number of bedrooms (1): 1.9; 
First year: Total per-unit cost (2): $10,200; 
First year: Adjusted total per-unit cost of voucher (3): $7,770; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 131%; 
30 years: Total per-unit cost (5): $182,710; 
30 years: Adjusted total per-unit cost of voucher (6): $158,510; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 115%. 

Program/Location: Tax credits/Nonmetro; 
Average number of bedrooms (1): 2.0; 
First year: Total per-unit cost (2): $8,610; 
First year: Adjusted total per-unit cost of voucher (3): $5,390; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 160%; 
30 years: Total per-unit cost (5): $154,100; 
30 years: Adjusted total per-unit cost of voucher (6): $109,990; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 140%. 

Program/Location: HOPE VI/Metro[B]: Housing-related costs; 
Average number of bedrooms (1): 2.4; 
First year: Total per-unit cost (2): $13,730; 
First year: Adjusted total per-unit cost of voucher (3): $8,610; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 159%; 
30 years: Total per-unit cost (5): $223,190; 
30 years: Adjusted total per-unit cost of voucher (6): $175,580; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 127%. 

Program/Location: HOPE VI/Metro[B]: All costs; 
Average number of bedrooms (1): 2.4; 
First year: Total per-unit cost (2): $15,580; 
First year: Adjusted total per-unit cost of voucher (3): $8,610; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 181%; 
30 years: Total per-unit cost (5): $248,720; 
30 years: Adjusted total per-unit cost of voucher (6): $175,580; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 142%. 

Program/Location: Section 202/Nation; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $9,420; 
First year: Adjusted total per-unit cost of voucher (3): $6,580; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 145%; 
30 years: Total per-unit cost (5): $156,590; 
30 years: Adjusted total per-unit cost of voucher (6): $132,110; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 119%. 

Program/Location: Section 202/Metro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $9,790; 
First year: Adjusted total per-unit cost of voucher (3): $6,840; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 143%; 
30 years: Total per-unit cost (5): $162,720; 
30 years: Adjusted total per-unit cost of voucher (6): $139,520; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 117%. 

Program/Location: Section 202/Nonmetro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $7,950; 
First year: Adjusted total per-unit cost of voucher (3): $4,700; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 169%; 
30 years: Total per-unit cost (5): $132,600; 
30 years: Adjusted total per-unit cost of voucher (6): $95,890; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 138%. 

Program/Location: Section 811/Nation; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $8,930; 
First year: Adjusted total per-unit cost of voucher (3): $6,480; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 138%; 
30 years: Total per-unit cost (5): $148,290; 
30 years: Adjusted total per-unit cost of voucher (6): $132,110; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 112%. 

Program/Location: Section 811/Metro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $9,320; 
First year: Adjusted total per-unit cost of voucher (3): $6,480; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 136%; 
30 years: Total per-unit cost (5): $154,820; 
30 years: Adjusted total per-unit cost of voucher (6): $139,520; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 111%. 

Program/Location: Section 811/Nonmetro; 
Average number of bedrooms (1): 1.1; 
First year: Total per-unit cost (2): $7,800; 
First year: Adjusted total per-unit cost of voucher (3): $4,770; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 164%; 
30 years: Total per-unit cost (5): $129,620; 
30 years: Adjusted total per-unit cost of voucher (6): $97,310; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 133%. 

Program/Location: Section 515/Nonmetro[C]; 
Average number of bedrooms (1): 1.6; 
First year: Total per-unit cost (2): $7,640; 
First year: Adjusted total per-unit cost of voucher (3): $5,190; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 147%; 
30 years: Total per-unit cost (5): $135,840; 
30 years: Adjusted total per-unit cost of voucher (6): $105,800; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 128%. 

[A] Not applicable. 

[B] All of HOPE VI's units are located in metropolitan areas. 

[C] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

In this report, we examine the cost of one- and two-bedroom units. For 
HOPE VI, we did not have data on individual unit sizes. To compare 
HOPE VI costs with voucher costs, we took the actual average rent for 
a voucher unit with a given number of bedrooms and interpolated a rent 
consistent with the average number of bedrooms for HOPE VI. For 
example, the average size of a HOPE VI unit was 2.4 bedrooms in 1999, 
and all of these units were located in metropolitan areas. The average 
rent for the voucher program at that time was $610 for a two-bedroom 
unit and $752 for a three-bedroom unit in metropolitan areas. We 
subtracted these two rents and multiplied the difference ($142) by the 
fraction by which the size of the average HOPE VI unit exceeded two 
bedrooms (0.4). We added the resulting product ($57) to the average 
rent for a two-bedroom voucher unit to derive our estimate of the rent 
for a 2.4-bedroom voucher unit—about $667. Finally, we added the 
average administrative fee, which is about $50 per month in 
metropolitan areas. The resulting total cost of vouchers is about $717 
per month, or about $8,610 per year (see table 5). 

In our interim report, we made these interpolations for unit size to 
compare the cost of vouchers with the cost of each production program. 
In table 5, columns 3 and 6 provide the adjusted voucher costs. These 
adjustments may narrow or widen the gap between the costs of vouchers 
and of a specific production program. Tax credit, Section 202, and 
Section 811 units are smaller, on average, than voucher units. As a 
result, this adjustment widens the gap between the costs of these 
programs and vouchers. Columns 4 and 7 present the total cost of the 
production programs as a percentage of the costs of adjusted vouchers. 
Although all of the production programs are more expensive than 
vouchers, both in the first year and over 30 years, the difference is 
smaller over 30 years. The magnitude of the difference decreases over 
time because the government subsidies for the production programs are 
fixed while the voucher subsidies increase with market rents. 
Furthermore, because of the development subsidies, the rents for 
production program units are lower initially than the rents for 
voucher units, as was shown in table 4. Therefore, even though we 
assumed the same rate of rent inflation for both types of units, the 
impact of rent inflation is less for the production programs because 
their starting rents are lower than voucher units. 

A problem with the adjusted costs presented in table 5 is that they 
provide for cost comparisons between vouchers and only one production 
program at a time. Because of differences in average unit size across 
the production programs, we could not compare costs across these 
programs. To provide for cost comparisons across all of the programs, 
we used a second approach, calculating the average first-year and 30-
year costs for one- and two-bedroom units, as shown in table 6. For 
vouchers, we knew the number of bedrooms for each recipient, so we 
simply calculated the average rents for one- and two-bedroom units. 
For the production programs, except HOPE VI, we knew the rents by the 
number of bedrooms. Table 6 does not include the HOPE VI program 
because cost data were not available by the number of bedrooms. For 
each project that has one- or two-bedroom units, we calculated the 
average development subsidy per unit. Since projects may have a 
mixture of units of different sizes, there will be some error in 
assigning an average per-unit subsidy across all units. 

Table 6: Average First- and 30-Year Total Costs of One- and Two-
Bedroom Units, by General Location, in 1999 Dollars: 

Unit size/Program: One-bedroom: Vouchers; 
First year, Nation: $6,480; 
First year, Metro: $6,480; 
First year, Nonmetro: $4,700; 
30 years, Nation: $132,110; 
30 years, Metro: $139,520; 
30 years, Nonmetro: $95,890. 

Unit size/Program: One-bedroom: Tax credits; 
First year, Nation: $9,100; 
First year, Metro: $9,280; 
First year, Nonmetro: $7,600; 
30 years, Nation: $164,270; 
30 years, Metro: $166,610; 
30 years, Nonmetro: $138,060. 

Unit size/Program: One-bedroom: Section 202; 
First year, Nation: $9,250; 
First year, Metro: $9,480; 
First year, Nonmetro: $7,950; 
30 years, Nation: $153,510; 
30 years, Metro: $157,410; 
30 years, Nonmetro: #133,070. 

Unit size/Program: One-bedroom: Section 811; 
First year, Nation: $8,850; 
First year, Metro: $9,140; 
First year, Nonmetro: $7,850; 
30 years, Nation: $146,600; 
30 years, Metro: $151,280; 
30 years, Nonmetro: $129,890. 

Unit size/Program: One-bedroom: Section 515; 
First year, Nation: [A]; 
First year, Metro: [A]; 
First year, Nonmetro: $7,470; 
30 years, Nation: [A]; 
30 years, Metro: [A]; 
30 years, Nonmetro: $132,890. 

Unit size/Program: Two-bedroom: Vouchers; 
First year, Nation: $7,460; 
First year, Metro: $7,920; 
First year, Nonmetro: $5,390; 
30 years, Nation: $152,170; 
30 years, Metro: $161,650; 
30 years, Nonmetro: $110,050. 

Unit size/Program: Two-bedroom: Tax credits; 
First year, Nation: $10,080; 
First year, Metro: $10,240; 
First year, Nonmetro: $8,500; 
30 years, Nation: $182,150; 
30 years, Metro: $184,130; 
30 years, Nonmetro: $151,350. 

Unit size/Program: Two-bedroom: Section 811; 
First year, Nation: $9,690; 
First year, Metro: $10,350; 
First year, Nonmetro: $8,430; 
30 years, Nation: $160,370; 
30 years, Metro: $171,240; 
30 years, Nonmetro: $139,480. 

Unit size/Program: Two-bedroom: Section 515; 
First year, Nation: [A]; 
First year, Metro: [A]; 
First year, Nonmetro: $7,500; 
30 years, Nation: [A]; 
30 years, Metro: [A]; 
30 years, Nonmetro: $132,600. 

Note: Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. Also, Section 202 does not generally develop two-bedroom 
units and, as a result, is not included in our two-bedroom analysis. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Table 7 presents our estimates of the total costs of one-bedroom units 
in metropolitan areas nationwide and in the seven metropolitan areas 
we selected for review. This table does not include information for 
the HOPE VI program because data were not available to identify costs 
by unit size for these metropolitan areas. The table also excludes 
data for the Section 515 program because it is primarily used in 
nonmetropolitan areas. 

Table 7: Average First- and 30-Year Total Costs of One-Bedroom Units, 
by General Location and for Seven Metropolitan Areas, in 1999 Dollars: 

Location: Metro; 
First year: Vouchers: $6,840; 
First year: Tax credits: $9,280; 
First year: Section 202: $9,480; 
First year: Section 811: $9,140; 
30 years: Vouchers: $139,520; 
30 years: Tax credits: $166,610; 
30 years: Section 202: $157,410; 
30 years: Section 811: $151,280. 

Location: Baltimore metro area; 
First year: Vouchers: $6,740; 
First year: Tax credits: $9,460; 
First year: Section 202: $10,380; 
First year: Section 811: [A]; 
30 years: Vouchers: $137,410; 
30 years: Tax credits: $169,980; 
30 years: Section 202: $173,160; 
30 years: Section 811: [A]. 

Location: Boston metro area; 
First year: Vouchers: $9,480; 
First year: Tax credits: $10,900; 
First year: Section 202: $12,050; 
First year: Section 811: $12,290; 
30 years: Vouchers: $193,400; 
30 years: Tax credits: $205,950; 
30 years: Section 202: $201,310; 
30 years: Section 811: $204,440. 

Location: Chicago metro area; 
First year: Vouchers: $6,620; 
First year: Tax credits: $10,310; 
First year: Section 202: $9,760; 
First year: Section 811: $10,040; 
30 years: Vouchers: $135,000; 
30 years: Tax credits: $181,210; 
30 years: Section 202: $163,000; 
30 years: Section 811: $170,320. 

Location: Dallas/Fort Worth metro area; 
First year: Vouchers: $6,150; 
First year: Tax credits: $8,030; 
First year: Section 202: $7,480; 
First year: Section 811: $8,540; 
30 years: Vouchers: $125,400; 
30 years: Tax credits: $152,130; 
30 years: Section 202: $127,350; 
30 years: Section 811: $142,080. 

Location: Denver metro area; 
First year: Vouchers: $6,330; 
First year: Tax credits: $9,380; 
First year: Section 202: $8,660; 
First year: Section 811: $10,700; 
30 years: Vouchers: $129,160; 
30 years: Tax credits: $180,760; 
30 years: Section 202: $141,890; 
30 years: Section 811: $182,290. 

Location: Los Angeles metro area; 
First year: Vouchers: $7,820; 
First year: Tax credits: $10,200; 
First year: Section 202: $10,980; 
First year: Section 811: $12,950; 
30 years: Vouchers: $159,550; 
30 years: Tax credits: $177,320; 
30 years: Section 202: $178,460; 
30 years: Section 811: $214,340. 

Location: New York metro area; 
First year: Vouchers: $8,200; 
First year: Tax credits: $12,410; 
First year: Section 202: $13,290; 
First year: Section 811: [A]; 
30 years: Vouchers: $167,300; 
30 years: Tax credits: $201,820; 
30 years: Section 202: $222,030; 
30 years: Section 811: [A]. 

Note: Section 515 is not included in this table because it develops 
properties in rural areas. Due to data limitations, we cannot present 
HOPE VI cost by bedroom size. 

[A] There were too few properties to estimate the average cost of one-
bedroom units. 

[End of table] 

Table 8 provides our estimates of the total cost of two-bedroom units 
in metropolitan areas nationwide and in our seven metropolitan areas. 
Besides excluding the HOPE VI and Section 515 programs, this table 
excludes the Section 202 program because it primarily provides one-
bedroom units. Information for the Section 811 program was also very 
limited. 

Table 8: Average First- and 30-Year Total Costs of Two-Bedroom Units, 
by General Location and for Seven Metropolitan Areas, in 1999 Dollars: 

Location: Metro; 
First year: Vouchers: $7,920; 
First year: Tax credits: $10,240; 
First year: Section 811: $10,350; 
30 years: Vouchers: $161,650; 
30 years: Tax credits: $184,130; 
30 years: Section 811: $171,240. 

Location: Baltimore metro area; 
First year: Vouchers: $7,830; 
First year: Tax credits: $10,720; 
First year: Section 811: [A]; 
30 years: Vouchers: $159,760; 
30 years: Tax credits: $198,190; 
30 years: Section 811: [A]. 

Location: Boston metro area; 
First year: Vouchers: $10,900; 
First year: Tax credits: $14,270; 
First year: Section 811: [A]; 
30 years: Vouchers: $222,350; 
30 years: Tax credits: $263,980; 
30 years: Section 811: [A]. 

Location: Chicago metro area; 
First year: Vouchers: $7,940; 
First year: Tax credits: $11,400; 
First year: Section 811: $12,280; 
30 years: Vouchers: $161,970; 
30 years: Tax credits: $202,480; 
30 years: Section 811: $213,500. 

Location: Dallas/Fort Worth metro area; 
First year: Vouchers: $7,690; 
First year: Tax credits: $9,930; 
First year: Section 811: [A]; 
30 years: Vouchers: $156,780; 
30 years: Tax credits: $189,000; 
30 years: Section 811: [A]. 

Location: Denver metro area; 
First year: Vouchers: $8,420; 
First year: Tax credits: $10,820; 
First year: Section 811: $10,020; 
30 years: Vouchers: $171,690; 
30 years: Tax credits: $207,760; 
30 years: Section 811: $160,610. 

Location: Los Angeles metro area; 
First year: Vouchers: $9,410; 
First year: Tax credits: $13,520; 
First year: Section 811: $13,170; 
30 years: Vouchers: $192,020; 
30 years: Tax credits: $232,040; 
30 years: Section 811: $217,380. 

Location: New York metro area; 
First year: Vouchers: $9,710; 
First year: Tax credits: $14,290; 
First year: Section 811: $13,970; 
30 years: Vouchers: $198,090; 
30 years: Tax credits: $232,690; 
30 years: Section 811: $231,350. 

Note: Section 515 is not included in this table because it develops 
properties in rural areas. Also, Section 202 does not generally 
develop two-bedroom units and, as a result, is not included in this 
table. Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. 

[A] There were too few properties to estimate the cost of two-bedroom 
units. 

[End of table] 

Cost Shares: 

Table 9 presents the average share of the total per-unit cost of a one-
bedroom unit paid under the various programs by the federal 
government, tenants, and other sources, including state, local, and 
private entities. With the exception of vouchers, housing programs 
make different sources of funding available to varying degrees. The 
tax credit program, for example, involves more development subsidies 
from state, local, and private entities than the Section 202 and 
Section 811 programs. For all programs except tax credits, we obtained 
the average federal rental assistance payment and tenant contribution 
for each property. For the tax credit program, no data were available 
on the amount of rental assistance provided by the federal government. 
Using data from our 1997 report on tax credits, we estimated the 
percentage of average rent paid for all units by the federal 
government in the form of Section 8 tenant-based and project-based 
assistance.[Footnote 44] In our 30-year analysis, we increase both the 
federal and tenant contributions for rent at the same rate. 

Table 9: Average Share of First- and 30-Year Total Costs of One-
Bedroom Units Paid by the Federal Government, Tenants, and Others, in 
1999 Dollars: 

Program/Location: Vouchers/Nation; 
First year: Federal cost share: $4,190; 
First year: Tenant cost share: $2,290; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $6,480; 
30 years: Federal cost share: $85,410; 	
30 years: Tenant cost share: $46,700; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $132,110. 

Program/Location: Vouchers/Metro; 
First year: Federal cost share: $4,490; 
First year: Tenant cost share: $2,350; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $6,840; 
30 years: Federal cost share: $91,670; 
30 years: Tenant cost share: $47,850; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $139,520. 

Program/Location: Vouchers/Nonmetro; 
First year: Federal cost share: $2,690; 
First year: Tenant cost share: $2,010; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $4,700; 
30 years: Federal cost share: $54,800; 
30 years: Tenant cost share: $41,090; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $95,890. 

Program/Location: Tax credits/Nation; 
First year: Federal cost share: $4,020; 
First year: Tenant cost share: $4,340; 
First year: Other cost share[A]: $740; 
First year: Total cost: $9,100; 
30 years: Federal cost share: $65,480; 
30 years: Tenant cost share: $88,580; 
30 years: Other cost share[A]: $10,210; 
30 years: Total cost: $164,270. 

