GAO-12-342SP: Social services: 28. Housing Assistance

Social services > 28. Housing Assistance

Examining the benefits and costs of housing programs and tax expenditures that address the same or similar populations or areas, and potentially consolidating them, could help mitigate overlap and fragmentation and decrease costs.

Why This Area Is Important


The federal government has played a major role in supporting housing since the 1930s. It funds programs that assist homebuyers, renters, and state and local governments. The goals of these efforts include encouraging homeownership and providing affordable rental housing for low-income families. Millions of Americans have benefited, whether by taking out a federally guaranteed mortgage, deducting mortgage interest or real estate taxes from income, or receiving a rental subsidy. In fiscal year 2010, the federal government incurred about $170 billion for obligations for housing-related programs and estimated revenue forgone for tax expenditures.[1] Tax expenditures represent $132 billion (about 78 percent) and may be viewed as spending programs channeled through the tax system because they are federal revenue forgone due to exclusions, credits, deductions, deferrals, and preferential rates.[2]

In the current housing crisis, support for homeownership has expanded dramatically with nearly all mortgage originations having direct or indirect federal support. The Department of the Treasury (Treasury) and the Board of Governors of the Federal Reserve System (Federal Reserve) together invested more than $1.67 trillion in Fannie Mae and Freddie Mac, the government-sponsored enterprises, which issue and guarantee mortgage-backed securities. Specifically, Treasury purchased about $221 billion of mortgage-backed securities issued by Fannie Mae and Freddie Mac and about $183 billion of senior preferred stock, and the Federal Reserve purchased $1.27 trillion in the debt and securities of Fannie Mae and Freddie Mac. The ultimate costs of these efforts are not yet known. The federal role also expanded through programs such as the Home Affordable Modification Program and the First-Time Homebuyer Credit. However, fiscal and budget realities call into question continued maintenance of 160 different efforts with similar goals and sometimes parallel delivery systems.

[1]The total does not include other types of emergency assistance. For loan programs, these obligations represent the expected credit subsidy costs for loan commitments made in fiscal year 2010. These estimates are revised in subsequent years and the ultimate cost will not be known until the loans mature. The amount of obligations we reported for fiscal year 2010 may include funds appropriated in the American Recovery and Reinvestment Act of 2009.

[2]Summing tax expenditure estimates does not take into account interactions between individual provisions. This total also does not include the exclusion of imputed net rental income. Imputed net rental income is the amount that owner-occupiers would have paid to rent a home, less nondeductible costs such as depreciation and maintenance expense. It is not subject to tax. The Department of the Treasury lists the exclusion of imputed net rental income as a tax expenditure and estimated the expenditure at $41 billion for fiscal year 2010. However, the Joint Committee on Taxation does not list the exclusion as a tax expenditure because it views measuring and taxing net imputed rental income as administratively infeasible.

What GAO Found


Twenty different entities administer 160 programs, tax expenditures, and other tools GAO identified that supported homeownership and rental housing in fiscal year 2010 (see fig. below).[1] For example, 39 programs, tax expenditures, and other tools provide assistance for buying, selling, or financing a home, such as the single-family guaranteed loan program of the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA), the Department of Agriculture’s (USDA) Rural Housing Service (RHS), and the Department of Veterans Affairs and the capital gains exclusion on home sales administered by Treasury’s Internal Revenue Service (IRS). Eight programs and tax expenditures provide assistance for rental property owners, such as separate project-based rental assistance programs provided by HUD and RHS and accelerated depreciation on rental housing administered by the IRS. Program overlap can occur when agencies and programs address the same or similar needs or target similar populations, and can result in fragmentation.


Housing Activities/PRograms by Purpose and Agency in Fiscal Year 2010

aSome activities may have multiple purposes.

bActivities undertaken only by the Federal Reserve, not other regulators.


As GAO reported in September 2000, overlap exists between products offered and markets served by USDA’s RHS, HUD, and others, and GAO questioned the need for maintaining separate programs for rural areas. GAO recommended that Congress consider requiring USDA and HUD to examine the benefits and costs of merging programs and cited RHS’s and FHA’s single-family guaranteed loan and multifamily portfolio management programs. In response, USDA noted that such a merger could be detrimental and result in rural areas losing a federal voice. In addition, HUD noted that without legislative changes, any efforts to merge the programs likely would result in a more cumbersome delivery system. The House Committee on Financial Services held hearings in 2011 considering a proposal that would move management of rural housing programs to HUD.


