Potential Reduction in Federally Assisted Rental Housing From Expiring Section 8 Contracts and Mortgage Prepayment Restrictions

GAO testified on two reports concerning possible reductions in the number of federally assisted rental housing units. GAO noted that expiring section 8 contracts and mortgage prepayments could reduce the inventory of privately owned, project-based housing units by more than 50 percent by fiscal year 2005; however, this inventory could expand as new units are added. GAO estimated the potential for reducing the tenant-based section 8 inventory using assumptions about minimum and maximum contract terms. Minimum contract terms assume that there will not be funding to renew annual contribution contracts in the next renewal period; however, maximum contract terms assume that funding will be available to renew annual contribution contracts for the total contract term. GAO found that: (1) about 50 percent of the fiscal year 1985 inventory of privately owned, project-based housing units will be subject to prepayment when, and if, alternate private financing becomes available; (2) the fact that section 8 contracts expire will not affect the availability of low income housing; and (3) project marketability and the availability and type of federal assistance will influence the extent to which owners renew their section 8 contracts or prepay their mortgages.