Multifamily Housing
More Accessible HUD Data Could Help Efforts to Preserve Housing for Low-Income Tenants Gao ID: GAO-04-20 January 23, 2004The Department of Housing and Urban Development (HUD) has subsidized the development of over 23,000 properties by offering owners favorable long-term mortgage financing or rental assistance payments in exchange for owners' commitment to house low-income tenants. When owners pay off mortgages--the mortgages "mature"--the subsidized financing ends, raising the possibility of rent increases. GAO was asked to determine the number of HUD mortgages that are scheduled to mature in the next 10 years, the potential impact on tenants, and what HUD and others can do to keep these properties affordable.
Nationwide, the HUD mortgages on 2,328 properties--21 percent of the 11,267 subsidized properties with HUD mortgages--are scheduled to mature in the next 10 years, but among states this percentage varies significantly: from 7 percent in Alabama, to 53 percent in South Dakota. About three-quarters of these mortgages are scheduled to mature in the last 3 years of the 10-year period. A CD-ROM (GAO-04-210SP) that accompanies this report provides property-level data for subsidized properties with mortgages scheduled to mature. Impacts on tenants depend on tenant protections available under program statutes and regulations, as well as on property owners' decisions about their properties. While about 134,000, or 57 percent, of the rental units in the 2,328 properties are protected by rental assistance contracts, tenants in over 101,000 units without rental assistance are at risk of paying higher rents after mortgage maturity because no requirement exists to protect tenants when HUD mortgages mature. Absent specific requirements, property owners' decisions on whether to continue serving low-income tenants after their HUD mortgages mature depend on many factors, including neighborhood incomes, property conditions, and owners' missions. Of the 32 properties with HUD mortgages that matured during the past 10 years, 16 have rental assistance contracts that continue to subsidize at least some units, and 10 of the remaining 16 that GAO was able to contact offer rents that are affordable to tenants with incomes below 50 percent of area median income. HUD does not offer incentives to owners to keep properties affordable upon mortgage maturity. While many state and local agencies GAO surveyed offer incentives to preserve affordable housing, they have not directed them specifically at properties where HUD mortgages mature. Most of the agencies do not track HUD mortgage maturity dates for subsidized properties. In addition, although HUD's Web site contains detailed property-level data, some state and local agencies perceive that the information is not readily available. Refer to GAO-04-211SP for survey details.
RecommendationsOur 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: Team: Phone:GAO-04-20, Multifamily Housing: More Accessible HUD Data Could Help Efforts to Preserve Housing for Low-Income Tenants
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Report to the Committee on Financial Services, House of
Representatives:
January 2004:
MULTIFAMILY HOUSING:
More Accessible HUD Data Could Help Efforts to Preserve Housing for
Low-Income Tenants:
GAO-04-20:
GAO Highlights:
Highlights of GAO-04-20, a report to
the Committee on Financial Services, House of Representatives
Why GAO Did This Study:
The Department of Housing and Urban Development (HUD) has subsidized
the development of over 23,000 properties by offering owners favorable
long-term mortgage financing or rental assistance payments in exchange
for owners‘ commitment to house low-income tenants. When owners pay
off mortgages”the mortgages ’mature“”the subsidized financing ends,
raising the possibility of rent increases. GAO was asked to determine
the number of HUD mortgages that are scheduled to mature in the next
10 years, the potential impact on tenants, and what HUD and others can
do to keep these properties affordable.
What GAO Found:
Nationwide, the HUD mortgages on 2,328 properties”21 percent of the
11,267 subsidized properties with HUD mortgages”are scheduled to
mature in the next 10 years, but among states this percentage varies
significantly: from 7 percent in Alabama, to 53 percent in South
Dakota. About three-quarters of these mortgages are scheduled to
mature in the last 3 years of the 10-year period. A CD-ROM (GAO-04-
210SP) that accompanies this report provides property-level data for
subsidized properties with mortgages scheduled to mature.