GAO’s ongoing work has shown increased evidence that some RHS and FHA programs can be consolidated. For instance, RHS relies on more in-house staff to oversee its single-family and multifamily loan portfolio of about $93 billion than HUD relies on to manage its single-family and multifamily loan portfolio of more than $1 trillion, largely because of differences in delivery structures. RHS has a decentralized structure of about 500 field offices that was set up to interact directly with borrowers. RHS relies on over 1,600 full-time equivalent staff to process and service its direct single-family loans and grants. Since GAO’s 2000 report, the trend away from labor-intensive direct loans to guaranteed loans has accelerated. While RHS limits its direct loans to low-income households and its guaranteed loans to moderate-income households, FHA has no income limits and does not offer a comparable direct loan program. HUD operates about 80 field offices and primarily interacts through lenders, nonprofits, and other intermediaries. RHS and FHA programs both utilize FHA-approved lenders and underwriting processes based on FHA’s scorecard—an automated tool that evaluates new mortgage loans. RHS has about 530 full-time equivalent staff to process its single-family guaranteed loans. FHA relies on lenders to process its loans. Although FHA insures far more mortgages than RHS guarantees, FHA has just over 1,000 full-time equivalent staff to oversee lenders and appraisers and contractors that manage foreclosed properties—costs for overseeing and disposing of such properties, were $887 million in 2010. In contrast, RHS’s costs for foreclosed property management are lower because RHS requires lenders to dispose of foreclosed properties. While the number of RHS field offices decreased by about 40 percent since 2000, its decentralized field structure continues to reflect the era in which it was established—the 1930s, when geographic boundaries greatly limited communication and transportation. These limitations have diminished and HUD programs can be used in all areas of the country.

Additionally, the two agencies offer examples of overlap in products offered (mortgage credit and rental assistance), functions performed (portfolio management and preservation), and geographic areas served. For instance, RHS and HUD guarantee single-family and multifamily loans, and offer rental subsidies using similar income eligibility criteria. Also, both agencies have been working to maintain and preserve existing multifamily portfolios. Although RHS may offer its products only in rural areas, it is not always the insurer of choice in those areas. For example, in fiscal year 2009 FHA insured over eight times as many single-family loans in economically distressed rural counties as RHS guaranteed. And, many RHS loan guarantees financed properties near urban areas—56 percent of single-family guarantees made in fiscal year 2009 were in metropolitan counties.

As shown in the figure above, Treasury and IRS provide numerous types of housing assistance through tax expenditures. Although often necessary to meet federal priorities, some tax expenditures can contribute to mission fragmentation and program overlap that, in turn, can create service gaps, additional costs, and the potential for duplication. For example, to qualify for a historic preservation tax credit, rehabilitation must preserve historic character, which may conflict with states’ efforts to produce energy-efficient, low-income properties with tax credits, and could increase project costs. Furthermore, inadequate or missing data and difficulties in quantifying the benefits of some tax expenditures can impede studies of their efficiency, effectiveness, and equity.

Data represent a key challenge, as the data necessary to assess who benefits from tax expenditures is not always collected on tax returns unless IRS needs the information or collection was legislatively mandated. For example, although IRS collects some data on the mortgage interest deduction (the single-largest, housing-related tax expenditure), the data may not contribute to analyses of its effectiveness. Studies by the Joint Committee on Taxation and others differ as to the extent to which the mortgage interest deduction increases homeownership. Some studies suggest that the deduction increases homeownership, while others suggest that the deduction increases the price of housing (and higher prices are negatively associated with homeownership rates). Furthermore, some analyses emphasize the need for additional data to more effectively assess the impact of proposed modifications to the mortgage interest deduction on homeownership.

GAO recommended in September 2005 that the Office of Management and Budget (OMB) use information on outlay programs and tax expenditures to recommend to the President and Congress the most effective methods for accomplishing federal objectives. GAO concluded that better targeting by Congress and the executive branch of all federal spending and subsidy programs could save resources and increase economic efficiency. As discussed later, OMB disagreed with GAO’s 2005 recommendations.

[1]See appendix III for the list of programs, tax expenditures, and other tools that supported homeownership and rental housing in fiscal year 2010 and their related budgetary information. Many of these programs/activities incurred no obligations in fiscal year 2010 for a number of reasons, such as the program/activity was not part of the federal budget or was inactive during the year.

Actions Needed


HUD and RHS have shared beneficial practices. For example, RHS collaborated with HUD on restructuring multifamily mortgages, underwriting guaranteed loans, and making properties more energy-efficient. In 2010, the White House’s Domestic Policy Council established a Rental Policy Working Group to better coordinate among HUD, USDA, and Treasury. The agencies have been aligning rules for rental programs, will examine homeownership programs, and expect to accept each other’s inspections and forms for housing programs. In 2011, the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity developed draft legislation and hosted hearings in May and September on a proposal to move management of rural housing programs from USDA to HUD. At the May hearing, while some industry experts said the consolidation plan merited further discussion, others stated the proposal could negatively affect USDA’s efforts to deliver its other rural development programs. In September, the RHS Administrator testified that while she believed RHS and HUD shared an important commitment to meeting the housing needs of rural America, she opposed the draft legislation. She believed that RHS housing services uniquely served rural communities by working in “synergy” with other rural development programs.

