Section 236 Rental Housing:

An Evaluation with Lessons for the Future

PAD-78-13: Published: Jan 10, 1978. Publicly Released: Jan 10, 1978.

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The Section 236 Rental Assistance Program provided new and rehabilitated rental housing to low and moderate income tenants. This program, along with other housing initiatives, was created in 1968 to boost the nation's existing housing supply. It joined Federal Housing Administration mortgage insurance with a direct mortgage interest subsidy, the usual tax incentives for residential development, and special tax incentives for low and moderate income housing. This combination of subsidies and a 40-year mortgage term resulted in lower rents than would have been possible in conventionally financed projects.

Section 236 has been effective in providing housing for moderate income families during a period when the supply of moderately-priced rentals has been shrinking. However, section 236 construction is complete, and the Department of Housing and Urban Development (HUD) refused to make new commitments under the program. At the same time, current public policy provides housing assistance to low income households, and middle and upper income household benefit from tax expenditures for mortgage interest deductions and tax incentives for rental housing. Housing subsidy costs have been analyzed unsatisfactorily because little consideration has been given to indirect subsidies or long-term costs. Alternatives to construction continue to be stressed primarily because of short-term cost savings.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary, HUD, should design positive measures to ensure that moderate income households receive some equitable share of future housing assistance. HUD should revive section 236 to provide moderate income housing until workable alternatives are developed. Congress should provide additional funding for section 236 to allow HUD to enter into new commitments under the program and amend present housing law to require some percentage of housing assistance funds to be used to subsidize moderate income households.

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