Multifamily Housing: Issues and Options to Consider in Revising HUD's Low-Income Housing Preservation Program

GAO discussed issues and options to consider in revising the Department of Housing and Urban Development's (HUD) Low-Income Housing Preservation Program. GAO noted that: (1) the current preservation program restricts owners' unlimited right to prepay mortgages but provides them with various financial incentives, such as increases in federal rental assistance and financing of capital improvements, to continue the affordability restrictions for their properties; (2) the owners of 1,122 projects eligible to participate in the preservation program have filed notices of intent to extend affordability restrictions or to sell their properties to qualified purchasers; and (3) there are concerns about the size of the incentives provided to project owners and the funding of these incentives through increased federal rental assistance. In addition, GAO noted that HUD has proposed to replace its current program with an approach that restores the owners' right to prepay: (1) mortgages and use capital improvement grants in lieu of federal rental assistance payments; (2) and repeal the preservation incentives; and (3) and continue preservation incentives, albeit on a more targeted basis and at a reduced level.