Impacts on tenants depend on tenant protections available under
program statutes and regulations, as well as on property owners‘
decisions about their properties. While about 134,000, or 57 percent,
of the rental units in the 2,328 properties are protected by rental
assistance contracts, tenants in over 101,000 units without rental
assistance are at risk of paying higher rents after mortgage maturity
because no requirement exists to protect tenants when HUD mortgages
mature. Absent specific requirements, property owners‘ decisions on
whether to continue serving low-income tenants after their HUD
mortgages mature depend on many factors, including neighborhood
incomes, property conditions, and owners‘ missions. Of the 32
properties with HUD mortgages that matured during the past 10 years,
16 have rental assistance contracts that continue to subsidize at
least some units, and 10 of the remaining 16 that GAO was able to
contact offer rents that are affordable to tenants with incomes below
50 percent of area median income.
HUD does not offer incentives to owners to keep properties affordable
upon mortgage maturity. While many state and local agencies GAO
surveyed offer incentives to preserve affordable housing, they have
not directed them specifically at properties where HUD mortgages
mature. Most of the agencies do not track HUD mortgage maturity dates
for subsidized properties. In addition, although HUD‘s Web site
contains detailed property-level data, some state and local agencies
perceive that the information is not readily available.
What GAO Recommends:
To help state and local housing agencies track properties with
maturing mortgages, we recommend that the Secretary of HUD solicit the
views of state and local housing agencies to determine what
information on HUD-subsidized properties is needed and the most
effective format to convey this information.
GAO provided a draft of this report to HUD for comment. HUD agreed
with the report‘s conclusions and recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-20].
To view the full product, including the scope and methodology, click
on the link above.
To view the survey results (GAO-04-211SP), click on the following link
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-211SP]. To place
an order for a copy of the CD-ROM (GAO-04-210SP) with property-level
data, click on the following link
[Hyperlink, http://www.gao.gov/cgi-bin/ordtab.pl].
For more information, contact David G. Wood at (202) 512-8678 or
WoodD@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
About One-Fifth of HUD's Mortgages Are Scheduled to Mature through
2013:
Tenant Impacts Depend on Protections and Property Owners' Decisions:
Tools and Incentives Are Available to Help Keep Properties Affordable,
but Are Not Specifically Designed to Deal with HUD Mortgage Maturity:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Questions from December 10, 2002, Letter from the House
Committee on Financial Services:
Appendix III: Comments from the Department of Housing and Urban
Development:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Subsidized Properties with HUD Mortgages by Program Scheduled
to Mature through 2013:
Table 2: Subsidized Properties with HUD Mortgages Scheduled to Mature
through 2013, by Rental Assistance Program:
Table 3: Data for 16 Properties with Matured HUD Mortgages and without
Project-Based Rental Assistance Contracts:
Figures:
Figure 1: Universe of Subsidized Properties, 2003:
Figure 2: HUD Mortgages Scheduled to Mature Annually through 2013:
Figure 3: Subsidized Properties with HUD Mortgages Scheduled to Mature
through 2013, by State:
Figure 4: Percentage of HUD-Subsidized Mortgages within Each State
Scheduled to Mature through 2013:
Figure 5: Expiring Rental Assistance Contracts, 2003 through 2013:
Figure 6: Properties with Mortgages Scheduled to Mature and/or Expiring
Long-Term Rental Assistance Contracts, 2003 through 2013:
Figure 7: Assisted Units in Properties with Mortgages Scheduled to
Mature and/or Expiring Long-Term Rental Assistance Contracts, 2003
through 2013:
Figure 8: HUD Mortgages Scheduled to Mature on Properties without Rental
Assistance:
Figure 9: State and Local Agencies' Efforts to Identify and Track
Properties That May Leave HUD Programs:
Abbreviations:
BMIR: below-market interest rate:
CDBG: Community Development Block Grant:
COSCDA: Council of State Community Development Agencies:
FHA: Federal Housing Administration:
HUD: Department of Housing and Urban Development:
NALHFA: National Association of Local Housing Finance Agencies:
NCDA: National Community Development Association:
NCSHA: National Council of State Housing Agencies:
OMHAR: Office of Multifamily Housing and Restructuring:
RAP: Rental Assistance Payment program:
REAC: Real Estate Assessment Center:
REMS: Real Estate Management System:
TRACS: Tenant Rental Assistance Certification System:
Letter January 23, 2004:
The Honorable Michael G. Oxley:
Chairman:
The Honorable Barney Frank:
Ranking Minority Member:
Committee on Financial Services:
House of Representatives:
Since the 1950s, the Department of Housing and Urban Development (HUD)
has subsidized about 1.7 million rental units in over 23,000 privately
owned properties that are generally affordable to low-income tenants--
those with incomes 80 percent or less of area median income. HUD
supported the development of affordable housing by offering property
owners favorable mortgage financing, long-term rental assistance
contracts, or both in exchange for owners' commitment to house low-
income tenants for at least 20 years and, in some cases, up to 40
years. However, many of these commitment periods will be completed in
the next 10 years. Properties subsidized under these HUD programs
represent a significant source of housing that is currently affordable
to low-income households.