Program/Location: Tax credits/Metro; 
First year: Federal cost share: $4,090; 
First year: Tenant cost share: $4,340; 
First year: Other cost share[A]: $850; 
First year: Total cost: $9,280; 
30 years: Federal cost share: $66,420; 
30 years: Tenant cost share: $88,460; 
30 years: Other cost share[A]: $11,730; 
30 years: Total cost: $166,610. 

Program/Location: Tax credits/Nonmetro; 
First year: Federal cost share: $3,380; 
First year: Tenant cost share: $3,730; 
First year: Other cost share[A]: $480; 
First year: Total cost: $7,600; 
30 years: Federal cost share: $55,290; 
30 years: Tenant cost share: $76,150; 
30 years: Other cost share[A]: $6,620; 
30 years: Total cost: $138,060. 

Program/Location: Section 202/Nation
First year: Federal cost share: $6,810; 
First year: Tenant cost share: $2,260; 
First year: Other cost share[A]: $190; 
First year: Total cost: $9,250; 
30 years: Federal cost share: $104,900; 
30 years: Tenant cost share: $46,060; 
30 years: Other cost share[A]: $2,550; 
30 years: Total cost: $153,510. 

Program/Location: Section 202/Metro; 
First year: Federal cost share: $6,900; 
First year: Tenant cost share: $2,370; 
First year: Other cost share[A]: $210; 
First year: Total cost: $9,480; 
30 years: Federal cost share: $106,230; 
30 years: Tenant cost share: $48,260; 
30 years: Other cost share[A]: $2,930; 
30 years: Total cost: $157,410. 

Program/Location: Section 202/Nonmetro; 
First year: Federal cost share: $5,960; 
First year: Tenant cost share: $1,980; 
First year: Other cost share[A]: $8; 
First year: Total cost: $7,950; 
30 years: Federal cost share: $92,630; 
30 years: Tenant cost share: $40,330; 
30 years: Other cost share[A]: $110; 
30 years: Total cost: $133,070. 

Program/Location: Section 811/Nation; 
First year: Federal cost share: $6,570; 
First year: Tenant cost share: $2,000; 
First year: Other cost share[A]: $280; 
First year: Total cost: $8,850; 
30 years: Federal cost share: $102,040; 
30 years: Tenant cost share: $40,750; 
30 years: Other cost share[A]: $3,810; 
30 years: Total cost: $146,600. 

Program/Location: Section 811/Metro; 
First year: Federal cost share: $6,780; 
First year: Tenant cost share: $2,020; 
First year: Other cost share[A]: $340; 
First year: Total cost: $9,140; 
30 years: Federal cost share: $105,370; 
30 years: Tenant cost share: $41,210; 
30 years: Other cost share[A]: $4,700; 
30 years: Total cost: $151,280. 

Program/Location: Section 811/Nonmetro; 
First year: Federal cost share: $5,780; 
First year: Tenant cost share: $1,930; 
First year: Other cost share[A]: $150; 
First year: Total cost: $7,850; 
30 years: Federal cost share: $88,530; 
30 years: Tenant cost share: $39,330; 
30 years: Other cost share[A]: $2,030; 
30 years: Total cost: $129,890. 

Program/Location: Section 515/Nonmetro; 
First year: Federal cost share: $4,800; 
First year: Tenant cost share: $2,280; 
First year: Other cost share[A]: $390; 
First year: Total cost: $7,470; 
30 years: Federal cost share: $81,010; 
30 years: Tenant cost share: $46,510; 
30 years: Other cost share[A]: $5,370; 
30 years: Total cost: $132,890. 

Note: Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[A] "Other cost share" includes state, local, and private funding 
sources. 

[B] Not applicable. 

[End of table] 

Table 10 presents the share of costs paid by these different sources 
for two-bedroom units. Although data were not available to calculate 
cost shares for HOPE VI units of different sizes, we included the cost 
share for the average HOPE VI unit, with 2.4 bedrooms. Also, since we 
did not have HOPE VI data on operating subsidies and tenant 
contributions for individual properties, we applied the average per-
unit operating subsidy and tenant contribution for all public housing 
units. Finally, Section 202 does not provide two-bedroom units and, 
consequently, does not appear in table 10. 

Table 10: Average Share of First- and 30-Year Total Costs of Two-
Bedroom Units Paid by the Federal Government, Tenants, and Others, in 
1999 Dollars: 

Program/Location: Vouchers/Nation; 
First year: Federal cost share: $4,760; 
First year: Tenant cost share: $2,700; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $7,460; 
30 years: Federal cost share: $97,160; 
30 years: Tenant cost share: $55,020; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $152,170. 

Program/Location: Vouchers/Metro; 
First year: Federal cost share: $5,110; 
First year: Tenant cost share: $2,820; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $7,920; 
30 years: Federal cost share: $104,230; 
30 years: Tenant cost share: $57,420; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $161,650. 

Program/Location: Vouchers/Nonmetro; 
First year: Federal cost share: $3,220; 
First year: Tenant cost share: $2,180; 
First year: Other cost share[A]: [B]; 
First year: Total cost: $5,390; 
30 years: Federal cost share: $65,680; 
30 years: Tenant cost share: $44,380; 
30 years: Other cost share[A]: [B]; 
30 years: Total cost: $110,050. 

Program/Location: Tax credits/Nation; 
First year: Federal cost share: $4,450; 
First year: Tenant cost share: $4,840; 
First year: Other cost share[A]: $790; 
First year: Total cost: $10,080; 
30 years: Federal cost share: $72,540; 
30 years: Tenant cost share: $98,670; 
30 years: Other cost share[A]: $10,930; 
30 years: Total cost: $182,150. 

Program/Location: Tax credits/Metro; 
First year: Federal cost share: $4,470; 
First year: Tenant cost share: $4,820; 
First year: Other cost share[A]: $950; 
First year: Total cost: $10,240; 
30 years: Federal cost share: $72,740; 
30 years: Tenant cost share: $98,280; 
30 years: Other cost share[A]: $13,110; 
30 years: Total cost: $184,130. 

Program/Location: Tax credits/Nonmetro; 
First year: Federal cost share: $4,090; 
First year: Tenant cost share: $3,820; 
First year: Other cost share[A]: $600; 
First year: Total cost: $8,500; 
30 years: Federal cost share: $65,180; 
30 years: Tenant cost share: $77,980; 
30 years: Other cost share[A]: $8,200; 
30 years: Total cost: $151,350. 

Program/Location: HOPE VI/Metro[C]: Housing-related costs; 
First year: Federal cost share: $10,210; 
First year: Tenant cost share: $2,320; 
First year: Other cost share[A]: $1,190; 
First year: Total cost: $13,730; 
30 years: Federal cost share: $159,350; 
30 years: Tenant cost share: $47,400; 
30 years: Other cost share[A]: $16,430; 
30 years: Total cost: $223,190. 

Program/Location: HOPE VI/Metro[C]: All costs; 
First year: Federal cost share: $11,900; 
First year: Tenant cost share: $2,320; 
First year: Other cost share[A]: $1,360; 
First year: Total cost: $15,580; 
30 years: Federal cost share: $182,650; 
30 years: Tenant cost share: $47,400; 
30 years: Other cost share[A]: $18,660; 
30 years: Total cost: $248,720. 

Program/Location: Section 811/Nation; 
First year: Federal cost share: $7,020; 
First year: Tenant cost share: $2,180; 
First year: Other cost share[A]: $480; 
First year: Total cost: $9,690; 
30 years: Federal cost share: $109,190; 
30 years: Tenant cost share: $44,550; 
30 years: Other cost share[A]: $6,630; 
30 years: Total cost: $160,370. 

Program/Location: Section 811/Metro; 
First year: Federal cost share: $7,680; 
First year: Tenant cost share: $2,120; 
First year: Other cost share[A]: $540; 
First year: Total cost: $10,350; 
30 years: Federal cost share: $120,430; 
30 years: Tenant cost share: $43,320; 
30 years: Other cost share[A]: $7,490; 
30 years: Total cost: $171,240. 

Program/Location: Section 811/Nonmetro; 
First year: Federal cost share: $5,760; 
First year: Tenant cost share: $2,300; 
First year: Other cost share[A]: $370; 
First year: Total cost: $8,430; 
30 years: Federal cost share: $87,490; 
30 years: Tenant cost share: $46,960; 
30 years: Other cost share[A]: $5,020; 
30 years: Total cost: $139,480. 

Program/Location: Section 515/Nonmetro[D]; 
First year: Federal cost share: $4,890; 
First year: Tenant cost share: $2,280; 
First year: Other cost share[A]: $330; 
First year: Total cost: $7,500; 
30 years: Federal cost share: $81,540; 
30 years: Tenant cost share: $46,510; 
30 years: Other cost share[A]: $4,550; 
30 years: Total cost: $132,600. 

Note: Section 202 does not generally develop two-bedroom units and, as 
a result, is not included in the two-bedroom analysis. 

[A] "Other cost share" includes state, local, and private funding 
sources. 

[B] Not applicable. 

[C] All of HOPE VI's units are located in metropolitan areas. 

[D] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Using the approach in our interim report, table 11 presents our 
estimates of the average federal per-unit costs of the six housing 
programs. Columns 2 and 5 provide the average federal costs for the 
first year and 30 years, respectively. In comparing the federal costs 
of the production programs and vouchers, we made adjustments to 
reflect the differences in average unit size, as shown in column 1, 
and in average tenant contributions. To estimate federal voucher cost 
that accounts for differences in tenant contribution, we simply 
subtracted the average tenant contribution for each of the production 
programs from the interpolated total voucher costs (shown in table 5, 
columns 3 and 6). This adjusted federal cost appears in columns 3 and 
6 in table 11. In other words, we assumed that the average tenant 
contributions under the voucher program were the same as those under 
the production programs. 

Table 11: Average First- and 30-Year Federal Costs Per Unit: Housing 
Production Program Federal Costs Compared With Voucher Federal Costs 
Adjusted for General Location, Unit Size, and Tenant Contribution, in 
1999 Dollars: 

Program/Location: Tax credits/Nation; 
Average number of bedrooms (1): 1.9; 
First year: Total per-unit cost (2): $4,500; 
First year: Adjusted total per-unit cost of voucher (3): $2,610; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 172%; 
30 years: Total per-unit cost (5): $73,010; 
30 years: Adjusted total per-unit cost of voucher (6): $53,190; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 137%. 

Program/Location: Tax credits/Metro; 
Average number of bedrooms (1): 2.0; 
First year: Total per-unit cost (2): $4,510; 
First year: Adjusted total per-unit cost of voucher (3): $3,060; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 147%; 
30 years: Total per-unit cost (5): $73,020; 
30 years: Adjusted total per-unit cost of voucher (6): $62,420; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 117%. 

Program/Location: Tax credits/Nonmetro; 
Average number of bedrooms (1): 2.0; 
First year: Total per-unit cost (2): $4,050; 
First year: Adjusted total per-unit cost of voucher (3): $1,430; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 283%; 
30 years: Total per-unit cost (5): $65,040; 
30 years: Adjusted total per-unit cost of voucher (6): $29,070; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 224%. 

Program/Location: HOPE VI/Metro[B]: Housing-related costs; 
Average number of bedrooms (1): 2.4; 
First year: Total per-unit cost (2): $10,210; 
First year: Adjusted total per-unit cost of voucher (3): $6,280; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 163%; 
30 years: Total per-unit cost (5): $159,350; 
30 years: Adjusted total per-unit cost of voucher (6): $128,170; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 124%. 

Program/Location: HOPE VI/Metro[B]: All costs; 
Average number of bedrooms (1): 2.4; 
First year: Total per-unit cost (2): $11,900; 
First year: Adjusted total per-unit cost of voucher (3): $6,280; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 189%; 
30 years: Total per-unit cost (5): $182,650; 
30 years: Adjusted total per-unit cost of voucher (6): $128,170; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 143%. 

Program/Location: Section 202/Nation; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $6,920; 
First year: Adjusted total per-unit cost of voucher (3): $4,200; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 165%; 
30 years: Total per-unit cost (5): $107,130; 
30 years: Adjusted total per-unit cost of voucher (6): $85,610; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 125%. 

Program/Location: Section 202/Metro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $7,050; 
First year: Adjusted total per-unit cost of voucher (3): $4,470; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 158%; 
30 years: Total per-unit cost (5): $109,090; 
30 years: Adjusted total per-unit cost of voucher (6): $91,080; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 120%. 

Program/Location: Section 202/Nonmetro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $5,960; 
First year: Adjusted total per-unit cost of voucher (3): $2,790; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 214%; 
30 years: Total per-unit cost (5): $92,630; 
30 years: Adjusted total per-unit cost of voucher (6): $57,000; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 163%. 

Program/Location: Section 811/Nation; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $8,930; 
First year: Adjusted total per-unit cost of voucher (3): $6,480; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 138%; 
30 years: Total per-unit cost (5): $148,290; 
30 years: Adjusted total per-unit cost of voucher (6): $132,110; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 112%. 

Program/Location: Section 811/Metro; 
Average number of bedrooms (1): 1.0; 
First year: Total per-unit cost (2): $6,940; 
First year: Adjusted total per-unit cost of voucher (3): $4,760; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 146%; 
30 years: Total per-unit cost (5): $108,410; 
30 years: Adjusted total per-unit cost of voucher (6): $100,240; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 108%. 

Program/Location: Section 811/Nonmetro; 
Average number of bedrooms (1): 1.1; 
First year: Total per-unit cost (2): $5,800; 
First year: Adjusted total per-unit cost of voucher (3): $2,840; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 204%; 
30 years: Total per-unit cost (5): $88,860; 
30 years: Adjusted total per-unit cost of voucher (6): $60,280; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 147%. 

Program/Location: Section 515/Nonmetro[C]; 
Average number of bedrooms (1): 1.6; 
First year: Total per-unit cost (2): $4,960; 
First year: Adjusted total per-unit cost of voucher (3): $2,910; 
First year: Program total cost as a percentage of adjusted voucher 
cost(4): 170%; 
30 years: Total per-unit cost (5): $83,690; 
30 years: Adjusted total per-unit cost of voucher (6): $59,290; 
30 years: Program total cost as a percentage of adjusted voucher 
cost(7): 141%. 

[A] All of HOPE VI's units are located in metropolitan areas. 

[B] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

The comparison of federal cost can also be analyzed by unit size. 
Table 12 presents the average federal per-unit costs for one-bedroom 
units. As in table 11, we adjusted the federal voucher cost by 
assuming that the households assisted with vouchers made the same 
average contribution toward rent as the households under the 
production programs. 

Table 12: Average First- and 30-Year Federal Costs for One-Bedroom 
Units: Housing Production Program Federal Costs Compared With Voucher 
Federal Costs, Adjusted for General Location and Tenant Contribution, 
in 1999 Dollars: 

Program/Location: Tax credits/Nation; 
First year: Total per-unit cost: $4,020; 
First year: Adjusted total per-unit cost of voucher: $2,140; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 188%; 
30 years: Total per-unit cost: $65,480; 
30 years: Adjusted total per-unit cost of voucher: $43,530; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
150%. 

Program/Location: Tax credits/Metro; 
First year: Total per-unit cost: $4,090; 
First year: Adjusted total per-unit cost of voucher: $2,500; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 164%; 
30 years: Total per-unit cost: $66,420; 
30 years: Adjusted total per-unit cost of voucher: $51,060; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
130%. 

Program/Location: Tax credits/Nonmetro; 
First year: Total per-unit cost: $3,380; 
First year: Adjusted total per-unit cost of voucher: $970; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 348%; 
30 years: Total per-unit cost: $55,290; 
30 years: Adjusted total per-unit cost of voucher: $19,740; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
280%. 

Program/Location: Section 202/Nation; 
First year: Total per-unit cost: $6,810; 
First year: Adjusted total per-unit cost of voucher: $4,220; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 161%; 
30 years: Total per-unit cost: $104,900; 
30 years: Adjusted total per-unit cost of voucher: $86,050; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
122%. 

Program/Location: Section 202/Metro; 
First year: Total per-unit cost: $6,900; 
First year: Adjusted total per-unit cost of voucher: $4,470; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 154%; 
30 years: Total per-unit cost: $106,230; 
30 years: Adjusted total per-unit cost of voucher: $91,260; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
116%. 

Program/Location: Section 202/Nonmetro; 
First year: Total per-unit cost: $5,960; 
First year: Adjusted total per-unit cost of voucher: $2,720; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 219%; 
30 years: Total per-unit cost: $92,630; 
30 years: Adjusted total per-unit cost of voucher: $55,560; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
167%. 

Program/Location: Section 811/Nation; 
First year: Total per-unit cost: $6,570; 
First year: Adjusted total per-unit cost of voucher: $4,480; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 147%; 
30 years: Total per-unit cost: $102,040; 
30 years: Adjusted total per-unit cost of voucher: $91,360; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
112%. 

Program/Location: Section 811/Metro; 
First year: Total per-unit cost: $6,780; 
First year: Adjusted total per-unit cost of voucher: $4,820; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 141%; 
30 years: Total per-unit cost: $105,370; 
30 years: Adjusted total per-unit cost of voucher: $98,310; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
107%. 

Program/Location: Section 811/Nonmetro; 
First year: Total per-unit cost: $5,780; 
First year: Adjusted total per-unit cost of voucher: $2,770; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 209%; 
30 years: Total per-unit cost: $88,530; 
30 years: Adjusted total per-unit cost of voucher: $56,560; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
157%. 

