HUD-Proposed Legislative Changes to Section 203 of the Housing and Community Development Amendments of 1978

GAO reviewed the implementation of the Department of Housing and Urban Development (HUD) policy to attach section 8 subsidies to the sales of acquired multifamily housing projects to insure their continued availability to low- and moderate-income tenants. Specifically, the review determined the cost and effectiveness of the policy and whether other less costly, but effective, sales methods were adequately considered.

In developing and implementing its policy, HUD never performed a thorough analysis of those projects sold without subsidies attached to establish the degree to which these projects were effectively serving low- and moderate-income tenants. The review indicated that it may not always be necessary or effective to attach section 8 subsidies to project units to the extent called for in the regulations. Overall project success appears to be related more to project location, surrounding neighborhood, owner/manager competence, and socioeconomic characteristics, rather than to whether the project was sold with section 8 subsidies. GAO believes that the HUD disposition regulations need to be revised to allow more flexibility, but does not agree with HUD that the section 203 provisions of the Housing and Community Development Amendments of 1978 should be eliminated. There is some question as to how successful a proposed voucher program can be, whether there is sufficient existing housing stock for the program to work effectively, how supply would affect participation, and whether the structure of such a program would tend to exclude the very poor. HUD has recently begun to change its policy and is revising its regulations to allow greater flexibility in the use of section 8 subsidies. Each disposal decision should be thoroughly supported and documented to justify the decision and protect HUD against any potential law suits resulting from that decision.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Steven J. Wozny Team: General Accounting Office: Community and Economic Development Division Phone: (202) 426-1780