HUD programs that provide mortgage financing in subsidized properties
to private developers are known by the section of the act that
authorized them.[Footnote 1] We consider a property subsidized if HUD
provided favorable financing (below-market interest rate mortgages),
rental assistance, or both. They include the following programs:
* Section 202 Elderly and Disabled Housing Direct Loan, which provided
below-market interest rates on up to 40-year mortgages to developers of
rental housing for low-income elderly and persons with disabilities
from 1959 to 1991.[Footnote 2] Congress changed Section 202 to a grant
program in 1990;
* Section 221(d)(3) Below-Market Interest Rate (BMIR), which provided
subsidized financing on private 40-year mortgages to developers of
rental housing from 1961 to 1968;
* Section 236, which provided monthly subsidies to effectively reduce
interest rates on private 40-year mortgages for rental housing from
1968 to 1973;
* Sections 221(d)(3) and 221(d)(4), which insured private mortgages to
developers of rental housing from 1961; and:
* Section 231, which insured private mortgages to developers of rental
housing for the elderly from 1959.
Frequently, properties that benefited from HUD mortgages were coupled
with long-term rental assistance provided under various programs, such
as project-based Section 8, Rent Supplement, and Rental Assistance
Payment (RAP) programs. (The project-based Section 8 program also
provides rental assistance to owners of properties that were not
financed with HUD mortgages.) Rental subsidy was also provided through
the Section 8 Moderate Rehabilitation program, which is administered by
local housing authorities and tied to rehabilitated units. Rental
assistance programs basically pay property owners a portion of the
monthly rents for units occupied by assisted low-income tenants.
Subsidized financing, rental assistance, or a combination of both
allows property owners the opportunity to earn financial returns while
limiting the rents paid by low-income tenants to a fixed percentage of
their household incomes.
Both mortgages and rental assistance contracts are for set periods of
time, and subject to specific program provisions, properties become
eligible to leave HUD programs when mortgages mature or when HUD or
owners elect not to renew expiring rental assistance contracts. HUD
mortgages subsidized under Section 202, Section 221(d)(3) BMIR, and
Section 236 restrict how much rent an owner can charge. These
restrictions are generally effective until the mortgage is paid off.
Mortgages financed under Section 221(d)(3), Section 221(d)(4), and
Section 231 do not have similar requirements. In addition, certain
properties are eligible to leave HUD programs by paying off the
mortgage prior to the maturity date.
As agreed with your offices, this report provides information on (1)
the numbers and selected characteristics of HUD-subsidized rental
properties scheduled to reach mortgage maturity over the next 10 years;
(2) the potential impact on tenants when mortgages reach maturity; and
(3) the tools and incentives that HUD, the states, and localities offer
owners to keep HUD properties affordable when mortgages mature. The 10
questions contained in your December 10, 2002, letter and summary
answers are presented in appendix II.
To address these objectives, we analyzed HUD databases, including the
Real Estate Management System (as of April 2003), to identify the
characteristics of those properties with mortgages that have already
reached maturity as well as those scheduled to reach maturity by
December 31, 2013.[Footnote 3] We also interviewed HUD and housing
industry officials and reviewed literature on the preservation of low-
income housing. Because nationwide data on tools and incentives that
can be used to preserve affordable housing do not exist, we used a Web-
based questionnaire to survey 327 state and local housing and community
development agencies to determine what tools and incentives they use to
keep HUD-subsidized properties affordable to low-income tenants and
which of the tools and incentives they believed to be effective. We
received 226 usable responses, for a response rate of 69 percent. We
reviewed statutes and regulations, interviewed HUD officials, and
obtained relevant documents to identify tenants' protections when
mortgages mature in subsidized properties. Additional details on our
scope and methodology, including information on our survey design and
participants, are discussed in appendix I. We performed our work from
January through November 2003 in accordance with generally accepted
government auditing standards.