Program/Location: Section 515/Nonmetro[C]; 
First year: Total per-unit cost): $4,800; 
First year: Adjusted total per-unit cost of voucher: $2,420; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 198%; 
30 years: Total per-unit cost: $81,010; 
30 years: Adjusted total per-unit cost of voucher: $49,380; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
164%. 

Note: Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Similarly, table 13 presents the average federal costs for two-bedroom 
units. 

Table 13: Average First- and 30-Year Federal Costs for Two-Bedroom 
Units: Housing Production Program Federal Costs Compared With Voucher 
Federal Costs, Adjusted for General Location and Tenant Contribution, 
in 1999 Dollars: 

Program/Location: Tax credits/Nation; 
First year: Total per-unit cost: $4,450; 
First year: Adjusted total per-unit cost of voucher: $2,620; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 170%; 
30 years: Total per-unit cost: $72,540; 
30 years: Adjusted total per-unit cost of voucher: $53,500; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
136%. 

Program/Location: Tax credits/Metro; 
First year: Total per-unit cost: $4,470; 
First year: Adjusted total per-unit cost of voucher: $3,100; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 144%; 
30 years: Total per-unit cost: $72,740; 
30 years: Adjusted total per-unit cost of voucher: $63,370; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
115%. 

Program/Location: Tax credits/Nonmetro; 
First year: Total per-unit cost: $4,090; 
First year: Adjusted total per-unit cost of voucher: $1,570; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 261%; 
30 years: Total per-unit cost: $65,180; 
30 years: Adjusted total per-unit cost of voucher: $32,070; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
203%. 

Program/Location: Section 811/Nation; 
First year: Total per-unit cost: $7,020; 
First year: Adjusted total per-unit cost of voucher: $5,280; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 133%; 
30 years: Total per-unit cost: $109,190; 
30 years: Adjusted total per-unit cost of voucher: $107,620; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
101%. 

Program/Location: Section 811/Metro; 
First year: Total per-unit cost: $7,680; 
First year: Adjusted total per-unit cost of voucher: $5,800; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 132%; 
30 years: Total per-unit cost: $120,430; 
30 years: Adjusted total per-unit cost of voucher: $118,330; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
102%. 

Program/Location: Section 811/Nonmetro; 
First year: Total per-unit cost: $5,760; 
First year: Adjusted total per-unit cost of voucher: $3,090; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 186%; 
30 years: Total per-unit cost: $87,490; 
30 years: Adjusted total per-unit cost of voucher: $63,090; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
139%. 

Program/Location: Section 515/Nonmetro[C]; 
First year: Total per-unit cost): $4,890; 
First year: Adjusted total per-unit cost of voucher: $3,110; 
First year: Program total cost as a percentage of adjusted voucher 
cost: 157%; 
30 years: Total per-unit cost: $81,540; 
30 years: Adjusted total per-unit cost of voucher: $63,540; 
30 years: Program total cost as a percentage of adjusted voucher cost: 
128%. 

Note: Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. In addition, Section 202 does not generally develop two-
bedroom units and, as a result, is not included in the two-bedroom 
analysis. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Sources of Data Used in the Analysis: 

The sources of data used in our analysis vary by program and by our 
seven metropolitan areas. The primary sources of these data were the 
headquarters and field offices of HUD and of the U.S. Department of 
Agriculture's (USDA) Rural Housing Service (RHS), public housing 
authorities, and managing agents and owners of federally assisted 
properties. For the tax credit program, we also relied heavily on tax 
credit data collected and analyzed by a private research firm, 
supplemented by data we collected from state housing finance agencies. 
We attempted to verify the accuracy of the data collected and 
corrected any observed errors. We converted all development cost and 
rent data to 1999 dollars using the Consumer Price Index. For all of 
the programs, we relied on the information provided by the various 
offices. However, we contacted the appropriate officials or property 
management agents to correct any apparent inaccuracies in the data we 
received. 

Housing Vouchers: 

We obtained from HUD national and aggregate metropolitan-area data 
from the Multifamily Tenant Characteristics Systems on gross rents, 
housing assistance payments, tenant contributions, and incomes for the 
housing voucher and certificate programs. We also collected 
information from HUD and individual housing authorities on the average 
administrative fee paid to housing authorities. These data were 
provided for about 1.4 million households participating in the 
programs in 2000. 

Tax Credits: 

Because of the decentralized nature of the tax credit program, there 
is no national database to evaluate the program's characteristics, 
including costs. Consequently, we relied extensively on rent and 
development subsidy data collected and analyzed by City Research, 
which is a private research firm located in Boston. City Research 
assembled and analyzed detailed data on over 2,500 tax credit 
properties, with over 150,000 units, which were acquired by 4 national 
syndicators.[Footnote 45] These units were estimated to represent 
about 25 to 27 percent of those generated under the program from 1987 
through 1996. The results of City Research's analyses were published 
in a report and in a housing journal.[Fo0tnote 46] We compared the 
nationwide rent data collected by City Research with the data 
collected for our 1997 study[Footnote 47] and supplemented City 
Research's data with our data on tax credit properties placed in 
service in 1999 within the seven metropolitan areas. 

HOPE VI: 

We obtained data from HUD on the total development costs for 130 
planned and completed HOPE VI developments, which contained about 
63,560 planned units as of 2000. Approximately 10 percent of these 
properties were either completed or substantially completed. HOPE VI 
properties use multiple sources of funding, but the data were not 
sufficiently detailed to identify funding by individual sources other 
than the HOPE VI and HUD grants. For properties in the seven 
metropolitan areas, we contacted public housing authorities and were 
able to obtain complete data on their sources of funds. For our 
national cost estimate, we based the distribution of costs paid by 
state, local, and private entities on the actual cost shares in our 
seven metropolitan areas. The properties in the seven metropolitan 
areas constituted about 20 percent of the units in our HOPE VI 
inventory. The HOPE VI program also funds various types of activities 
(e.g., property demolition, tenant relocation, and community services) 
in addition to housing-related construction. We estimated both housing-
related costs and all costs for the HOPE VI program. 

Public housing, in general, does not identify revenues and expenses on 
a property-by-property basis. This information also is not available 
for the HOPE VI program. Consequently, to estimate a national rent for 
the HOPE VI program, we obtained from HUD the average tenant rental 
contribution and operating subsidy paid by HUD for all public housing 
units. Together, these payments constitute an approximation of a 
traditional rental payment. 

Section 202 and Section 811: 

HUD identified about 135 properties, comprising about 6,040 units, 
that were placed in service nationwide in fiscal year 1998 under the 
Section 202 program and about 115 properties, comprising about 1,420 
units, under the Section 811 program. From the list provided, we 
contacted 39 HUD field offices to obtain detailed data on the 
properties' total development costs and the sources of funds used to 
pay these costs. We also obtained data from the field offices on 
properties' rents. Most of the seven metropolitan areas did not have 
enough properties placed in service in 1998 to compute meaningful 
averages for development costs and rents. Consequently, we asked the 
field offices to identify the properties placed in service from 1996 
to 1999 to ensure that we would have at least four properties under 
each program to better compute such averages. 

Section 515: 

RHS state offices identified 53 Section 515 properties, containing 
about 1,250 units, that were placed in service in fiscal year 1998. 
The state offices provided data on total development costs, including 
the sources and terms of funds used to finance these costs. The state 
offices also provided information on 1999 rents. Since Section 515 is 
a rural program, we did not include it in our analysis of the seven 
metropolitan areas. 

[End of section] 

Appendix II: Sensitivity Analysis: 

To test the robustness of the results presented in this report and 
illustrate the sensitivity of our estimates to specific assumptions 
about rental market conditions, the following tables provide estimates 
of the 30-year total costs of the six housing programs when two 
different rates are used to increase rents over time. In the letter 
and appendix I, our base 30-year cost estimates assume an annual rate 
increase of 3 percent, which approximates the annual average rent 
inflation for the past 10 years (about 2.9 percent), according to the 
Consumer Price Index. We discounted the annual costs by 6 percent, 
which is the approximate 30-year discount rate published by the Office 
of Management and Budget. In tables 14 through 19, we estimate the 
average 30-year total costs of the housing programs using rates of 
rent increases that are 2 percentage points above and below our base 
rate. 

Overall, an increase in the rate of inflation from our base estimate 
of 3 percent to 5 percent decreases the difference in total cost 
between the production programs and vouchers. As noted in appendix I, 
the production programs are less vulnerable than vouchers to inflation 
in market rents because, among other things, development subsidies are 
fixed over time. Consequently, rent inflation has a smaller impact on 
the production programs than on vouchers because the starting rents 
are lower for the production programs than for vouchers. 

Table 14: Average 30-Year Total Costs of Housing Programs Per Unit 
Under Different Rates of Inflation, by General Location, in 1999 
Dollars: 

Program/Location: Vouchers/Nation; 
Average unit size: 2.2; 
30-year total costs at an inflation rate of 1 percent: $127,710; 
30-year total costs at an inflation rate of 5 percent: $206,510. 

Program/Location: Vouchers/Metro; 
Average unit size: 2.2; 
30-year total costs at an inflation rate of 1 percent: $135,490; 
30-year total costs at an inflation rate of 5 percent: $219,090. 

Program/Location: Vouchers/Nonmetro; 
Average unit size: 2.1; 
30-year total costs at an inflation rate of 1 percent: $91,860; 
30-year total costs at an inflation rate of 5 percent: $148,540. 

Program/Location: Tax credits/Nation; 
Average unit size: 1.9; 
30-year total costs at an inflation rate of 1 percent: $154,950; 
30-year total costs at an inflation rate of 5 percent: $219,490. 

Program/Location: Tax credits/Metro; 
Average unit size: 1.9; 
30-year total costs at an inflation rate of 1 percent: $156,120; 
30-year total costs at an inflation rate of 5 percent: $219,870. 

Program/Location: Tax credits/Nonmetro; 
Average unit size: 2.0; 
30-year total costs at an inflation rate of 1 percent: $131,710; 
30-year total costs at an inflation rate of 5 percent: $185,400. 

Program/Location: HOPE VI/Metro[A]: Housing-related costs; 
Average unit size: 2.4; 
30-year total costs at an inflation rate of 1 percent: $201,640; 
30-year total costs at an inflation rate of 5 percent: $253,290. 

Program/Location: HOPE VI/Metro[A]: All costs; 
Average unit size: 2.4; 
30-year total costs at an inflation rate of 1 percent: $227,170; 
30-year total costs at an inflation rate of 5 percent: $278,820. 

Program/Location: Section 202/Nation; 
Average unit size: 1.0; 
30-year total costs at an inflation rate of 1 percent: $139,770; 
30-year total costs at an inflation rate of 5 percent: $180,660. 

Program/Location: Section 202/Metro; 
Average unit size: 1.0; 
30-year total costs at an inflation rate of 1 percent: $144,040; 
30-year total costs at an inflation rate of 5 percent: $186,380. 

Program/Location: Section 202/Nonmetro; 
Average unit size: 1.0; 
30-year total costs at an inflation rate of 1 percent: $118,170; 
30-year total costs at an inflation rate of 5 percent: $153,890. 

Program/Location: Section 811/Nation; 
Average unit size: 1.0; 
30-year total costs at an inflation rate of 1 percent: $133,540; 
30-year total costs at an inflation rate of 5 percent: $172,480. 

Program/Location: Section 811/Metro; 
Average unit size: 1.0; 
30-year total costs at an inflation rate of 1 percent: $138,500; 
30-year total costs at an inflation rate of 5 percent: $178,890. 

Program/Location: Section 811/Nonmetro; 
Average unit size: 1.1; 
30-year total costs at an inflation rate of 1 percent: $117,050; 
30-year total costs at an inflation rate of 5 percent: $150,320. 

Program/Location: Section 515/Nonmetro[B]; 
Average unit size: 1.6; 
30-year total costs at an inflation rate of 1 percent: $116,570; 
30-year total costs at an inflation rate of 5 percent: $162,750. 

[A] All HOPE VI units are located in metropolitan areas. 

[B] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Table 15: Average 30-Year Total Costs Per Unit Under Different Rates 
of Inflation: Housing Production Program Costs Compared With Voucher 
Costs, Adjusted for General Location and Unit Size, in 1999 Dollars: 

Production program/Location: Vouchers/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $127,710; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost: [A]; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $206,510; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost: [A]. 

Production program/Location: Vouchers/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $135,490; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost: [A]; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $219,090; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost: [A]. 

Production program/Location: Vouchers/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $91,860; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost:[A]; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $148,540; 
Adjusted total per-unit cost of voucher: [A]; 
Production program cost as a percentage of voucher cost: [A]. 

Production program/Location: Tax credits/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $154,950; 
Adjusted total per-unit cost of voucher: $119,670; 
Production program cost as a percentage of voucher cost: 129%; 
Average total per-unit cost of production program: $219,490; 
Adjusted total per-unit cost of voucher: $193,500; 
Production program cost as a percentage of voucher cost: 113%. 

Production program/Location: Tax credits/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $156,120; 
Adjusted total per-unit cost of voucher: $126,060; 
Production program cost as a percentage of voucher cost: 124%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $219,870; 
Adjusted total per-unit cost of voucher: $203,840; 
Production program cost as a percentage of voucher cost: 108%. 

Production program/Location: Tax credits/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $131,710; 
Adjusted total per-unit cost of voucher: $87,470; 
Production program cost as a percentage of voucher cost: 151%; 	
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $185,400; 
Adjusted total per-unit cost of voucher: $141,450; 
Production program cost as a percentage of voucher cost: 131%. 

Production program/Location: HOPE VI/Metro[B]: Housing-related costs; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $201,640; 
Adjusted total per-unit cost of voucher: $139,640; 
Production program cost as a percentage of voucher cost: 145%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $253,290; 
Adjusted total per-unit cost of voucher: $225,790; 
Production program cost as a percentage of voucher cost: 112%. 

Production program/Location: HOPE VI/Metro[B]: All costs; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $227,170; 
Adjusted total per-unit cost of voucher: $139,640; 
Production program cost as a percentage of voucher cost: 163%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $278,820; 
Adjusted total per-unit cost of voucher: $225,790; 
Production program cost as a percentage of voucher cost: 123%. 

Production program/Location: Section 202/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $139,770; 
Adjusted total per-unit cost of voucher: $105,070v
Production program cost as a percentage of voucher cost: 133%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $180,660; 
Adjusted total per-unit cost of voucher: $169,890; 
Production program cost as a percentage of voucher cost: 106%. 

Production program/Location: Section 202/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $144,040; 
Adjusted total per-unit cost of voucher: $110,960; 
Production program cost as a percentage of voucher cost: 130%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $186,380; 
Adjusted total per-unit cost of voucher: $179,420; 
Production program cost as a percentage of voucher cost: 104%. 

Production program/Location: Section 202/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $118,170; 
Adjusted total per-unit cost of voucher: $76,260; 
Production program cost as a percentage of voucher cost: 155%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $153,890; 
Adjusted total per-unit cost of voucher: $123,310; 
Production program cost as a percentage of voucher cost: 125%. 

Production program/Location: Section 811/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $133,540; 
Adjusted total per-unit cost of voucher: $105,070; 
Production program cost as a percentage of voucher cost: 127%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $172,480; 
Adjusted total per-unit cost of voucher: $169,890; 
Production program cost as a percentage of voucher cost: 102%. 

Production program/Location: Section 811/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $138,500; 
Adjusted total per-unit cost of voucher: $110,960; 
Production program cost as a percentage of voucher cost: 125%; 
30-year total costs at an inflation rate of 5 percent: 	
Average total per-unit cost of production program: $178,890; 
Adjusted total per-unit cost of voucher: $179,420; 
Production program cost as a percentage of voucher cost: 100%. 

Production program/Location: Section 811/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $117,050; 
Adjusted total per-unit cost of voucher: $77,390; 
Production program cost as a percentage of voucher cost: 151%; 
30-year total costs at an inflation rate of 5 percent: 	
Average total per-unit cost of production program: $150,320; 
Adjusted total per-unit cost of voucher: $125,130; 
Production program cost as a percentage of voucher cost: 120%. 

Production program/Location: Section 515/Nonmetro[C]; 
30-year total costs at an inflation rate of 1 percent: 
Average total per-unit cost of production program: $116,570; 
Adjusted total per-unit cost of voucher: $84,150; 
Production program cost as a percentage of voucher cost: 139%; 
30-year total costs at an inflation rate of 5 percent: 
Average total per-unit cost of production program: $162,750; 
Adjusted total per-unit cost of voucher: $136,060; 
Production program cost as a percentage of voucher cost: 120%. 

[A] Not applicable. 

[B] All HOPE VI units are located in metropolitan areas. 

[C] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Table 16: Average 30-Year Total Costs of One- and Two-Bedroom Units 
Under Different Rates of Inflation, by General Location, in 1999 
Dollars: 

Unit size/Program: One-bedroom/Vouchers; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $105,070; 
Metro: $110,960; 
Nonmetro: $76,260; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $169,890; 
Metro: $179,420; 
Nonmetro: $123,320. 

Unit size/Program: One-bedroom/Tax credits; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $139,750; 
Metro: $142,120; 
Nonmetro: $116,980; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $198,520; 
Metro: $200,820; 
Nonmetro: $167,510. 

Unit size/Program: One-bedroom/Section 202; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $137,010; 
Metro: $140,490; 
Nonmetro: $118,170; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $176,550; 
Metro: $181,060; 
Nonmetro: $153,890. 

Unit size/Program: One-bedroom/Section 811; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $130,990; 
Metro: $135,260; 
Nonmetro: $116,150; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $168,410; 
Metro: $173,660; 
Nonmetro: $149,080. 

Unit size/Program: One-bedroom/Section 515; 
30-year total costs at an inflation rate of 1 percent: 
Nation: [A]; 
Metro: [A]; 
Nonmetro: $113,930; 
30-year total costs at an inflation rate of 5 percent: 
Nation: [A]; 
Metro: [A]; 
Nonmetro: $159,390. 

