Portfolio Reengineering: Properties Unable to Cover Operating Expenses at Market Rents

Pursuant to a congressional request, GAO provided information on properties that would be unable to cover operating expenses with market-level rents on the basis of GAO's analysis of Ernst and Young LLP's 1996 study on the effects of the Department of Housing and Urban Development's (HUD) proposal for restructuring the insured Section 8 portfolio, focusing on the: (1) basic methodology used in Ernst & Young's study; (2) data that the study developed on properties that would not be able to cover operating expenses (i.e., that would have a negative cash flow) after restructuring; and (3) increase in rents above market-level rents that would be needed for these properties to achieve a positive cash flow and a comparison between the rent levels and the fair market rents (FMR) for the areas in which properties are located.