Results in Brief:
Nationwide, 21 percent (2,328) of the 11,267 subsidized properties with
HUD mortgages are scheduled to reach mortgage maturity through 2013
(see fig.1), but among states this percentage varies significantly:
from 7 percent in Alabama, to 53 percent in South Dakota. Nearly all of
these 2,328 properties were financed under the Section 236, Section
221(d)(3) BMIR, and Section 221(d)(3) programs, and about three-
quarters of these mortgages are scheduled to mature in the last 3 years
of the 10-year period.
Figure 1: Universe of Subsidized Properties, 2003:
[See PDF for image]
[End of figure]
Impacts on tenants depend in part on tenant protections available under
program statutes and regulations, as well as on owners' decisions about
their properties. No statutory requirement exists to protect tenants
from increases in rent when HUD mortgages mature, absent the existence
of rental assistance contracts or other subsidies. Without tenant
protection requirements, tenants in over 101,000 units under the
Section 202, Section 221(d)(3) BMIR, and Section 236 programs that do
not receive rental assistance may have to pay higher rents or move to
other housing when the HUD mortgages on these properties mature and
rent restrictions are lifted. Further, owners are not required to
notify tenants when a property's mortgage is about to mature. In
contrast, owners are required to notify tenants by up to 1 year in
advance of their intent to prepay mortgages or opt out of the rental
assistance contracts. Property owners' decisions on whether they
continue to serve low-income tenants after their HUD mortgages mature
depend on many factors, such as neighborhood incomes, the condition of
their properties, and owners' missions. During the past 10 years, HUD-
insured mortgages at 32 properties reached mortgage maturity, and the
majority of these properties are still serving low-income tenants.
HUD does not offer any tool or incentive to keep properties affordable
after HUD mortgages mature, although it does offer incentives to keep
properties affordable under certain other circumstances, such as the
expiration of rental assistance contracts or prepayment of HUD
mortgages. According to officials from the four national housing and
community development organizations we contacted, because few HUD
mortgages have matured to date, their member state and local agencies
have not experienced the need to develop programs to deal with mortgage
maturity specifically.[Footnote 4] However, they noted that their
member agencies could offer tools and incentives, such as loans and
grants, to keep properties affordable after mortgage maturity. Yet,
over 50 percent of the state and local agencies that responded to our
survey reported that they have no system in place to identify and track
properties that may leave HUD's programs, and about three-quarters of
them did not track the maturity dates of HUD mortgages.[Footnote 5]
This report contains recommendations to the Secretary of HUD intended
to help state and local housing agencies gain access to useful
information on HUD-subsidized properties, including mortgage maturity
dates.
Background:
Prior to the early 1970s, the federal government provided affordable
multifamily housing to low-and moderate-income households by
subsidizing the production of either privately owned housing or
government-owned public housing. Under the production programs, the
subsidy is tied to the unit (project-based), and tenants benefit from
reduced rents while living in the subsidized unit. These programs
include Section 202, Section 221(d)(3) BMIR, and Section 236. A portion
of the units in properties developed under these production programs
received rental assistance under programs such as Rent Supplement,
Rental Assistance Payments (RAP), and project-based Section 8 in order
to reach lower-income tenants.[Footnote 6]
In the early 1970s, questions were raised about the production
programs' effectiveness: many moderate-income tenants benefited from
federal assistance, while lower-income families did not; federal costs
of producing housing exceeded the private-sector costs to produce the
same services; and allegations of waste surfaced.[Footnote 7] Interest
in a more cost-effective approach led Congress to explore options for
using existing housing to shelter low-income tenants. The Housing and
Community Development Act of 1974, a major overhaul of housing laws,
included both approaches--a project-based new construction and
substantial rehabilitation program and a tenant-based rent certificate
program for use in existing housing (currently named the Housing Choice
Voucher program)--all referred to as Section 8 housing. Project-based
and tenant-based Section 8 assistance is targeted to tenants with
incomes no greater than 80 percent of area median income, and tenants
generally pay rent equal to 30 percent of adjusted household income.