Unit size/Program: Two-bedroom/Vouchers; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $121,020; 
Metro: $128,560; 
Nonmetro: $87,520; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $195,690; 
Metro: $207,880; 
Nonmetro: $141,530. 

Unit size/Program: Two-bedroom/Tax credits; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $154,840; 
Metro: $156,930; 
Nonmetro: $129,770; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $220,300; 
Metro: $222,130; 
Nonmetro: $181,500. 

Unit size/Program: Two-bedroom/Section 811; 
30-year total costs at an inflation rate of 1 percent: 
Nation: $143,370; 
Metro: $153,100; 
Nonmetro: $124,710; 
30-year total costs at an inflation rate of 5 percent: 
Nation: $184,130; 
Metro: $196,580; 
Nonmetro: $160,100. 

Unit size/Program: Two-bedroom/Section 515; 
30-year total costs at an inflation rate of 1 percent: 
Nation: [A]; 
Metro: [A]; 
Nonmetro: $114,110; 
30-year total costs at an inflation rate of 5 percent: 
Nation: [A]; 
Metro: [A]; 
Nonmetro: $158,450. 

Note: Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. Also, Section 202 does not generally develop two-bedroom 
units and, as a result, is not included in the two-bedroom analysis. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of table] 

Table 17: Average Federal Share of 30-Year Total Costs Per Unit Under 
Different Rates of Inflation: Housing Production Program Costs 
Compared With Voucher Costs, Adjusted for General Location, Unit Size, 
and Tenant Contribution, in 1999 Dollars: 

Program/Location: Tax credits/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $66,000; 
Estimated federal voucher cost: $42,310; 
Actual federal cost as a percentage of estimated federal cost: 156%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $82,810; 
Estimated federal voucher cost: $68,410; 
Actual federal cost as a percentage of estimated federal cost: 121%. 

Program/Location: Tax credits/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $66,100; 
Estimated federal voucher cost: $49,640; 
Actual federal cost as a percentage of estimated federal cost: 133%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $82,700; 
Estimated federal voucher cost: $80,270; 
Actual federal cost as a percentage of estimated federal cost: 103%. 

Program/Location: Tax credits/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $59,210; 
Estimated federal voucher cost: $23,110; 
Actual federal cost as a percentage of estimated federal cost: 256%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $73,190; 
Estimated federal voucher cost: $37,390; 
Actual federal cost as a percentage of estimated federal cost: 196%. 
					
Program/Location: HOPE VI/Metro[A]: Housing-related costs; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $147,510; 
Estimated federal voucher cost: $101,940; 
Actual federal cost as a percentage of estimated federal cost: 145%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $175,900; 
Estimated federal voucher cost: $164,830; 
Actual federal cost as a percentage of estimated federal cost: 107%. 

Program/Location: HOPE VI/Metro[A]: All costs; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $170,810; 
Estimated federal voucher cost: $101,940; 
Actual federal cost as a percentage of estimated federal cost: 168%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $199,200; 
Estimated federal voucher cost: $164,830; 
Actual federal cost as a percentage of estimated federal cost: 121%. 
					
Program/Location: Section 202/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $99,670; 
Estimated federal voucher cost: $67,780; 
Actual federal cost as a percentage of estimated federal cost: 147%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $117,550; 
Estimated federal voucher cost: $109,600; 
Actual federal cost as a percentage of estimated federal cost: 107%. 

Program/Location: Section 202/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $101,520; 
Estimated federal voucher cost: $71,720; 
Actual federal cost as a percentage of estimated federal cost: 142%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $119,650; 
Estimated federal voucher cost: $115,970; 
Actual federal cost as a percentage of estimated federal cost: 103%. 

Program/Location: Section 202/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $85,990; 
Estimated federal voucher cost: $44,190; 
Actual federal cost as a percentage of estimated federal cost: 195%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $101,920; 
Estimated federal voucher cost: $71,450; 
Actual federal cost as a percentage of estimated federal cost: 143%. 
		
Program/Location: Section 811/Nation; 			
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $96,490; 
Estimated federal voucher cost: $71,540; 
Actual federal cost as a percentage of estimated federal cost: 135%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $114,740; 
Estimated federal voucher cost: $115,670; 
Actual federal cost as a percentage of estimated federal cost: 99%. 

Program/Location: Section 811/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $100,280; 
Estimated federal voucher cost: $77,060; 
Actual federal cost as a percentage of estimated federal cost: 130%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $119,770; 
Estimated federal voucher cost: $124,610; 
Actual federal cost as a percentage of estimated federal cost: 96%. 

Program/Location: Section 811/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $83,210; 
Estimated federal voucher cost: $45,430; 
Actual federal cost as a percentage of estimated federal cost: 183%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $96,770; 
Estimated federal voucher cost: $73,450; 
Actual federal cost as a percentage of estimated federal cost: 132%. 

Program/Location: Section 515/Nonmetro[B]; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $73,950; 					
Estimated federal voucher cost: $47,160; 
Actual federal cost as a percentage of estimated federal cost: 157%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $97,300; 
Estimated federal voucher cost: $76,240; 
Actual federal cost as a percentage of estimated federal cost: 128%. 

[A] All of HOPE VI units are located in metropolitan areas. 

[B] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

Table 18: Average Federal Share of 30-Year Total Costs of One-Bedroom 
Units Under Different Rates of Inflation: Housing Production Program 
Costs Compared With Voucher Costs, Adjusted for General Location and 
Tenant Contribution, in 1999 Dollars: 

Program/Location: Tax credits/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $59,090; 
Estimated federal voucher cost: $34,620; 
Actual federal cost as a percentage of estimated federal cost: 171%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $74,400; 
Estimated federal voucher cost: $55,970; 
Actual federal cost as a percentage of estimated federal cost: 133%. 

Program/Location: Tax credits/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $60,050; 
Estimated federal voucher cost: $40,610; 
Actual federal cost as a percentage of estimated federal cost: 148%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $75,330; 
Estimated federal voucher cost: $65,660; 
Actual federal cost as a percentage of estimated federal cost: 115%. 
					
Program/Location: Tax credits/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $49,810; 
Estimated federal voucher cost: $15,700; 
Actual federal cost as a percentage of estimated federal cost: 317%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $62,960; 
Estimated federal voucher cost: $25,390; 
Actual federal cost as a percentage of estimated federal cost: 248%. 

Program/Location: Section 202/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $97,840; 
Estimated federal voucher cost: $68,440; 
Actual federal cost as a percentage of estimated federal cost: 143%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $114,770; 
Estimated federal voucher cost: $110,660; 
Actual federal cost as a percentage of estimated federal cost: 104%. 
	
Program/Location: Section 202/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $99,180; 
Estimated federal voucher cost: $72,580; 
Actual federal cost as a percentage of estimated federal cost: 137%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $116,070; 
Estimated federal voucher cost: $117,360; 
Actual federal cost as a percentage of estimated federal cost: 99%. 

Program/Location: Section 202/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $85,990; 
Estimated federal voucher cost: $44,190; 
Actual federal cost as a percentage of estimated federal cost: 195%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $101,920; 
Estimated federal voucher cost: $71,450; 
Actual federal cost as a percentage of estimated federal cost: 143%. 

Program/Location: Section 811/Nation; 			
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $94,770; 
Estimated federal voucher cost: $72,660; 
Actual federal cost as a percentage of estimated federal cost: 130%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $112,200; 
Estimated federal voucher cost: $117,490; 
Actual federal cost as a percentage of estimated federal cost: 95%. 

Program/Location: Section 811/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $97,790; 
Estimated federal voucher cost: $78,180; 
Actual federal cost as a percentage of estimated federal cost: 125%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $115,960; 
Estimated federal voucher cost: $126,420; 
Actual federal cost as a percentage of estimated federal cost: 92%. 

Program/Location: Section 811/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $82,840; 
Estimated federal voucher cost: $44,980; 
Actual federal cost as a percentage of estimated federal cost: 184%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $96,480; 
Estimated federal voucher cost: $72,730; 
Actual federal cost as a percentage of estimated federal cost: 133%. 

Program/Location: Section 515/Nonmetro[B]; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $71,560; 					
Estimated federal voucher cost: $39,270; 
Actual federal cost as a percentage of estimated federal cost: 182%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $94,200; 
Estimated federal voucher cost: $63,490; 
Actual federal cost as a percentage of estimated federal cost: 148%. 

Note: Due to data limitations, we cannot present HOPE VI cost by 
bedroom size. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

Table 19: Average Federal Share of 30-Year Total Costs of Two-Bedroom 
Units Under Different Rates of Inflation: Housing Production Program 
Costs Compared With Voucher Costs, Adjusted for General Location and 
Tenant Contribution, in 1999 Dollars: 

Program/Location: Tax credits/Nation; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $65,430; 
Estimated federal voucher cost: $42,550; 
Actual federal cost as a percentage of estimated federal cost: 154%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $82,480; 
Estimated federal voucher cost: $68,800; 
Actual federal cost as a percentage of estimated federal cost: 120%. 

Program/Location: Tax credits/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $65,650; 
Estimated federal voucher cost: $50,400; 
Actual federal cost as a percentage of estimated federal cost: 130%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $82,630; 
Estimated federal voucher cost: $81,490; 
Actual federal cost as a percentage of estimated federal cost: 101%. 

Program/Location: Tax credits/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $59,560; 
Estimated federal voucher cost: $25,510; 
Actual federal cost as a percentage of estimated federal cost: 233%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $73,030; 
Estimated federal voucher cost: $41,250; 
Actual federal cost as a percentage of estimated federal cost: 177%. 

Program/Location: Section 811/Nation; 			
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $101,310; 
Estimated federal voucher cost: $85,590; 
Actual federal cost as a percentage of estimated federal cost: 118%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $120,210; 
Estimated federal voucher cost: $138,400; 
Actual federal cost as a percentage of estimated federal cost: 87%. 

Program/Location: Section 811/Metro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $111,160; 
Estimated federal voucher cost: $94,100; 
Actual federal cost as a percentage of estimated federal cost: 118%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $133,380; 
Estimated federal voucher cost: $152,170; 
Actual federal cost as a percentage of estimated federal cost: 88%. 

Program/Location: Section 811/Nonmetro; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $82,340; 
Estimated federal voucher cost: $50,170; 
Actual federal cost as a percentage of estimated federal cost: 164%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $94,680; 
Estimated federal voucher cost: $81,140; 
Actual federal cost as a percentage of estimated federal cost: 117%. 

Program/Location: Section 515/Nonmetro[B]; 
30-year total costs at an inflation rate of 1 percent: 
Actual federal cost: $72,570; 					
Estimated federal voucher cost: $50,530; 
Actual federal cost as a percentage of estimated federal cost: 144%; 
30-year total costs at an inflation rate of 5 percent: 
Actual federal cost: $94,080; 
Estimated federal voucher cost: $81,710; 
Actual federal cost as a percentage of estimated federal cost: 115%. 

Note: Due to data limitation, we cannot present HOPE VI cost by 
bedroom size. Also, Section 202 does not generally develop two-bedroom 
units and, as a result, is not included in the two-bedroom analysis. 

[A] Since Section 515 units are located in rural areas, it is more 
appropriate to compare the costs of Section 515 units in 
nonmetropolitan areas. 

[End of section] 

Appendix III: Evolution of Federal Housing Assistance Programs: 

Federal housing assistance, which began with the enactment of the U.S. 
Housing Act of 1937, involves subsidies to construct new affordable 
housing and to make rents affordable in existing rental housing. From 
1937 through 1974, the emphasis was almost exclusively on new 
construction. Then, with the enactment of Section 8 of the 1937 Act, 
as amended in 1974, tenant-based rental assistance programs assumed 
growing importance. Finally, the Tax Reform Act of 1986 gave renewed 
impetus to new construction, and, over the last decade, the voucher 
and tax credit programs have provided the bulk of the new federal 
housing subsidies. 

The federal government has supported several types of new construction 
programs, starting with public housing. Under this program, authorized 
in 1937, the government financed properties owned and managed by local 
public housing authorities. In 1966, it began contracting with private 
developers to build housing for low-income households in rural areas 
under the Section 515 Rural Rental Assistance program. Other early 
programs, including the Section 202 Elderly and Disabled Housing 
Direct Loan program and the Section 221(d)(3) Below-Market Interest 
Rate (BMIR) program, provided low-interest-rate loans to nonprofit 
organizations and cooperatives. In 1968, the Section 236 program 
succeeded the Section 221(d)(3) BMIR program and encouraged for-profit 
developers to produce affordable housing by subsidizing mortgage 
interest rates. 

Questions about the cost-effectiveness of new construction led the 
Congress to explore options for using existing housing to shelter low-
income families. In 1965, it tested one such option, enacting Section 
23 of the 1937 Act, which authorized public housing authorities to 
lease private unsubsidized apartments for households eligible for 
public housing. In 1974, it added Section 8 to the 1937 Act and 
created the certificate program, the first major program to rely on 
existing privately owned rental housing and to provide tenant-based, 
rather than project-based, assistance. Another type of Section 8 
assistance, the voucher program, started as a demonstration program in 
1983, was made permanent in 1988, and operated simultaneously with the 
certificate program until 1998. At that time, the Congress 
consolidated the two programs into the Housing Choice Voucher Program, 
which combined features of both earlier programs. This program is now 
the largest federal housing assistance program. 

From 1974 to 1986, federal housing policy emphasized the use of 
existing housing over new construction. Then, with the Tax Reform Act 
of 1986, the Congress renewed its commitment to housing production 
while continuing to support tenant-based assistance. The 1986 Act 
substituted tax credits for older incentives to construct low-income 
housing, such as accelerated depreciation. Under the tax credit 
program, approximately 700,000 to 800,000 units have been built. In 
2000, the Congress increased the per-capita allocation of tax credits 
from $1.25 to $1.50 beginning in 2001. In 2002, this allocation is 
scheduled to rise to $1.75, and beginning in 2003, the allocation will 
be adjusted for inflation. The program will likely soon become the 
second largest housing program (after vouchers) for low-income 
households. In large part because of the renewed emphasis on new 
construction through tax credits, the majority of the additional 
recipients of federal housing assistance since 1990 have received 
project-based assistance. 

Other funds for new construction have come through the HOME Investment 
Partnerships Program, enacted in 1990, which awards block grants to 
state and local governments, primarily for the development of 
affordable housing. In addition, the HOPE VI program has provided 
grants since 1993 for local housing authorities to demolish their 
worst properties and replace them with lower density developments. 
Table 20 summarizes the history of federal housing assistance 
programs, including their authorization date and current status. 

Table 20: Multifamily Housing Programs, by Type of Subsidy, in Order 
of Year Authorized: 

Program: Public Housing; 
Type of subsidy: Project-based: Operating subsidy; Grant; Debt-service 
payment; Payment in lieu of taxes; 
Year authorized: 1937; 
Status: No new commitments since 1994 (see HOPE VI); 
Description: Pays for developing, operating, and modernizing projects 
owned by local public housing authorities. Before 1987, funds paid off 
debt service for project development costs over 20 to 40 years. From 
1987 to 1994, development costs have been financed with up-front 
grants. Since 1970, the program has also paid approximately the 
difference between housing authorities' formula-determined cost levels 
and rent 
collections and other receipts.
			
Program: Section 202 Elderly and Disabled Housing Direct Loan Program; 
Type of subsidy: Project-based: Direct loan with below-market interest 
rates; Rental assistance payments; 
Year authorized: 1959 
Status: No new commitments since 1991; 
Description: Provides direct loans at below-market rates for up to 40 
years to finance the construction of rental housing for the elderly 
and disabled. All projects built since 1974 also receive Section 8 
rent subsidies. 
			
Program: Section 221(d)(3) Below-Market Interest Rate; 
Type of subsidy: Project-based: Below-market interest rate loan; 
Mortgage insurance; Rental assistance payments; 
Year authorized: 1961; 
Status: No new commitments since 1968; 
Description: Provides subsidies that reduce to 3 percent the interest 
rate on private 40-year mortgages for multifamily rental housing. 
Tenants in certain units receive rent subsidies.
			
Program: Section 515 Rural Rental Assistance; 
Type of subsidy: Project-based: Direct loan with below-market interest 
rates; Rental assistance payment[A]; 
Year authorized: 1962; 
Status: Active; 
Description: Provides direct loans to developers at a 1-percent 
interest rate. Supplementary rental assistance is provided to 
approximately half of the units through Section 521. Some units also 
receive rental assistance through the Section 8 programs. 

Program: Rent Supplement; 
Type of subsidy: Project-based: Rental assistance payment; 
Year authorized: 1965; 
Status: No new commitments since 1973; 
Description: Provides rental assistance for housing projects insured 
under certain Federal Housing Administration (FHA) mortgage insurance 
programs. Most outstanding commitments under rent supplement programs 
have been converted to Section 8 rental assistance.
		
Program: Section 23 Leased Housing; 
Type of subsidy: Project-based: Lease of privately owned units; 
Year authorized: 1965; 
Status: No new commitments since 1973; 
Description: Local public housing authorities leased acceptable units 
from private landlords and sublet these units to eligible households 
at below-market rents. This program was a precursor of the Section 8 
Existing Housing Certificates program. 

Program: Section 236; 
Type of subsidy: Project-based: Interest rate subsidy; Mortgage 
insurance; Rental assistance payment[A]; 
Year authorized: 1968; 
Status: No new commitments since 1973; 
Description: Provides monthly subsidies that reduce to 1 percent the 
interest rate on private 40-year mortgages for multifamily rental 
projects. Tenants of certain units receive rent subsidies through the 
rental assistance program (RAP). Many units receiving RAP have been 
converted to Section 8 assistance. 