GAO recommended in September 2000 that Congress consider requiring USDA and HUD to examine the benefits and costs of merging those programs that serve similar markets and provide similar products. Further, GAO noted that as a first step, the Congress could consider requiring RHS and HUD to explore merging their single-family insured lending programs and multifamily portfolio management programs, taking advantage of the best practices of each and ensuring that targeted populations are not adversely affected.


The agencies have been working to align certain requirements of the various multifamily housing programs. In addition, in February 2011, the Administration reported to Congress that it would establish a task force to evaluate the potential for coordinating or consolidating the housing loan programs at HUD, USDA, and VA. According to HUD, a benchmarking effort associated with the task force was recently begun. GAO’s ongoing work considers options for consolidating these programs and GAO expects to make additional recommendations.

GAO recommended in September 2005 and reiterated in March 2011 that coordinated reviews of tax expenditures with related spending programs could help policymakers reduce overlap and inconsistencies and direct scarce resources to the most-effective or least-costly methods to deliver federal support. Coordinated reviews of support of housing, which consists of tax expenditures and federal programs and regulations, could be useful. Specifically, GAO recommended in September 2005 and March 2011 that the Director of OMB, in consultation with the Secretary of the Treasury should

  • develop and implement a framework for conducting performance reviews of tax expenditures. This includes (1) outlining leadership responsibilities and coordination among agencies with related responsibilities; (2) setting a review schedule; (3) identifying review methods and ways to address the lack of credible tax expenditure information; and (4) identifying resources needed for tax expenditure reviews; and
  • require that tax expenditures be included in executive branch budget and performance review processes.

OMB, citing methodological and conceptual issues, disagreed with GAO’s 2005 recommendations. To date, OMB has not used its budget and performance review processes to systematically review tax expenditures and promote integrated reviews of related tax and spending programs. However, in its fiscal year 2012 budget guidance, OMB instructed agencies, where appropriate, to analyze how to better integrate tax and spending policies with similar objectives and goals. The GPRA Modernization Act of 2010 also envisions such an approach for selected crosscutting areas.[1] Such analysis could help identify redundancies.

[1]The GPRA Modernization Act of 2010 established a new, crosscutting, and integrated framework for achieving results and improving government performance. It requires OMB to coordinate with agencies to establish outcome-oriented goals covering a limited number of crosscutting policy areas and to develop a governmentwide performance plan for making progress toward achieving those goals. The executive branch and Congress could use this process to identify a6nd address program areas where strengthened interagency coordination is needed to better achieve results as well as areas of fragmentation, overlap, and duplication.

How GAO Conducted Its Work


The information in this submission is based on findings from the products listed in the related GAO products section and additional work GAO conducted. GAO reviewed prior reports as well as collected and analyzed preliminary information from housing industry, USDA, and HUD officials, on examples of overlap or fragmentation in products offered, functions performed, and geographic areas served by various federal housing programs. GAO developed a catalog of direct spending programs, tax expenditures, and other activities used by federal agencies and financial regulators to support rental housing and homeownership, and identified what is known about the purpose, cost, eligibility, and populations served. GAO reviewed the Catalog of Federal Domestic Assistance, agency program documentation, and previous studies by the Congressional Research Service, Congressional Budget Office, and other housing groups, and interviewed agency officials. GAO also reviewed the fiscal year 2012 President’s Budget, agencies’ budget justification, the Joint Committee on Taxation’s estimates of tax expenditures, and a compendium of tax expenditures prepared by the Congressional Research Service to obtain information on obligations, full-time equivalents, credit subsidy costs, administrative costs, and revenue loss estimates incurred by the federal government in administering housing programs. See pages 351-370 of the PDF version of this report (appendix III) for a list of the programs GAO identified that may have similar or overlapping objectives, provide similar services or be fragmented across government missions. Overlap and fragmentation may not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.

Agency Comments & GAO Contact


GAO provided a draft of this report section to USDA, HUD, Department of Veterans Affairs, Treasury, the Internal Revenue Service, OMB, Federal Housing Finance Agency, Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Consumer Financial Protection Bureau, Federal Financial Institutions Examination Council, and the Farm Credit Administration for review and comment. The Department of Veterans Affairs and the Consumer Financial Protection Bureau provided no comments. All other agencies provided technical comments, which were incorporated as appropriate. USDA reiterated the position that its rural agencies and programs, including the delivery system, serve a unique purpose and are vital to the rural communities they serve. In addition, USDA noted its recent efforts to streamline and improve the effectiveness of federal programs that serve rural communities, as part of the agency’s involvement in the President’s Rural Council. OMB stated that it agrees that savings might be achieved from the partial consolidation of guaranteed loan programs across agencies, but noted that any savings may be limited because USDA’s decentralized field offices support more than loan guarantee programs. OMB also indicated that they will identify tax expenditures which support the achievement of a limited number of cross-agency priority goals along with the fiscal year 2013 President’s Budget, as required by the GPRA Modernization Act of 2010.


For additional information about this area, contact Mathew Scirè at
(202) 512-8678 or or James White at (202) 512-9110 or

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