Millions of Dollars for Rehabilitating Housing Can Be Used More Effectively

Gao ID: CED-80-19 December 7, 1979

Annually, about $240 million in Federal funds are not being used effectively for rehabilitating housing under the Department of Housing and Urban Development's (HUD) Section 312 Rehabilitation Loan Program and its Community Development Block Grant Program.

Borrowers are refinancing existing home mortgages with low-cost rehabilitation loans, thereby diverting substantial funds from housing rehabilitation. Some borrowers receive low-payment loans even though they could afford higher payments. Communities often award direct grants to cover all rehabilitation costs rather than requiring homeowners to finance part of the cost from other sources or using loans that, when repaid, will return money to community rehabilitation programs. Many communities are inconsistent or ineffective in giving funding priority to low- and moderate-income borrowers. They award loans to higher income borrowers who could obtain financial assistance from commercial sources instead of to more needy, lower income homeowners who require assistance.


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