Program: Section 521; 
Type of subsidy: Project-based: Rental assistance payment; 
Year authorized: 1968; 
Status: Active; 
Description: Provides rental assistance payments to owners and 
developers of RHS-financed rental units under Section 515 and farm 
labor housing loans and grants (Section 514/516) on behalf of low-
income tenants.
			
Program: Section 8 New Construction and Substantial Rehabilitation; 
Type of subsidy: Project-based: Rental assistance payment; Tax-exempt 
financing[A]; Mortgage insurance[A]; Below-market interest rate 
loan[A]; 
Year authorized: 1974; 
Status: No new commitments since 1983, except for Section 202 program 
(see above); 
Description: Provides rent subsidies in new or substantially 
rehabilitated projects. Subsidy initially covered the difference 
between tenants' payment and fair market rent, as determined by HUD. 
Subsidy contracts were for 20 to 40 years. Tax incentives and 
financing arrangements also may reduce owners' effective mortgage 
interest rates and project rents. Current restructuring of ongoing 
contracts will result in realignment of subsidy payments.
			
Program: Section 8 Loan Management Set-Aside and Property Disposition; 
Type of subsidy: Project-based: Rental assistance payment; 
Year authorized: 1974; 
Status: No new commitments; 
Description: Provides subsidies to units in financially troubled 
projects in the FHA-insured inventory and on the sale of HUD-owned 
projects, respectively. Subsidies ensure improved cash flows and 
preserve projects for lower income tenants. Subsidies cover the 
difference between tenant payments and unit rents, which often are 
below market rates because of other federal subsidies. 

Program: Section 8 Existing Housing Certificates; 
Type of subsidy: Tenant-based: Rental assistance payment; 
Year authorized: 1974; 
Status: Merged in 1998 with the Section 8 Voucher program; 
Description: Aids low-income households to rent housing units in the 
market. Rent cannot exceed the HUD-established fair market rent for 
the geographical area. HUD pays the difference between the actual unit 
rent and the tenant payment. Administered by local public housing 
authorities, which enter into contracts with landlords. 

Program: Community Development Block Grants; 
Type of subsidy: Project-based: Grant; 
Year authorized: 1974; 
Status: Active; 
Description: Distributes grants to local and state governments by 
formula for community development activities. The Housing and 
Community Development Act of 1974 established this program. 
Rehabilitation and other housing activities now consistently represent 
the largest single use of funds. 

Program: Section 8 Vouchers: 
Type of subsidy: Tenant-based: Rental assistance payment; 
Year authorized: 1983; 
Status: Merged in 1998 with Existing Housing Certificates; 
Description: Similar to the Section 8 Certificate program in that 
assisted households could live in privately owned units and public 
housing authorities administered the program. Unlike the Certificate 
program in that recipients could occupy units whose rents exceeded the 
voucher payment standard—roughly equivalent to the fair market rent—if 
they paid the difference. If rents were below the payment standard, 
households could keep the difference (also known as the "shopper's 
incentive"). 

Program: Low-Income Housing Tax Credits; 
Type of subsidy: Project-based: Tax credit; 
Year authorized: 1986; 
Status: Active; 
Description: The Tax Reform Act of 1986 substituted tax credits for 
existing tax incentives to construct low-income housing, such as 
accelerated depreciation. The maximum tax credit allowed per year is 
about 9 percent of a newly constructed project's development costs, 
less land and certain other costs. Project owners can claim the tax 
credit award annually on their tax returns for 10 years. 

Program: Affordable Housing Program; 
Type of subsidy: Project-based: Grant; Below-market interest rate loan. 
Year authorized: 1989; 
Status: Active; 
Description: Provides grants or reduced-interest-rate loans for the 
production of affordable rental and owner-occupied housing. Program 
was intended to expand the Federal Home Loan Bank system's overall 
involvement in community lending and promote the production of low-
income housing. 		 

Program: Section 202 Supportive Housing for the Elderly; 
Type of subsidy: Project-based: Capital advance (grant); Rental 
assistance payment; 
Year authorized: 1990; 
Status: Active; 
Description: Provides capital advances to finance the construction or 
rehabilitation of rental housing for very-low-income elderly 
households. Capital advances do not have to be repaid as long as the 
housing remains available for occupancy by very-low-income elderly 
households for 40 years. 
			
Program: Section 811 Supportive Housing for Persons with Disabilities; 
Type of subsidy: Project-based: Capital advance (grant); Rental 
assistance payment; 
Year authorized: 1990; 
Status: Active; 
Description: Provides capital advances to finance the construction or 
rehabilitation of rental housing for very-low-income persons with 
disabilities. Capital advances do not have to be repaid as long as the 
housing remains available for occupancy by very-low-income persons 
with disabilities for 40 years.
			
Program: HOME; 
Type of subsidy: Multipurpose (project- and tenant-based): Development 
grant; Rental assistance payment; Homeownership assistance; 
Year authorized: 1990; 
Status: Active; 
Description: Provides formula grants to states and localities. 
Communities use these grants, often in partnership with local 
nonprofit groups, to build, buy, and/or rehabilitate affordable 
housing for rent or homeownership or to provide tenant-based rental 
assistance to low-income households. 
			
Program: HOPE VI; 
Type of subsidy: Project-based: Operating subsidy; Grant; 
Year authorized: 1993; 
Status: Active; 
Description: Provides grants to public housing authorities to 
transform severely distressed public housing sites into economically 
viable communities and to support service programs. 

Program: Housing Choice Voucher Program; 
Type of subsidy: Tenant-based: Rental assistance payment; 
Year authorized: 1998; 
Status: Active; 
Description: Aids low-income households to rent housing units in the 
market. Public housing authorities have discretion to set voucher 
payment standards anywhere between 90 and 110 percent of the local 
fair market rent. HUD pays the difference between the payment standard 
(or, if less, the unit's rent) and the total tenant payment, which is 
usually at least 30 percent of adjusted household income. If the 
unit's rent exceeds the payment standard, the tenant can pay the 
difference, provided that household initial rent burden does not 
exceed 40 percent of adjusted income. 

[A] The subsidy is provided by another housing program. 

Source: GAO adaptation of the analysis in Current Housing Problems and 
Possible Federal Responses, Congressional Budget Office (Dec. 1988). 

[End of table] 

[End of section] 

Appendix IV: Federal Expenditures on Housing Programs: 

An outlay is generally a payment of an obligation incurred, 
representing federal spending for programs at a particular time. In 
fiscal year 1999, the federal government provided housing assistance 
to about 5.2 million renter households at a cost of about $28.7 
billion in budgetary outlays and tax credits. This assistance was 
delivered through both tenant-based and project-based programs. Since 
federal outlays cover expenditures for everything from development to 
rental assistance and since the timing of these outlays varies, using 
federal outlays to compare per-unit costs across programs would be 
misleading. Nevertheless, outlays are useful as indicators of federal 
spending for programs at a particular time. Determining how much the 
federal government spends each year to assist households under a 
particular program is complicated when units or households benefit 
from more than one subsidy. 

Defining Budgetary Outlays: 

An outlay is generally defined as the payment of an obligation 
incurred in a previous year or in the same year. Although outlays 
measure federal spending for programs at a particular time, they do 
not represent, nor were they intended to represent, the total costs of 
housing to all parties, including state and local governments, private 
entities, and assisted households. For assisted housing programs, 
outlays cover the federal costs. More specifically, for housing 
vouchers, outlays cover the cost of the tenant-based rental assistance 
provided to low-income households and the fee paid to local housing 
authorities for administering the program. For housing production 
programs, outlays pay for a broader range of activities that vary by 
program, from the project-based rental assistance provided for the 
Section 8 New Construction and Substantial Rehabilitation program to 
the operating, capital improvement, and debt-service subsidies 
provided for public housing. 

Program Outlays for Fiscal Year 1999: 

Table 21 presents the outlays for housing assistance programs 
administered by HUD and RHS. Also included are the estimated forgone 
taxes for the Low-Income Housing Tax Credit program administered by 
the Internal Revenue Service. The table categorizes these programs as 
inactive or active. Whereas the outlays for inactive programs support 
existing units and do not currently fund the production of any new 
units, the outlays for active programs provide assistance to 
previously built units while continuing to fund new units of 
affordable housing. Within both the inactive and active project-based 
categories, an assisted property can be privately or publicly owned. 
In the case of vouchers, assistance is provided to the tenant. 

Table 21: Federal Outlays for Major Assisted Housing Programs in 
Fiscal Year 1999: 

Inactive: 

Program: Publicly owned, project-based: Public Housing; 
Total units funded as of FY 99: 1,273,500; 
Operating subsidy/Rental assistance (in millions): $3,860[B]; 	
Development/Modernization (in millions): $3,080; 
Total outlays (in millions): $6,940; 
Operating subsidy/Rental assistance per unit[A]: $5,450. 

Program: Privately owned, project-based: Section 8 New 
Construction/Substantial Rehabilitation; 
Total units funded as of FY 99: 643,600; 
Operating subsidy/Rental assistance (in millions): $4,320; 	
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $4,320; 
Operating subsidy/Rental assistance per unit[A]: $6,710. 

Program: Privately owned, project-based: Section 202 Elderly and 
Disabled Housing Direct Loan; 
Total units funded as of FY 99: 207,100; 
Operating subsidy/Rental assistance (in millions): $1,190; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $1,190; 
Operating subsidy/Rental assistance per unit[A]: $5,750. 

Program: Privately owned, project-based: Section 8 Property 
Disposition; 
Total units funded as of FY 99: 60,300; 
Operating subsidy/Rental assistance (in millions): $360; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $360; 
Operating subsidy/Rental assistance per unit[A]: $5,970. 

Program: Privately owned, project-based: Section 8 Loan Management Set-
Aside; 
Total units funded as of FY 99: 409,000; 
Operating subsidy/Rental assistance (in millions): $1,650; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $1,650; 
Operating subsidy/Rental assistance per unit[A]: $4,030; 

Program: Privately owned, project-based: Rent Supplement; 
Total units funded as of FY 99: 20,900; 
Operating subsidy/Rental assistance (in millions): $60; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $60; 
Operating subsidy/Rental assistance per unit[A]: $2,870. 

Program: Privately owned, project-based: Section 236; 
Total units funded as of FY 99: 464,000; 
Operating subsidy/Rental assistance (in millions): $610; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $610; 
Operating subsidy/Rental assistance per unit[A]: $1,310. 

Program: Privately owned, project-based: Section 221(d)(3) Below-
Market Interest Rate[A]; 	
Total units funded as of FY 99: 145,000; 
Operating subsidy/Rental assistance (in millions): [Empty]; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): [Empty]; 
Operating subsidy/Rental assistance per unit[A]: [Empty]. 
		
Active: 

Program: Tenant-based: Section 8 Certificates/Vouchers; 
Total units funded as of FY 99: 1,580,500; 
Operating subsidy/Rental assistance (in millions): $7,010; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $7,010; 
Operating subsidy/Rental assistance per unit[A]: $4,440. 

Program: Publicly owned, project-based: Public Housing: HOPE VI[D]; 
Total units funded as of FY 99: 
Operating subsidy/Rental assistance (in millions): [Empty]; 
Development/Modernization (in millions): $320; 
Total outlays (in millions): $320; 
Operating subsidy/Rental assistance per unit[A]: [Empty]. 

Program: Privately owned, project-based: Section 202 Supportive 
Housing for the Elderly; 
Total units funded as of FY 99: 65,500; 
Operating subsidy/Rental assistance (in millions): $80; 
Development/Modernization (in millions): $500; 
Total outlays (in millions): $580; 
Operating subsidy/Rental assistance per unit[A]: $1,220. 

Program: Privately owned, project-based: Section 811 Supportive 
Housing for Persons With Disabilities; 
Total units funded as of FY 99: 17,800; 
Operating subsidy/Rental assistance (in millions): $20; 
Development/Modernization (in millions): $110; 
Total outlays (in millions): $140; 
Operating subsidy/Rental assistance per unit[A]: $1,120. 

Program: Privately owned, project-based: Section 515 Rural Housing 
Rental Assistance; 
Total units funded as of FY 99: 484,700; 
Operating subsidy/Rental assistance (in millions): [Empty]; 
Development/Modernization (in millions): $90; 
Total outlays (in millions): $90; 
Operating subsidy/Rental assistance per unit[A]: [Empty]. 

Program: Privately owned, project-based: Section 521; 
Total units funded as of FY 99: 264,700; 
Operating subsidy/Rental assistance (in millions): $560; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $560; 
Operating subsidy/Rental assistance per unit[A]: $2,120. 

Program: Privately owned, project-based: Low-Income Housing Tax 
Credits[E]; 
Total units funded as of FY 99: 700,000; 
Operating subsidy/Rental assistance (in millions): [Empty]; 
Development/Modernization (in millions): $3,500; 
Total outlays (in millions): $3,500; 
Operating subsidy/Rental assistance per unit[A]: [Empty]. 

Program: Multipurpose: HOME Investment Partnerships Program[F]; 
Total units funded as of FY 99: 
Operating subsidy/Rental assistance (in millions): [Empty]; 
Development/Modernization (in millions): [Empty]; 
Total outlays (in millions): $1,350; 
Operating subsidy/Rental assistance per unit[A]: [Empty]. 

Program: Total; 
Total units funded as of FY 99: 5,247,300[G]; 
Operating subsidy/Rental assistance (in millions): $19,710; 
Development/Modernization (in millions): $8,950; 
Total outlays (in millions): $28,670. 

Note: Figures may not add due to rounding. 

[A] Per-unit calculations cannot be done for outlays used to construct 
new units because outlays for one particular year do not correspond to 
the number of units actually placed in service that year. Only rental 
assistance is included in the per-unit cost estimates, with the 
exception of Public Housing (see note b). 

[B] Outlays for operating expenses include $2.9 billion in operating 
subsidies, $705 million in annual debt service payments on the costs 
of developments constructed before 1974, and $283 million for the Drug 
Elimination program. The outlay per unit for public housing's 
operating subsidy is $2,260. Outlays for development and modernization 
under HOPE VI are broken out separately from those for Public
Housing. 

[C] Interest rate subsidies were made at closing and accordingly would 
not be reflected in 1999 outlays. 

[D] As of 2000, the HOPE VI program had demolished over 30,000 units 
and constructed over 7,000 units of public housing units. 

[E] Since there is no official estimate of the number of units 
developed under the Low-Income Housing Tax Credit program, we relied 
primarily on estimates from HUD's National Low-Income Housing Tax 
Credit database. 

[F] Because reliable data were not readily available, this table 
excludes substantial numbers of commitments made through the HOME 
Investment Partnerships Program. In addition, HOME funds can be used 
for tenant-based assistance or assistance to new homebuyers. These 
funds can also be used for acquisition, rehabilitation, or in limited 
circumstances, construction of both rental and owner-occupied housing. 

[G] The total number of units is adjusted to account for cases in 
which one particular unit may be receiving subsidies from two 
different programs. For instance, approximately 40 percent of tax 
credit units receive Section 8 project-based or tenant-based 
assistance. 

Source: GAO analysis of agency data. Forgone taxes resulting from the 
Low-Income Housing Tax Credit program are from Estimates of Federal 
Tax Expenditures for Fiscal Years 1999-2005, prepared by the Joint 
Committee on Taxation for the House Committee on Ways and Means and 
the Senate Committee on Finance. 

[End of table] 

Overall, rental assistance accounted for nearly $15.9 billion of the 
$28.7 billion in federal outlays and tax credits for the major housing 
assistance programs in fiscal year 1999. Operating and other related 
subsidies for public housing cost another $3.9 billion. The remaining 
$9 billion covered $3.1 billion for public housing capital and 
management improvement efforts, $3.5 billion in forgone tax revenue 
for the development of affordable housing under the tax credit 
program,[Footnote 48] and $2.4 billion in subsidies for the 
development of affordable housing under the other active housing 
programs. In other words, nearly 70 percent of the 1999 federal 
expenditures provided for rental assistance of existing units, and the 
remainder was used to develop additional units of affordable housing. 

Problems With Comparing Program Outlays: 

Because the annual federal per-unit outlays for different housing 
programs often cover different housing costs, they should not be used 
to compare subsidy costs across programs. For example, the annual 
federal per-unit outlays for housing vouchers cover all of the 
government's costs. By contrast, the annual outlays for the housing 
production programs often do not include all of the subsidy costs. 
Specifically, they may not include—nor were they intended to include—
the up-front development costs paid in previous years when properties 
were built; the indirect costs of forgone taxes to federal, state, or 
local entities; or the costs of funding capital replacement reserves.
Computing the costs of federal housing assistance programs is further 
complicated when subsidies overlap—-that is, when rental assistance is 
combined with development subsidies to make units affordable for very--
low-income households, both in older and in newly developed 
properties. We estimate that about 1.1 million households receive 
overlapping subsidies. Specifically, we estimate that about 85 percent 
of the units that received interest rate subsidies under the Section 
236 program also receive Section 8 project-based assistance. In 
addition, according to our September 1999 estimate,[Footnote 49] about 
10 to 14 percent of the households in tax credit units also receive 
tenant-based housing vouchers. To the extent that rental assistance 
lowers the costs of serving households in Section 236 and tax credit 
units, the average annual per-unit outlays understate federal 
expenditures for those units. 

[End of section] 

Appendix V: Comments From the Department of Housing and Urban 
Development: 

Note: GAO comments supplementing those in the report text appear at 
the end of this appendix. 

U.S. Department Of Housing And Urban Development: 
Office Of The Assistant Secretary: 
For Policy Development and Research: 
Washington, D.C. 20410-6000: 

January 10, 2002: 

Mr. Stanley J. Czerwinski: 
Director, Physical Infrastructure: 
General Accounting Office: 
Washington, DC 20548: 

Dear Mr. Czerwinski: 

This is in response to your letter of December 20, 2001 to Secretary 
Martinez concerning the GAO report, "Federal Housing Assistance: 
Production Programs Cost More Than Vouchers but Respond to Broader 
Objectives." Thank you for the opportunity to review and comment on 
this draft report. 

