Multifamily Housing: HUD's Proposals for Reengineering Its Insured Section 8 Portfolio

GAO discussed the Department of Housing and Urban Development's (HUD) proposal to restructure its section 8 multifamily rental housing portfolio. GAO noted that: (1) the section 8 portfolio suffers from high subsidy costs, exposure to insurance losses, and deteriorating property conditions; (2) HUD has proposed to implement a mark-to-market process that would allow property owners to set rents at market levels and allow HUD to reduce mortgage debt, terminate mortgage insurance, and restructure section 8 subsidies; (3) HUD contracted for a study to obtain information on market rents and the physical condition of the properties in its portfolio; (4) the study showed that the majority of insured section 8 properties would require debt reduction or forgiveness to continue operating; (5) the study also showed that, for most properties, assisted rents are higher than estimated market rents; (6) the contractor's study methodology was reasonable; and (7) any benefits that the HUD proposal realizes may come at a high cost.