Beginning in the late 1980s, owners of some subsidized properties began
to be eligible to leave HUD programs by prepaying their mortgages or
opting out of their project-based Section 8 rental assistance
contracts. Once these owners removed their properties from HUD
programs, they were no longer obligated to maintain low rents or accept
rental assistance payments. In response, in 1996, among other things,
Congress created a special type of voucher, known as an enhanced
voucher, to protect tenants from rent increases in these properties.
Enhanced vouchers differ from regular tenant-based housing vouchers in
two ways. Enhanced vouchers may provide a greater subsidy (that is, be
used to rent more expensive units) and give tenants a right to remain
in their unit after conversion to market rent, thus creating an
obligation for the owner to accept the voucher. So long as the rent
remains reasonable, the tenant's portion of the rent should:
not increase.[Footnote 8] If the tenant elects to move, the voucher
becomes a "regular" housing voucher and is subject to the program's
standard rent limits.
Not all property owners repay mortgages as originally scheduled. For
example, an owner may refinance the mortgage to pay for improvements to
the property. Other owners may experience financial difficulties and
default on their mortgages. From January 1993 through December 2002,
for example, HUD data show that the agency terminated the insurance on
231 mortgages. About 14 percent were due to mortgages that matured;
other reasons included owners' prepayment of the mortgage (37 percent)
and foreclosure (22 percent).
Funds provided by other federal programs can be used by states and
localities to subsidize housing for low-income tenants. The CDBG
program, authorized by the Housing and Community Development Act of
1974, distributes grants to local and state governments for community
development activities. Rehabilitation and other housing activities now
consistently represent the largest single use of CDBG funds. Other
funds for housing production have been made available through the HOME
program, authorized by the Cranston-Gonzalez National Affordable
Housing Act of 1990, which awards block grants to state and local
governments primarily for the development of affordable housing. Under
the Low-Income Housing Tax Credit Program, authorized by the Tax Reform
Act of 1986, state housing finance agencies provide tax incentives to
private investors to develop housing affordable to low-income tenants.
In addition to using their HOME and CDBG allocations as well as tax
credits, some states and localities have established housing trust
funds and other financial mechanisms, which have helped organizations
acquire subsidized properties that may leave HUD's programs. Further,
the states and localities may use other tools and incentives, such as
offering property tax relief, to encourage owners to keep serving low-
income tenants.
About One-Fifth of HUD's Mortgages Are Scheduled to Mature through
2013:
Nationwide, 21 percent (2,328) of the 11,267 subsidized properties with
HUD mortgages are scheduled to mature through 2013. The percentage
varies significantly by state: from 7 percent in Alabama, to 53 percent
in South Dakota. Nearly all of these 2,328 properties were financed
under the Section 236, Section 221(d)(3) BMIR, and Section 221(d)(3)
programs, and about three-quarters of these mortgages are scheduled to
mature in the last 3 years of the 10-year period. The remaining 79
percent of HUD's outstanding mortgages in subsidized properties are
scheduled to mature after 2013.
Scheduled Mortgage Maturities through 2013 Vary by Year and Program:
Of the 11,267 subsidized properties (containing 914,441 units) with HUD
mortgages, 21 percent (2,328 properties) have mortgages that are
scheduled to mature through 2013. The remaining 79 percent of these
mortgages are scheduled to reach maturity outside of the 10-year
period. Additionally, the bulk of these mortgages (about 75 percent)
are scheduled to mature in the latter 3 years of the 10-year period
(see fig. 2). This concentration in the latter part of the 10-year
period is attributable to the 40-year Section 221(d)(3) BMIR and
Section 236 mortgages that HUD helped finance in the late 1960s and
1970s, respectively.
Figure 2: HUD Mortgages Scheduled to Mature Annually through 2013:
[See PDF for image]
[End of figure]
As table 1 shows, about 57 percent of the properties with mortgages
scheduled to mature in the 10-year period were financed under Section
236, 22 percent under Section 221(d)(3) BMIR, and 19 percent under
Section 221(d)(3). Section 202, Section 221(d)(4), and Section 231
accounted for only 3 percent of these properties.
Table 1: Subsidized Properties with HUD Mortgages by Program Scheduled
to Mature through 2013:
Financing program: HUD subsidized mortgage: Section 236;
Number of properties: HUD subsidized mortgage: 1,333;
Percentage of properties: 57%;
Total units: 139,769;
Units assisted with project-based Section 8[A]: 78,139.