The draft report addresses a critical question: what are the relative 
costs of the different Federal rental housing subsidy programs? As 
these programs are administered by multiple Federal agencies and, in 
the case of the tax credit program, by state agencies as well, the 
process of gathering data for this report was quite challenging. GAO 
is to be commended for its hard work in pulling together the various 
data sources needed for this important analysis. 

Although the draft final report contains much useful information, it 
has a number of serious limitations that should be addressed before 
the report is finalized. In its present form, it does not provide all 
of the information on costs that policymakers need to make informed 
decisions regarding the nation's low-income housing programs. 

1. Federal Costs to Serve Households of Similar Incomes and Size: 

From the perspective of Federal policymakers, the most important 
housing cost question is the following: how much does it cost the 
Federal government to provide housing to a particular household 
through each of the various housing programs? To answer this question, 
it is essential to control for household income, as families with 
higher incomes require less of a subsidy to ensure that they can 
afford their housing costs. It is also important to control for unit 
size, as construction costs and rents tend to vary by unit size. 

Although the report recognizes and addresses the need for adjustments 
for unit size — though see below our comments on this issue — it falls 
short on the critical issue of adjustments for income. The report 
devotes only two paragraphs (on page 21) to discussing Federal costs 
as adjusted for income. These paragraphs contain examples of how 
voucher costs compare to the costs of selected production programs 
after adjusting for income, but do not provide data for all programs. 
[Footnote 1] Moreover, data are provided only for one-bedroom units, 
and not for two-bedroom units or larger units. Finally, in contrast 
with earlier sections, there are no graphics displaying this 
information. 

Given the central importance of this issue, these omissions should be 
corrected in the body of the report. The information is too important 
to be relegated to an appendix. 

Recommendations: [See comment 1] 

* The section of the report on Federal costs, as adjusted for income, 
should be expanded to provide data on each program, for both one- and 
two-bedroom units.[Footnote 2] 

* As it does for the other comparisons presented in the report, the 
report should include graphics displaying the results of this 
comparison. 

* In view of the fundamental importance of this issue for Federal 
policymakers, GAO should consider moving this discussion up to an 
earlier section of the report. 

2. Total Federal, State, and Local Government Costs, as adjusted for 
income: 

Another valid way to ask the question addressed in the prior point is 
as follows: what is the total Federal, state and local government cost 
to provide housing to a particular household through each of the 
various housing programs? This approach differs from that of the prior 
point in that it includes State and local government costs as well as 
Federal costs. Given the trend towards shared responsibility for 
social welfare programs across Federal, State and local governments, 
this approach is increasingly relevant to policy decisions.
Although the report does include a brief discussion of non-Federal and 
non-tenant costs, it does not include a comparison of total government 
costs, as adjusted for income. 

Recommendation: [See comment 2] 

* Add a discussion, table and graphic, comparing the total government 
costs for each program, as adjusted for income and unit size. 

* Note within this discussion the fact that the data on the costs of 
the production programs do not include many of the administrative 
costs of these programs — for example, the costs to states of 
administering the low-income housing tax credit program. By contrast, 
the full administrative costs of vouchers are captured. 

3. The Projected Cost of Production Programs: 

One important issue that should be discussed at some length in the 
body of the report is the likelihood that the report systematically 
underestimates the lifetime costs of production programs. This occurs 
because the report assumes that the total costs for the production 
programs over 30 years is equal to the amounts projected at the outset 
for the programs, with no additional infusion of subsidy. This 
assumption runs counter to the history of Federal production programs. 

The history of prior production efforts indicates that substantial 
amounts of additional subsidies have generally been added within the 
first 5, 10, or 15 years after these programs were initiated. For 
example, project-based Section 8 and Flexible Subsidies were provided 
to many properties initially funded with subsidized mortgages under 
the Section 236 and Section 221(d)(3) BMIR programs. A more recent 
example of a later subsidy being added to an earlier production 
program is reflected in GAO's earlier finding that about 27 percent of 
units provided with a low-income housing tax credit (LIHTC) between 
1992 and 1994 also had project-based Section 8 subsidies. Still 
another example is the Mark-up-to-Market program that is increasing 
compensation to owners of Section 8 project-based developments as 
their initial 15-20 year contracts expire. Looking forward, it is 
quite likely that current LIHTC projects will seek additional 
subsidies once their initial 15-year compliance period expires. 
[Footnote 3] 

Despite the inclusion by HUD of a comment to this effect on the 
interim report, the final report does not address this issue in a 
satisfactory fashion. HUD recognizes that there are a number of 
different ways to adjust the cost estimates to reflect the likelihood
that additional subsidies will be provided, raising the costs of 
production programs relative to vouchers. For example: 

* The approach suggested in HUD's comments on the interim report was 
to provide cost estimates over a shorter time period such as 15 years, 
in addition to the 30-year estimates. This models the eventuality that 
additional subsidies are provided within the initial 15-year period 
such that it is no longer accurate to assume that the initial costs 
are amortized over a 30-year period. The 15-year model also has the 
advantage of reducing the uncertainties associated with extrapolating 
from a limited sample of properties and averaging development costs. 
[Footnote 4] The longer one looks into the future, the more one 
compounds initial estimation errors. A 15-year estimate would involve 
less compounded error than a 30-year estimate. 

* Another approach would be to retain the 30-year time frame but model 
the infusion of additional funds for production programs through other 
means, such as by substantially increasing contributions to a reserve. 
The current draft includes in an appendix a "worst-case" estimate for 
understating the costs of production programs by assuming that 
properties receive a full property tax abatement and provide no 
funding to reserves estimated to be $600 per unit/per year. This may 
not be a worst case estimate at all, as recent HUD studies on public 
housing and on FHA-insured rental housing suggest that annual accruals 
of capital needs may be as high as $1,100 to $1,700 per year.[Footnote 
5] 

This suggests that if one is looking to get a better handle on the 
upper bound of likely production costs, it may be necessary to model 
much larger contributions to reserves than $600 per unit per year. One 
approach would be to look at the costs assuming $1,000 per unit per 
year. Any range of accrual estimates is subject to considerable 
uncertainty, but a higher range would have a significant cost impact. 
Accrual need is only one of the types of uncertainties associated with 
doing projections 30 years into the future. 

Recommendation: [See comment 3] 

* Add to the body of the report a section discussing the history of 
additional infusions of subsidy into Federal production programs. This 
discussion should note that, if this practice is followed with respect 
to the current production programs, the costs over 30 years will be 
substantially higher than projected in this report. 

* Develop additional cost estimates that model the cost relationship 
among the housing programs assuming the historical pattern is followed 
and additional funds are made available for the production programs. 
As noted above, this can be done in a number of different ways, 
including through a 15-year cost comparison and/or through the 
modeling of larger contributions for capital needs. A discussion of 
the results of this analysis should be included in the body of the 
report. 

4. Adjustments for Unit Size: 

One feature of the interim GAO report on costs that was quite helpful 
was the use of a single cost figure for comparing costs across 
programs. This cost figure adjusted for variations in the unit mix of 
the different programs, as well as for tenant income. 

The final report, by contrast, takes a very different approach. In 
addition to omitting a table adjusting for tenant income — see above — 
the body of the report does not include a discussion of costs as 
adjusted for unit size. (These data are included in Table 5 in 
Appendix I, but not given any prominence in the report.) Instead, 
except with respect to HOPE VI, the report provides costs separately 
for one-bedroom and two-bedroom units. 

The approach of providing costs separately for different bedroom 
sizes — if done accurately—has some advantages. Specifically, it can 
flag any differences in the cost relationships at different unit 
sizes. One problem, however, is that the report does not include a 
discussion of the costs of providing housing larger than two bedrooms. 
This is a significant omission given the housing problems of larger 
families, In addition, it appears that GAO has averaged development 
costs across all units for the production programs, making it quite 
difficult to break out costs by bedroom size. This suggests that a 
single unit-weighted cost figure may be more accurate. 

To address these issues, HUD has the following recommendations: 

Recommendations: [See comment 4] 

* In addition to providing cost comparisons for particular unit sizes 
in the report, provide a comparison that adjusts for unit size taking 
all available data into account. With respect to total costs, these 
data already appear in Table 5 of Appendix I, so it should not be 
difficult to include a discussion of these data in the report. 

It would also be useful to provide such a comparison that also adjusts 
for income. These data are not yet in the final report (though they 
were in the interim report). 

* Discuss the results of the cost comparisons for unit sizes greater 
than two-bedrooms. 

5. Program Characteristics Other than Cost: 

The subtitle of the draft report, "Production Programs Cost More Than 
Vouchers but Respond to Broader Objectives," implies that the report 
will be comparing Federal housing programs with respect to both cost 
and other objectives. The report itself, however, focuses primarily on 
cost issues. While some of the "broader objectives" of production 
programs are described on page 4 — to quote: "[production programs] can
directly increase the supply of affordable housing, accommodate 
special needs, or revitalize distressed communities." — the report 
does not actually assess whether production programs do a good job at 
responding to these broader objectives. Nor does it address in a 
thorough way the benefits of housing vouchers beyond cost savings. 
(The same point applies to page 23, where assertions are made about 
the relative benefits of vouchers and production programs, without a 
thorough supporting analysis.) 

This is not so much a weakness in the report as a weakness in the 
title and the expectations it creates, and in some of the language 
used to discussed differences among the programs. Given the difficulty 
of accurately comparing costs across programs, it is sensible to focus 
on this issue and leave a detailed investigation of the different 
objectives served by the various programs to another report. Rather 
than implying that the report assesses the extent to which the 
different programs meet non-cost objectives, the report would be 
better off modifying the title and text to clarify that the discussion 
of non-cost issues reflects only assertions or assumptions about the 
potential benefits of different programs. 

To the extent that a discussion of the different objectives of the 
various housing programs is maintained, it would be useful to present 
this discussion in a non-comparative context. In other words, rather 
than concluding (without any real proof) that production programs 
respond to "broader" objectives than the voucher program, it would be 
preferable to state that the various programs have the potential to 
accomplish different objectives. 

For example, in addition to simply putting a roof over families' 
heads, the voucher program has the potential to: 

* Expand the housing options of low-income families by allowing them 
to move and keep their subsidy. For example, families can use their 
vouchers to move closer to the location of a prospective job. 

* Adapt to changing housing needs over time through the flexibility to 
attach vouchers to specific developments or to use vouchers for 
homeownership. 

* Provide housing to a wide range of different family types and sizes 
and accommodate changes in the composition of housing programs that 
result from changes in local admissions preferences. 

* Help to reduce the rent burdens of households that rent in place, 
including elderly households and persons with disabilities who may not 
wish to move. 

* Leverage modest improvements to the housing stock by providing an 
incentive for landlords to fix up their apartments to meet housing 
quality standards. 

Production programs, as the report briefly notes, have the potential 
to achieve other objectives, such as the following: 

* Provide housing opportunities suitable to the needs of special 
populations, such as the elderly and disabled. 

* Facilitate the provision of place-based supportive services to 
populations of low-income families with particular needs; 

* Address the needs of larger families, who may have difficulty 
finding large rental units in the private market. 

* Address severe systemic local shortages of supply of multifamily 
housing. 

* Contribute to community revitalization efforts. 

Neither set of objectives is necessarily broader than the other. They 
are simply different. 

Recommendations: [See comment 5] 

* While a section discussing the different objectives that could be 
served by various production and voucher programs is appropriate, it 
should be presented in a non-comparative context. There is no basis in 
the report to conclude that production programs respond to "broader" 
objectives than the voucher program. They are simply different 
objectives. 

* Include a more robust discussion of the non-cost benefits of the 
voucher program, including the points listed above. 

In addition to the points discussed above, more specific comments are 
provided as an enclosure to this letter. 

Thank you for considering our comments in preparing the final report 
on this important subject. 

Sincerely, 

Signed by: 

Lawrence L. Thompson: 
General Deputy Assistant Secretary for Policy Development and Research: 

Enclosure: 

Footnotes: 

[1] A sentence on page 21 states that "Table 5 in Appendix 1 presents 
the 30-year Federal costs for each of the production programs, for 
both one- and two-bedroom units." We assume this reference is to 
Tables 9 and 10, rather than Table 5. Even so, these Tables do not 
appear to control for income. 

[2] As noted in point four, below, it would also be useful to produce 
a single unit-adjusted figure. 

[3] Even if the owners do not come forward and request additional tax 
credits or funds, there may be a need to infuse additional funds into 
LIHTC projects simply to maintain the project in satisfactory 
condition. Once the investor has taken all of the tax credits (10 
years) and the tax credits are no longer subject to recapture (15 
years), some investors may choose to increase short-term returns at 
the expense of long-term sustainability by, for example, foregoing 
maintenance or seeking ways to opt out of the program's 30-year 
extended use requirement. 

[4] For Vouchers, the data on rents and tenant incomes come from the 
full universe of 1,580 million units. National level data on LIHTC 
properties comes from a sample of properties placed in service between 
1992 and 1994 used for a 1997 GAO study supplemented by a larger 
private sample of LIHTC properties funded between 1987 and 1996. 
Together, this represents a substantial number of LIHTC properties 
although costs had to be extrapolated to 1999. 

However, the numbers of units and properties for the remaining 
programs are very small and generally reflect only one year of 
funding; the number of units Section 515 was only 1,250 placed in 
service in 1998. The small size of the universes and using an average 
development subsidy rather than adjusting for bedroom size can result 
some very anomalous findings. For example, the first-year or 30-year 
costs of one-bedroom and two-bedroom Section 515 units are essentially 
the same: $6,930 as compared to $7,010 and $125,520 as compared to 
$125,810, respectively (page 39). 

Projecting total costs 30 years into the future or even annualizing 
development costs over such a long period given the small number of 
properties used is fraught with uncertainty. GAO might consider using 
properties from several years, but this would take considerable time 
and given its cited limitations on the availability of data fraught 
with its own extrapolation issues. Adding a cost comparison over a 
shorter time frame is simpler and provides another way of looking at 
costs among programs. 

[5] The "Capital Needs of the Public Housing Stock in 1998" study 
concludes that the average annual accrual per unit for existing public 
housing is almost $1,700 on a present value basis. The "Status of HUD 
Insured (or Held) Multifamily Rental Housing in 1995" study concludes 
that average annual accrual per unit for existing HUD insured units is 
about $1,100 on a present value basis. 

Comments From the Department of Housing and Urban Development: 
The following are GAO's comments on the Department of Housing and 
Urban Development's letter dated January 10, 2002. 

1. As suggested in HUD's comments, we have expanded the discussion of 
federal costs in the letter and included figures 10 and 11 on the 
differences in the federal costs of production programs and vouchers 
for one-bedroom units. Detailed data on federal costs are still 
included in appendix I. 

2. Contributions from state and local sources are generally a small 
share of the 30-year total costs of housing programs. Nonetheless, 
given the emphasis placed on leveraging nonfederal funding by many of 
the programs, we have incorporated a brief discussion of the total 
government costs of the various housing programs, as suggested in 
HUD's comments. We have revised the draft to clarify that the 
administrative costs of the production programs are not fully 
accounted for because of data limitations. 

3. We recognize in our report that if current set-asides for future 
capital improvements were insufficient, our estimates of total costs 
will be accordingly understated. To address the issue of underfunded 
capital reserves, we revised the draft to include two additional 
scenarios evaluating the possible impact of shortfalls above and below 
our initial base estimate. We find that over 30 years, these 
shortfalls make up a small part of the average total costs.
HUD also comments that the history of federal housing programs 
indicates that additional subsidies are often required within the 
first 15 years to maintain the physical and financial viability of 
subsidized properties. We have revised the draft to include a note 
citing two studies prepared for HUD that estimate the capital needs of 
public housing and FHA-insured properties. However, the extent to 
which the experience of the older programs reviewed in these HUD 
studies is a good predictor of the future requirements of newer 
programs, such as tax credits, Section 202, or Section 811, is simply 
not known. For this reason, we refer to the importance of having 
current data on the financial condition of these properties.
We disagree with HUD's suggestion that we shorten our cost period to 
15 years because, in general, development subsidies buy more than 15 
years of affordable housing. 

4. We focused on one- and two-bedroom units because the large majority 
of units (over 75 percent) developed under the production programs 
(except HOPE VI) have either one or two bedrooms. Nonetheless, we 
revised the draft to include cost estimates for three-bedroom units 
for the tax credit and voucher programs—both of which had sufficient 
data for this analysis. As noted in this report, data for three-
bedroom units were not available for the other programs. 

Single unit-weighted cost figures were presented in our interim report 
(July 18, 2001) and are also presented in appendix I. We believe that 
our cost estimates in this report control for differences in unit size 
more rigorously than the single unit-weighted estimates. HUD states 
that we averaged total development costs evenly across units of 
different sizes, thereby reducing the accuracy of our cost estimates 
in the letter. In reality, we averaged total development subsidies 
across all units. For tax credits and Section 515, total development 
subsidies are less than total development costs, which means that the 
unsubsidized portion of total development costs is captured in the 
rents, which account for about 70 percent of the 30-year total cost 
estimates. In the case of grant programs, such as Section 202 and 
Section 811, the total development cost is completely subsidized. 
However, these two programs tend to develop properties that comprise 
units with the same number of bedrooms. 

5. We agree that vouchers also respond to objectives other than 
providing affordable housing. We have revised the draft to include a 
discussion of these benefits and changed the title of this report so 
as not to imply that we have assessed how well production programs 
meet their stated objectives. 

