Improving the Efficiency of Federal Housing Subsidies

T-RCED-89-72: Published: Sep 29, 1989. Publicly Released: Sep 29, 1989.

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GAO discussed S. 980, a bill which would improve the effectiveness of the low-income housing tax credit. GAO found that: (1) the lack of centralized review of the financial assistance awarded to individual housing projects allowed developers to realize cash proceeds greater than their costs for acquiring and rehabilitating the projects; (2) the Moderate Rehabilitation and Tax Credit Programs were most helpful in housing market with a shortage of rental housing, but other forms of assistance were more effective and less costly in housing markets with affordability problems; (3) the bill would give state housing credit agencies responsibility for coordinating and overseeing tax credit and for developing formal plans for allocating their available tax credits among competing qualified projects; (4) the bill would specify general criteria for screening tax credit applications and give priority to projects that served tenants with the lowest incomes or over the longest period, or produced the most units at the lowest cost; (5) although producing the most units at the lowest cost encouraged states to carefully review developer costs and allocate tax credits to the most cost-effective projects, it could override the other two selection factors; and (6) the bill would require states to examine other sources of state and federal funds and other tax benefits provided to specific projects, increase competition for tax credits to include buildings acquired from federal agencies and liberalize tax credit carryovers.

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