Financing program: HUD subsidized mortgage: Insured;
Number of properties: HUD subsidized mortgage: 1,333;
Percentage of properties: 57%;
Total units: 139,769;
Units assisted with project-based Section 8[A]: 78,139.
Financing program: HUD subsidized mortgage: Noninsured[B];
Number of properties: HUD subsidized mortgage: 0;
Percentage of properties: 0%;
Total units: 0;
Units assisted with project-based Section 8[A]: 0.
Financing program: HUD subsidized mortgage: Section 221(d)(3) BMIR;
Number of properties: HUD subsidized mortgage: 502;
Percentage of properties: 22%;
Total units: 56,573;
Units assisted with project-based Section 8[A]: 18,810.
Financing program: HUD subsidized mortgage: Section 202;
Number of properties: HUD subsidized mortgage: 41;
Percentage of properties: 2%;
Total units: 3,208;
Units assisted with project-based Section 8[A]: 871.
Financing program: HUD unsubsidized mortgage: Section 221(d)(3);
Number of properties: HUD subsidized mortgage: 431;
Percentage of properties: 19%;
Total units: 35,263;
Units assisted with project-based Section 8[A]: 34,711.
Financing program: HUD unsubsidized mortgage: Section 221(d)(4);
Number of properties: HUD subsidized mortgage: 14;
Percentage of properties: [ C];
Total units: 1,239;
Units assisted with project-based Section 8[A]: 1,146.
Financing program: HUD unsubsidized mortgage: Section 231;
Number of properties: HUD subsidized mortgage: 7;
Percentage of properties: [C];
Total units: 598;
Units assisted with project-based Section 8[A]: 410.
Financing program: HUD unsubsidized mortgage: Noninsured rent
supplement;
Number of properties: HUD subsidized mortgage: [D];
Percentage of properties: [D];
Total units: [D];
Units assisted with project-based Section 8[A]: [D].
Total;
Number of properties: HUD subsidized mortgage: 2,328;
Percentage of properties: 100%;
Total units: 236,650;
Units assisted with project-based Section 8[A]: 134,087.
Source: GAO analysis of HUD data.
[A] Also included are units that receive RAP or Rent Supplement.
Project-based Section 8, however, is the dominant form of rental
assistance across all financing programs. The Section 8 Moderate
Rehabilitation program is not included in this table because HUD's
multifamily database does not track this program.
[B] No mortgage was scheduled to mature in this period.
[C] Less than 1 percent.
[D] Since properties with noninsured rent supplement do not carry a HUD
mortgage, HUD does not track mortgage-level data on these properties.
[End of table]
Number of Mortgages Scheduled to Mature through 2013 Also Varies by
State:
The number of mortgages scheduled to mature through 2013 varies greatly
by state (see fig. 3). Although the average is 46 per state (including
the District of Columbia), the number ranges from a high of 273
maturing mortgages in California, to 3 in Vermont.
Figure 3: Subsidized Properties with HUD Mortgages Scheduled to Mature
through 2013, by State:
[See PDF for image]
Note: The map shown here includes 2,311 of the 2,328 properties in our
analysis--excluded are properties in territories of the United States,
such as Puerto Rico and Guam.
[End of figure]
Further, while 21 percent of HUD mortgages on subsidized properties
nationwide are scheduled to mature through 2013, individual states have
significantly different shares of these mortgages. Figure 4 shows the
proportion of each state's inventory of properties with HUD mortgages
scheduled to mature in the 10-year period. The percentage varies
significantly by state: from 7 percent in Alabama, to 53 percent in
South Dakota. The CD-ROM that accompanies this report provides detailed
property-level data that allows the users to perform similar analyses
to track mortgage maturity by state or other location (congressional
district or metropolitan area), as well as by other variables such as
property category or rental assistance program.
Figure 4: Percentage of HUD-Subsidized Mortgages within Each State
Scheduled to Mature through 2013:
[See PDF for image]
[End of figure]
More HUD Mortgages Are Scheduled to Mature after 2013:
Over 8,900 properties, containing almost 680,000 units, have
outstanding HUD mortgages scheduled to mature after 2013. Most of these
mortgages were financed under the Section 202, Section 221(d)(4), and
Section 236 programs. About 85 percent of the 680,000 units receive
rental assistance. Many of these rental assistance contracts will be
expiring through 2013. Specifically, 8,166 properties with HUD
mortgages have rental assistance contracts expiring through 2013,
affecting about 530,000 assisted units. Thus, while mortgages are not
scheduled to mature during the period, these properties have tenants
who could potentially face rent increases.