[End of section] 

Appendix VI: Comments From the U.S. Department of Agriculture: 

Note: The GAO comment supplementing those in the report text appears 
at the end of this appendix. 

USDA: 
United States Department of Agriculture: 
Rural Development: 
Rural Business—Cooperative Service: 
Rural Housing Service: 
Rural Utilities Service: 
Washington, DC 20250: 

January 14, 2002: 

To: Stanley J. Czerwinski: 
Director, Physical Infrastructure: 
United States General Accounting Office: 

Through: [Signed by] Sherie Hinton Henry: 
Director: 
Financial Management Division: 

From: [Signed by] Michael E. Neruda: 
Deputy Under Secretary: 
Rural Development: 

Subject: United States General Accounting Office Draft Report, GAO-02-
76, Federal Housing Assistance: Production Programs Cost More Than 
Vouchers but Respond to Broader Objectives: 

We appreciate the opportunity to provide comments on the draft report, 
Federal Housing Assistance: Production Programs Cost More Than 
Vouchers but Respond to Broader Objectives. We believe the overall 
report fairly compares the federal multi-family housing production 
programs with vouchers. Our comments on specifics in the report are as 
follows: 

The title of the report accurately reflects one of the major problems 
of comparing only the costs of the different programs and not the 
objectives. Vouchers can be a less expensive method of housing low- 
and very low-income households. However, vouchers do not produce 
rental housing where there is no rental housing. Many rural 
communities do not have existing rental housing available for use by 
voucher holders. Nor do vouchers ensure that non-federally assisted 
housing available for use by voucher holders is maintained for long 
term use by low- and very low-income households. Production programs 
such as the Rural Housing Services (RHS) Section 515 programs are used 
to increase the number of available units. Properties built with 
Section 515 funds are subject to statutory restrictions that require 
that the rental units be maintained for use by eligible tenants. 
Additionally, through RHS's oversight of portfolio properties, the 
physical condition of the multi-family units is maintained for the 
life of the loan. 

We appreciate the recognition that the RHS Section 515 Rural Rental 
Housing Program as one of the most efficient federal production 
programs in operation. The report accurately states that development 
subsidies for the Section 515 program are lower than all other federal 
production programs with the exception of the low income housing tax 
credit program. As a reflection of efforts to reduce the government's 
share of the costs, tenants pay a greater portion of their incomes 
toward total rent under the Section 515 program than all other 
production programs except the tax credit program, but are still 
paying rents less than market. First and 30 year costs for the program 
are shown to be generally lower than all other programs except 
vouchers. The report reflects the lower cost of housing in non metro 
as compared to metro areas. Finally, the report shows that RHS has 
been successful in obtaining significant partnering from other sources 
to cover the costs of development of the rental properties produced 
under the program. 

We agree with the statement that further research on the adequacy of 
production programs' capital replacement reserves would put the 
federal government in a better position to manage long-term cost 
risks. Rural Development is considering a portfolio review to 
determine the adequacy of replacement reserves compared with the 
properties' long-term maintenance needs. 

The statement concerning the need for cooperation and coordination 
across federal agencies to establish standards for collecting data on 
housing programs is accurate. Often property owners are required to 
report to several different federal and state agencies concerning the 
operation of their properties and the eligibility of the tenants. A 
standardized reporting format would greatly reduce the complexity and 
cost of compliance for owners, property managers and government 
agencies. 

A final comment is to point out a possible error in Figure 9 on page 
20 of the report. The figure shows the average annual income of 
households served under the Section 515 program as being $8,760. The 
average adjusted annual income for Section 515 households reported in 
our January 2001 survey of all occupied units was $7,913, a 
significantly lower figure than shown in the figure. [See comment] 

Again, we appreciate the opportunity to provide you with our comments 
on the report. 

The following is GAO's comment on the Department of Agriculture's 
letter dated January 14, 2002. 

GAO Comment: 

We are retaining the estimated annual average income that appeared in 
the draft report since it is based on data for fiscal year 1998, the 
year for which we collected cost data from RHS. 

[End of section] 

Appendix VII: Comments From the National Council of State Housing 
Agencies: 

Note: GAO comments supplementing those in the report text appears at 
the end of this appendix. 

National Council of State Housing Agencies: 
444 North Capitol Street, NW, Suite 438: 
Washington, DC 20001: 
(202) 624-7710: 
Fax: (202)624-5899: 
[hyperlink, http://www.ncsha.org] 

January 11, 2002: 

Mr. Stanley J. Czerwinski: 
Director: 
Physical Infrastructure Issues: 
U.S. General Accounting Office: 
441 G Street, NW: 
Room 2T23: 
Washington, DC 20548: 

Dear Mr. Czerwinski: 

On behalf of the nation's state Housing Finance Agencies (HFAs), the 
National Council of State Housing Agencies (NCSHA) is grateful for the 
opportunity to comment on the General Accounting Office's (GAO) draft 
report: Federal Housing Assistance: Production Programs Cost More Than 
Vouchers but Respond to Broader Objectives. NCSHA's member agencies 
administer the Low Income Housing Tax Credit (Housing Credit) in all 
states, Section 8 tenant- and project-based assistance in 42 states, 
and the HOME Investment Partnerships program in 39 states. 

We respect Congress' interest in understanding the costs associated 
with various federal housing programs. However, we seriously question 
whether any useful conclusions can be drawn from comparing the costs 
of production programs with those of tenant assistance programs given 
that these programs have entirely different objectives and cannot 
substitute for one another. And, though we appreciate GAO's efforts in 
preparing this report, we must strenuously disagree both with its 
methodology and findings. GAO's analysis fails to consider adequately 
qualitative differences between newly produced housing and voucher-
assisted housing and to recognize several critical cost factors 
associated with each. For these reasons, unless GAO significantly 
revises its report to take our concerns into account, NCSHA will 
strongly urge Congress to disregard GAO's findings. 

For purposes of developing the detailed analysis which follows, we 
have focused on the differences between voucher-assisted housing and 
housing produced with the Housing Credit, currently the largest 
producer of affordable rental housing and the production program with 
which we are most familiar. 

The Nation's Affordable Housing Shortage Requires a Supply Response: 

We are deeply disappointed that the report does not deal in greater 
depth with the nation's severe affordable housing shortage as context 
for its discussion of the value of housing production programs. 
Production programs like the Housing Credit deliver new affordable 
housing where it is desperately needed and would not otherwise be 
produced. 

As HUD reported in January 2001, "by 1999, for every 100 renter 
households with incomes below 30 percent of area median income (AMI), 
there were only 40 units both affordable to and available for rent by 
them, well below the 47 units per 100 households observed in 1991." 
[Footnote 1] The same report concluded that the number of units 
affordable to renters with extremely low incomes dropped by 750,000 
and the total number of units affordable to renters with very low 
incomes fell by 1.14 million between 1997 and 1999. The Joint Center 
for Housing Studies of Harvard University found that "With 4.5 million 
unsubsidized renters earning less than 30 percent of the area median 
income, the shortfall in affordable housing for the very poorest now 
stands at 3.3 million units. These numbers in fact understate the 
shortage because higher-income households occupy 65 percent of the 
units affordable to extremely low-income households."[Footnote 2] 

Although GAO's report describes the history of federal housing 
programs, it does not draw the clear, important inference that 
Congress authorized and funded these programs to address unique needs 
and never intended them to substitute for one another. In fact, 
Congress intended many of these programs to work together to solve 
different housing problems. Yet, the report fails to recognize the 
frequency with which tenant assistance is combined with the Housing 
Credit and other production programs to deliver both the housing and 
more affordable rents. 

Comparing the Cost of Tenant Assistance with Housing Production Is Not 
Useful: 

Comparing the cost of tenant assistance to the cost of Housing Credit 
and other housing production programs is like comparing the cost of a 
screwdriver to that of a hammer. The screwdriver may cost more than 
the hammer, but so what if only the screwdriver can do the job. The 
Housing Credit and other production programs are designed to produce 
affordable housing where it is most needed and otherwise would not be 
built. Tenant assistance programs are designed to make existing 
housing more affordable to low income families. Yet, GAO, in drawing 
cost comparisons between newly produced and voucher-assisted housing 
fails to compare adequately the different goals and benefits of these 
programs. 

GAO's Cost-Comparison Analysis is Flawed and Incomplete: 

Though we question the usefulness of comparing the costs of tenant 
assistance and production programs and believe it is dangerous to draw 
conclusions from that comparison about the programs' cost-
effectiveness, we understand that Congress asked GAO to undertake this 
analysis. The remainder of our comment concerns the fault we find with 
GAO's analysis. 

GAO Fails to Adequately Account for Differences in Housing Quality: 

Although GAO acknowledges that Congress asked it to take into account 
qualitative differences between housing programs, GAO focused instead 
on the differences in housing characteristics, such as the number of 
apartments per project and bedrooms per apartment, not housing 
quality. Cost-effectiveness cannot be established without comparing 
the quality of new housing produced by the Housing Credit and other 
programs to that of the generally much older housing occupied by 
voucher-holders. 

* The Housing Credit produces new, high quality apartments. The 
Housing Credit creates new, high quality apartments, constructed in 
accordance with stringent federal, state, and local standards. In 
contrast, the average age of a voucher-assisted apartment is 35 years, 
and in some areas, nearly twice that. Many voucher-assisted apartments 
were built or last renovated, if renovated at all, before the 
imposition of energy efficiency, lead paint, and other design and 
safety standards. Yet, the report draws no inferences from the age of 
voucher-assisted units and does not consider the cost of maintaining 
and upgrading older apartments to meet modern standards or the 
implications of not doing so. [See comment 1] 

* Housing Credit properties provide amenities and services. Resident 
services and amenities common to Housing Credit properties, such as 
recreational space, childcare, and job-training facilities, are most 
often not found in voucher-assisted housing. Housing Credit properties 
also frequently offer on-site supportive services to families, 
elderly, and other special needs households who otherwise would have 
limited access to such services in voucher-assisted properties. 

* Housing Credits build housing in difficult-to-develop, often inner 
city, markets. Housing Credits make affordable housing production 
possible in neighborhoods where despite the need, developers otherwise 
would not build because of the added costs associated with demolition 
and site clearance, environmental remediation, and tenant relocation. 
The report makes no attempt to isolate or quantify these additional 
costs or the resulting benefit—affordable housing in neighborhoods 
which otherwise would not have it. 

* Production programs like the Housing Credit must comply with 
stringent federal regulations. Housing Credit properties must meet 
more stringent physical accessibility, environmental review, and other 
regulatory requirements than existing private housing. Compliance with 
these and other state and local regulations increases development 
costs. The report does not adequately recognize these costs or the 
associated benefits. 

* Housing Credits build communities, not just housing. Housing Credit 
properties are often anchors for the revitalization of whole low 
income communities. Vouchers simply do not have that impact on low 
income neighborhoods. While the benefits of Housing Credit housing to 
the broader community may be difficult to quantify, the report should 
at least acknowledge them. [See comment 2] 

GAO Fails to Account Adequately for Critical Cost Factors: 

GAO further compromises its analysis by failing to account adequately 
for certain cost savings associated with production programs, 
including longer affordability periods and slower rent increases. In 
doing so, it invalidates its conclusion that production programs cost 
more than vouchers. We believe if GAO considered these cost savings, 
it would find that the cost differences between Housing Credits and 
vouchers would be minor or nonexistent. 

* Production programs typically provide affordability for more than 30 
years. The report uses a minimum useful life of 30 years to compare 
costs of vouchers and production programs. This understates the cost 
of voucher-assisted housing and inflates the cost of production 
programs. After all, the GAO itself in its 1997 report on the Housing 
Credit program found that more than two-thirds of states require 
affordability of Housing Credit properties for periods well beyond 30 
years, and several states require a minimum of 55 years or more. 

The report acknowledges that longer affordability periods reduce 
program costs compared to vouchers, because the same finite subsidy 
purchases a longer benefit for the low income residents. Vouchers 
ensure affordability only as long as annual appropriations continue to 
renew them and housing exists in which to use them. GAO should have 
evaluated the cost of the Housing Credit over a more typical 
affordability period—or at least have shown the sensitivity of its 
cost estimates to longer affordability periods. 

* Rent growth is slower for production programs. The report
appropriately observes that rents in production programs are less 
vulnerable to increases than voucher rents. In projecting future rent 
increases, however, the report assumes the same annual growth rate of 
three percent for both vouchers and production programs. This analysis 
is flawed because rents in newly produced housing do not track 
inflation in market housing rents. Housing Credit rent increases, for 
example, are tied to increases in area median incomes, which often lag 
inflation in market rents. 

* FMR increases make GAO's analysis outdated. Since the GAO collected 
its data on voucher costs, HUD has increased the fair market rent in 
many jurisdictions to the 50th percentile rent from the 40th 
percentile. This change increases the per voucher costs and means the 
data GAO relied upon is outdated. 

* Housing supply and demand impacts rents. Production of new housing 
adds apartments to local supply, creating downward pressure on market 
rents. In fact, many Credit apartments rent significantly below the 
maximum rents permitted by the program due to the influence of market 
pressures. Vouchers, however, add demand to a fixed housing supply, 
creating pressure on owners to increase rents. In some markets where 
housing supply is scarce and market rents are high, owners simply will 
not accept vouchers because existing payment standards are too low. 
This effect was discussed in a 1990 article written by former HUD 
Assistant Secretary for Housing William Apgar, who stated that "In 
addition, by expanding the supply of rental housing, subsidized new 
construction programs may limit future rent increases, benefiting not 
only recipients, but others in the form of reduced rent payments. 
...The price effects of housing supply programs may be important and 
certainly must be included in any complete assessment of alternative 
housing assistance approaches."[Footnote 3] 

Other Deficiencies in GAO's Analysis: 

GAO states that production programs historically have not required 
owners to set aside sufficient reserves for major repairs or 
replacement, thereby driving up maintenance and rehabilitation costs. 
To account for this under-funding, GAO recommends adequate reserves of 
$600 per unit per year. While such an amount may be appropriate for a 
35-year old voucher-assisted apartment, it is drastically too high for 
a newly constructed Housing Credit apartment. States underwrite Credit 
developments using stringent standards that ensure sufficient 
operating and replacement reserves. GAO cites no credible data 
substantiating the under-funding of reserves in Housing Credit 
properties. [See comment 5] 

We are also concerned that GAO makes little mention of the benefits 
derived from the combining of vouchers with Housing Credits and other 
production programs that is sometimes crucial to the successful 
delivery of affordable housing to very low income families. Housing 
Credit developments and other newly constructed housing utilize 
vouchers to make properties affordable for very low income families, 
the elderly, disabled, and other special needs households. The report 
does, in fact, acknowledge that 40 percent of Housing Credit tenants 
receive some form of rental assistance, further reducing their portion 
of the rent. 

GAO concludes that a national, centralized database is needed to 
monitor and evaluate the Housing Credit program. While we question the 
need for such a database given that the Housing Credit is already one 
of the most exhaustively studied housing programs, we urge GAO and 
Congress to weigh carefully the benefits of such a database against 
the reporting burden it would impose on the states. [See comment 6] 

Finally, the report suggests the need for additional cost-containment 
measures for housing funding programs. Although it is important for 
the federal government to reduce unnecessary program costs, the 
Housing Credit program already requires extremely rigid cost-
containment measures that ensure that only the amount of Credit needed 
to assure long-term viability and affordability of the development is 
allocated. States underwrite Credit developments by carefully 
scrutinizing each development's sources and uses of funds, financial 
projections of future rental income and expenses, and the availability 
of other state, local, and private investments. 

Let's Get About the Business of Using a Variety of Approaches
to Solve Our Housing Needs: 

Although we recognize the effort that GAO has put into preparing this 
report, we oppose its use to draw any conclusions about the relative 
value of various housing programs. We believe William Apgar had it 
right when he concluded a similar analysis in 1990 with the comment 
that "Rather than continue the futile debate as to whether future 
housing assistance efforts should involve mostly vouchers or mostly 
production subsidies, the nation would do well to undertake the 
business of developing flexible programs that offer appropriate 
choices to state and local decision makers."[Footnote 4] This 
statement is still valid today and best sums up our response to this 
new report. 

We look forward to working with the GAO and the Congress to increase 
and use wisely the substantial investment in production programs and 
vouchers that we must make to address the serious housing problems we 
face. 

Sincerely, 

Signed by: 

Barbara J. Thompson: 
Executive Director: 

Footnotes: 

[1] A Report on Worst Case Housing Needs in 1999: New Opportunity Amid 
Continuing Challenges, Office of Policy Development and Research, U.S. 
Department of Housing and Urban Development, January 2001, p. 8. 

[2] The State of the Nation's Housing: 2001, The Joint Center for 
Housing Studies of Harvard University, p. 24. 

[3] Which Housing Policy is Best?, William C. Apgar, Jr. in Housing 
Policy Debate Vol. 1, Issue 1, Office of Housing Policy Research, 
Fannie Mae, 1990, p. 17. 

[4] Ibid., p. 28. 

The following are GAO's comments on the National Council of State 
Housing Agencies' (NCSHA) letter dated January 11, 2002. 

1. We agree that tax credits tend to produce new or substantially 
rehabilitated housing units with amenities and services often not 
provided by the average voucher unit. While new or substantially 
rehabilitated units may, on average, be of higher quality than the 
average voucher unit, the age of a unit may not accurately reflect its 
quality. In addition, the extent to which the benefits from the 
additional amenities and services justify their costs remains an open 
question. 

2. We agree that there are potential benefits to the broader community 
from tax credits. These potential benefits were discussed in the 
housing policy issues section of the draft report. 

3. We assumed an affordability period of 30 years throughout the 
draft. We agree with NCSHA that some properties have longer 
affordability requirements but note that other properties have shorter 
affordability requirements as well. In its comments, HUD requested 
that we present 15-year estimates rather than 30-year estimates. For 
simplicity, we continue to present 30-year estimates. Additionally, 
because of the time value of money, projections beyond 30 years will 
have a small impact on relative costs. 

4. Rent growth for production programs may or may not lag behind that 
for vouchers. The tables presented in appendix II provide the 
opportunity to consider the impact on rents of other rates of 
inflation. 

5. We agree that the reserves required for new or substantially 
rehabilitated units may be considerably lower than those required for 
older properties. HUD raised concerns that our base annual estimate of 
$600 per unit was too low, given past experience, while NCSHA argues 
that the figure is too high. To address both concerns, we revised the 
draft to include two additional scenarios evaluating the possible 
impact of shortfalls above and below our base estimate. We find that 
over 30 years, these shortfalls make up a small part of the average 30-
year total costs. 

6. NCSHA questioned the need for a national database on costs for the 
tax credit program, arguing that the tax credit is one of the most 
exhaustively studied programs. Few studies of the tax credit program 
have assessed the costs of providing housing under the program, the 
financial viability of tax credit projects over time, or the 
households served by the program. Michael A. Stegman's 1999 review 
attributes our lack of information to the fact that the program is 
financed by tax expenditures rather than by direct appropriations and 
therefore does not require annual budget justifications.[Footnote 50] 
Additionally, he notes that housing advocates have been reluctant to 
support independent evaluation of the program. The tax credit program 
consumes real taxpayer resources, and as with any government program, 
taxpayers deserve to know what is being purchased with their dollars 
and at what cost. 

[End of section] 

Appendix VIII: GAO Contacts and Staff Acknowledgments 

GAO Contacts: 
Stanley J. Czerwinski (202) 512-7631: 
Daniel Garcia-Diaz (202) 512-4529: 

Acknowledgments: 

In addition to the persons named above, Patrick Doerning, Elizabeth 
Eisenstadt, Dennis Fricke, and William McNaught made key contributions 
to this report. External consultants Denise DiPasquale and Jean L. 
Cummings, City Research, and Edgar 0. Olsen, Department of Economics, 
University of Virginia, also contributed to this report. 

[End of section] 

Footnotes: 

[1] Federal rental assistance programs define "low-income" households 
as those with incomes 80 percent or below of area median income and 
"very-low-income" households as those with incomes 50 percent or below 
of area median income. 

[2] See HUD's A Report on Worst Case Housing Needs in 1999: New 
Opportunity Amid Continuing Challenges, January 2001. According to 
HUD, almost 5 million of these unassisted households have "worst-case" 
housing needs, meaning that they pay over 50 percent of their income 
for rent, live in substandard or overcrowded housing, or both. 

[3] This analysis does not treat the HOME program as a separate 
production program because HOME grants are often used in conjunction 
with other housing production programs. The HOME funds provided with 
the production programs discussed in this report are included in our 
analyses of these programs' costs. 

[4] HOPE VI replaces existing public housing units and, therefore, 
does not increase the supply of affordable housing. Since 1994, public 
housing has not received new appropriations to fund incremental units. 
Nonetheless, we included HOPE VI among the active housing programs 
because it represents an ambitious effort to improve the quality of 
the housing provided under the program. Additionally, while other 
modernization efforts are funded through public housing's capital 
fund, the HOPE VI program was able to provide more extensive cost 
data, which greatly facilitated our analysis. 

[5] Federal Housing Programs: What They Cost and What They Provide 
[hyperlink, http://www.gao.gov/products/GAO-01-901R], July 18, 2001. 

[6] Tax Credits: Opportunities to Improve Oversight of the Low-Income 
Housing Program [hyperlink, 
http://www.gao.gov/products/GAO/GGD/RCED-97-55], Mar. 28, 1997 and 
Building Affordable Rental Housing: An Analysis of the Low-Income 
Housing Tax Credit, City Research (Boston: 1998). 

[7] We include outlays for rental assistance provided to Section 515 
units under the Section 521 program. 

[8] The public housing residents of HOPE VI properties; most Section 
202, Section 811, and Section 515 households; and, according to our 
estimate, about 40 percent of tax credit households receive rental 
assistance, pay about 30 percent of their income for rent, or both. 

[9] We did not include the costs incurred by federal and other 
government agencies to administer and monitor the programs since these 
costs are not identified in sufficient detail in the agencies' 
records. However, we believe these costs to be extremely small 
relative to those costs that we have accounted for. 

[10] For the nation, the average size of tax credit properties with 
Section 515 mortgages is 32 units. The average size of all tax credit 
properties is 57. 

[11] This percentage excludes tax credit units in properties with 
Section 515 mortgages because we included these units in our 
calculations for the Section 515 program. If these units were included 
in our calculations for tax credits, the percentage of units in 
nonmetropolitan areas would increase from about 6 percent to about 22 
percent. 

[12] supportive services provide residents with the assistance needed 
to live independently. In the case of elderly residents, such services 
can include transportation, dining services, and recreation. 

[13] In our July interim report, we presented total costs for 30 years 
and for the first year. This report also presents total costs for 30 
years, with first-year costs presented in appendix I. The total cost 
in the first year is the sum of the rent paid in the first year plus 
the annual payment for all development subsidies, assuming a 30-year 
life. Under both cost estimates, production programs are more 
expensive than vouchers. The disparities in costs between each of the 
production programs and vouchers are more pronounced in the first year 
than over 30 years because rents are higher for vouchers than for the 
production programs, which use development subsidies to reduce rents 
(see table 4 in appendix I). As a result, rent inflation has a more 
significant impact on the cost of vouchers than on the costs of the 
production programs, thereby narrowing the disparities in costs 
between the two over time. 

[14] In the seven metropolitan areas we selected for review, one- and 
two-bedroom production program units are also more expensive than one- 
and two-bedroom voucher units, respectively. Costs for one- and two-
bedroom units for the seven metropolitan areas are provided in tables 
7 and 8 in appendix I. 

[15] This comparison of HOPE VI and voucher costs follows the method 
employed in our interim report, in which we compared the cost of each 
of the production programs with the cost of vouchers. In that report, 
we took the actual rents for voucher units of different sizes and 
interpolated a rent consistent with the average bedroom size for each 
specific production program. Because these pairwise cost comparisons 
use a different average unit size for each of the programs, we cannot 
compare costs across the production programs. We did not normalize all 
of the production programs to 2.4 bedrooms because this size is 
considerably larger than the typical units under the other programs. 
Figures 6 and 7 permit comparisons for the most common unit sizes. 

[16] For some of the programs reviewed, variances in the costs of 
individual properties in certain locations can also be due to their 
small sample sizes. 

[17] A detailed discussion of the impact of housing characteristics 
and public amenities on housing rents is found in chapters 3, 4, and 
14 in Denise DiPasquale and William C. Wheaton, Urban Economics and 
Real Estate Markets (1996). 

[18] The impact of property and neighborhood characteristics on total 
development costs for the tax credit program is analyzed in Jean L. 
Cummings and Denise DiPasquale, "The Low-Income Housing Tax Credit: 
The First Ten Years," Housing Policy Debate, Vol. 10, Issue 2 (1999), 
pp. 251-307. GAO also analyzed these issues in Tax Credits: Reasons 
for Cost Differences in Housing Built by For-Profit and Nonprofit 
Developers [hyperlink, http://www.gao.gov/products/GAO/RCED-99-60], 
Mar. 10, 1999. For more information, HUD measured and explained the 
differences in total development costs among the inactive housing 
production programs in The Costs of HUD Multifamily Housing Programs, 
HUD, Office of Policy Development and Research (1982). 

[19] According to HUD, all HOPE VI developments must follow these 
regulations, including the Davis-Bacon Act, Section 3 requirements to 
hire small and minority contractors, and resident participation 
requirements. For example, HUD stated that, depending on the local 
construction labor market, Davis-Bacon alone, which requires 
construction workers to receive locally prevailing wages and fringe 
benefits, can increase construction costs by as much as 25 percent. 

[20] HOPE VI officials recognized that, unlike private sector 
developers, many housing authorities hire program and construction 
managers to oversee HOPE VI developments, which can increase costs. 
Also, see Cummings and DiPasquale (1999), pp. 260 and 261. 

[21] One HUD study estimates that modernization needs of public 
housing are nearly $20,000 per unit. If these needs were met, the 
ongoing annual accrual needs of public housing are estimated at almost 
$1,700 per unit. See Capital Needs of the Public Housing Stock in 
1998, Abt and Associates Inc. (2000). However, given the unique nature 
of public housing, its history may not shed much light on the future 
of other current programs. Perhaps more relevant, another HUD study 
estimates that the annual accrual needs of FHA-insured multifamily 
properties are almost $1,100 per unit. See Status of HUD-Insured (or 
Held) Multifamily Rental Housing in 1995, Abt Associates, Inc. (1999). 

[22] This percentage represents an increase of $35,220 to the total 30-
year cost of $223,190 for the HOPE VI program. Our estimate of this 
increase is based on the national average property tax rate of $11 per 
$1,000 in property value, according to the 1999 American Housing 
Survey, and an annual set-aside of $600 per unit. About 25 percent of 
this increase is attributable to shortfalls in capital reserves and 75 
percent to property tax abatements. Interviews with industry officials 
indicate that annual set-asides for new construction under the tax 
credit program are about $300 per unit. HUD officials, on the other 
hand, argue that the history of public housing and other federal 
multifamily housing programs suggests that a set-aside of about $1,000 
per unit is more appropriate. When an annual shortfall of $300 per 
unit is assumed and no changes are made to the property tax abatement 
estimates, our total 30-year cost estimate increases by 14 percent. 
When $1,000 per unit is assumed, our total 30-year cost estimate 
increases by 18 percent. 

[23] The tax credit program serves two distinct groups. The first 
group, which we estimate includes about 40 percent of tax credit 
households, has an average income of $8,350 (in 1999 dollars), 
comparable to the average incomes of households assisted through the 
other active programs. This group receives rental assistance and pays 
about 30 percent of its income for rent. The second group, on the 
other hand, has a larger average income of $17,750, does not receive 
rental assistance, and faces much higher rent burdens, sometimes 
exceeding 50 percent of its income. (See GAO/GGD/RCED-97-55, p. 41.) 

[24] According to our most recent letter on tax credits, Tax Credits: 
Characteristics of Tax Credit Properties and Their Residents 
[hyperlink, http://www.gao.gov/products/GAO/RCED-00-51R], Jan. 10, 
2000, pp. 6 and 7, about 57 percent of tax credit households paid 30 
percent or less of their income for rent, about 21 percent paid 
between 31 and 40 percent, about 8 percent paid between 41 and 50 
percent, about 8 percent paid over 50 percent, and 5 percent paid an 
unknown percentage. 

[25] Since differences in household incomes and rent burdens can have 
a significant impact on federal costs, we adjusted the rent paid by 
the voucher household to equal the rent paid by the tax credit 
household. We also made similar adjustments for the comparisons 
between vouchers and the other production programs. 

[26] Because data for the HOPE VI program were not available by unit 
size, we followed the approach used in our interim report to estimate 
the program's federal cost. For the other programs, we were able to 
compare cost across different unit sizes. 

[27] These contributions are not applicable to the voucher program. 

[28] Our estimate of total government cost may include private 
subsidies. However, these subsidies generally make up a very small 
fraction of the total cost of the programs. 

[29] Comprehensive and current data on success rates for the nation 
were not available. HUD is completing The Voucher Success Rates study 
based on sample data from 48 metropolitan public housing authorities. 
Anecdotal evidence, while not conclusive, points to the difficulty of 
finding housing with vouchers. A search of the NEXIS database found 
over 70 news articles published over the past year about the 
challenges faced by voucher recipients. We found references to this 
problem reported for certain high-cost areas, such as Boston and San 
Francisco, and also for certain low-cost areas, such as Little Rock, 
Ark. For example, see "Many Housing Vouchers Forfeited. Lack of 
Affordable Units Undermining Section 8," The Boston Globe, Mar. 24, 
2001; "Desperate Clutch for Subsidized Shelter; S.F. Applicants in 
Frenzy," The San Francisco Chronicle, Sept. 5, 2001; and "Project 
Tenants to Enter Tight Housing Market," Arkansas Democrat-Gazette, 
Feb. 18, 2001. 

[30] A 1999 study measured the impact of production program subsidies 
on the supply of housing. It found that, with the exception of public 
housing, these subsidy programs most likely add little or nothing to 
the total housing stock because they were simply displacing private, 
unsubsidized construction. The study concluded that public housing has 
steadily added to the housing stock since its inception. See Michael 
P. Murray, "Subsidized and Unsubsidized Housing Stocks 1935 to 1987: 
Crowding Out and Cointegration," Journal of Real Estate Finance and 
Economics, Vol. 18 (Jan. 1999). 

[31] HOPE VI program officials, however, are revising their data 
collection procedures to provide more details on all sources of funds. 

[32] NCSHA is a national nonprofit organization created in 1970 to 
assist state housing agencies in advancing the interest of low-income 
people through the financing, development, and preservation of 
affordable housing. NCSHA's members operate in every state and the 
District of Columbia, Puerto Rico, and the U.S. Virgin Islands. 

[33] Michael A. Stegman, "Comment on Jean L. Cummings and Denise 
DiPasquale's 'The Low-Income Housing Tax Credit: An Analysis of the 
First Ten Years': Lifting the Veil of Ignorance," Housing Policy 
Debate, Vol. 10, Issue 2 (1999). 

[34] [hyperlink, http://www.gao.gov/products/GAO/GGD/RCED-97-55], and 
Building Affordable Housing: An Analysis of the Low-Income Housing Tax 
Credit, City Research (Boston: 1998). 

[35] Life-cycle cost is the total cost of owning, operating, and 
maintaining a property over its useful life. In this analysis, we 
assume a useful life of 30 years. Also, for the purposes of 
comparison, we provide in this appendix detailed data on the first-
year costs, which appeared in our July 2001 interim report. The total 
first-year cost is the rent paid in the first year plus the annualized 
present value of all development subsidies, paid over 30 years at the 
government discount rate of 6 percent. 

[36] Langley C. Keyes and Denise DiPasquale, "Housing Policies for the 
1990s," in Building Foundations: Housing and Federal Policy, ed. 
Denise DiPasquale and Langley C. Keyes (University of Pennsylvania 
Press, 1990). 

[37] William C. Apgar, "Which Housing Policy is Best?" Housing Policy 
Debate, Vol. 1, Issue 1 (1990). 

[38] Edgar 0. Olsen, "The Cost-Effectiveness of Alternative Methods of 
Delivering Housing Subsidies," Thomas Jefferson Center for Political 
Economy, Working Paper 351 (Dec. 2000), available at [hyperlink, 
http://www.virginia.edu~econ/TJpapersx.htm]. 

[39] We did not include the costs incurred by federal agencies (HUD, 
the Rural Housing Service, and the Internal Revenue Service) to 
administer and monitor the programs, since these costs are not 
identified in sufficient detail in the agencies' records. However, we 
believe these costs to be extremely small relative to those costs that 
we have accounted for. In addition, we did not include the cost to the 
government in forgone taxes due to depreciation because the rationale 
for the depreciation deduction in tax law is to permit investors to 
realize the real costs associated with a structure's wearing out over 
time. However, to the extent that a building's tax life (27.5 years) 
is generally shorter than its economic life, some portion of the 
depreciation benefit may be viewed as a subsidy. 

[40] We estimated the interest subsidies using the same procedure we 
used for Section 515 below-market loans. 

[41] We assumed a 30-year holding period because each of the housing 
production programs we evaluated has a low-income-use restriction of 
at least 30 years. 

[42] To project out rents over 30 years, we used a constant rate of 3 
percent, which was based on a 10-year average rate of rent inflation 
for the nation according to the Consumer Price Index. 

[43] Assuming the same rate of rent inflation for vouchers and the 
production programs may overstate the costs of the production 
programs. Under the housing production programs, increases in rents 
are restricted by the programs' guidelines. For example, rents in tax 
credit properties are usually limited to 30 percent of either 50 or 60 
percent of the area median income, adjusted for unit size. 

[44] According to our report entitled Tax Credits: Opportunities to 
Improve Oversight of the Low-Income Housing Program (GAO/GGD/RCED-97-
55, Mar. 28, 1997), the average annual rent for 1992 to 1994 was 
$5,760 and the average Section 8 subsidy was about $1,500 for all 
units. When we divide the average subsidy by the average rent, the 
resulting percentage is 26 percent. 

[45] The four syndicators were Boston Capital Partners, Inc.; Boston 
Financial; Enterprise Social Investment Corporation; and the National 
Equity Fund, Inc. Each of these syndicators has a national portfolio 
and has been active in the tax credit market throughout the tax credit 
program's history. 

[46] Building Affordable Rental Housing: An Analysis of the Low-Income 
Housing Tax Credit (Feb. 1998) and "The Low-Income Housing Tax Credit: 
The First Ten Years," Housing Policy Debate, Vol. 10, Issue 2 (1999). 

[47] [hyperlink, http://www.gao.gov/products/GA0/GGD/RCED-97-55]. 

[48] While forgone tax revenue is not a budgetary outlay, we include 
its estimated value in table 21 because it represents a significant 
cost to the federal government for what is currently the largest 
program supporting the development of affordable housing. 

[49] Tax Credits: The Use of Tenant-Based Assistance in Tax-Credit-
Supported Properties [hyperlink, 
http://www.gao.gov/products/GAO/RCED-99-279R], Sept. 17, 1999. 

[50] Michael A. Stegman, "Comment on Jean L. Cummings and Denise 
DiPasquale's 'The Low-Income Housing Tax Credit: An Analysis of the 
First Ten Years': Lifting the Veil of Ignorance," Housing Policy 
Debate, Vol. 10, Issue 2 (1999). 

[End of section] 

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