According to HUD data, in the next 10 years, rental assistance contract
expiration will affect a total of 18,048 properties--10,382 with HUD
mortgages and another 7,666 without HUD mortgages--containing almost
1.1 million assisted units. Most of these long-term contracts are set
to expire in the near future--before the end of 2007 (see fig. 5).
Figure 5: Expiring Rental Assistance Contracts, 2003 through 2013:
[See PDF for image]
Note: The data only reflect long-term contract expirations and not
expected annual renewals of these contracts.
[End of figure]
When long-term rental assistance contracts expire, HUD may renew them.
Currently, HUD generally renews expiring long-term contracts on an
annual basis but may go as long as 5 years, and in some cases, 20
years. According to HUD, during the late 1990s, about 90 percent of the
property owners renewed their contracts, thereby continuing to provide
affordable housing. A 2001 publication by AARP reported that if past
trends continue, 85 to 90 percent of contracts will be
renewed.[Footnote 9] The extent to which the trend continues will
depend on the availability of program funding and housing market
conditions.
As shown in figure 6, mortgage maturity and rental assistance contract
expiration will affect a total of 18,553 properties through 2013:
* 505 properties will be affected by maturing mortgages only (480 of
these are not covered by rental assistance contracts, and the remaining
25 have rental assistance contracts that expire outside of our 10-year
window).
* 1,823 properties will be affected by both events (because they have
rental assistance contracts set to expire and HUD mortgages scheduled
to mature by 2013).
* 16,225 properties will be affected by expiring rental assistance
contracts only (8,166 of these have HUD mortgages, but the mortgages
are not scheduled to mature until after 2013).
Figure 6: Properties with Mortgages Scheduled to Mature and/or Expiring
Long-Term Rental Assistance Contracts, 2003 through 2013:
[See PDF for image]
Note: The 18,553 properties represent about 81 percent of the 23,051
HUD-subsidized properties.
[End of figure]
There are about 1.1 million assisted units in those properties with
mortgages maturing or rental assistance expiring in the 10-year period.
These units make up nearly 81 percent of all assisted units in HUD's
inventory. As figure 7 shows, about 48,000 units are in properties with
maturing mortgages only, about 951,400 assisted units are in properties
that have expiring rental assistance only, and about 132,600 assisted
units (out of the approximate 188,600 total units) are in properties
with both mortgages maturing and rental assistance expiring in the 10-
year period.
Figure 7: Assisted Units in Properties with Mortgages Scheduled to
Mature and/or Expiring Long-Term Rental Assistance Contracts, 2003
through 2013:
[See PDF for image]
Note: 48,045 units with maturing HUD mortgages only are not assisted:
[End of figure]
Tenant Impacts Depend on Protections and Property Owners' Decisions:
Over the next 10 years, low-income tenants in over 101,000 units may
have to pay higher rents or move to more affordable housing when HUD-
subsidized mortgages reach maturity. This is because no statutory
requirement exists to protect tenants from increases in rent when HUD
mortgages mature and rent restrictions are lifted. Over the next 10
years, 480 subsidized properties that do not have rental assistance
contracts are scheduled to reach mortgage maturity. Unassisted tenants
in some of these properties are at risk of not being able to afford
their units if rents are raised. The remaining 1,848 subsidized
properties with HUD mortgages scheduled to mature through 2013 have
rental assistance contracts, and the protections against rent increases
offered under the rental assistance programs will apply. However, not
all units in these properties are covered by the rental assistance
contracts, thus limiting the number of tenants protected. A number of
factors may affect owners' decisions regarding the continued
affordability of their properties after mortgages mature, including
neighborhood incomes, physical condition of the property, and owners'
missions. While experience with mortgage maturity has been limited, 16
of the 32 subsidized properties that reached mortgage maturity in the
past 10 years are still serving low-income tenants through project-
based Section 8 rental assistance contracts. Additionally, at least 10
of the remaining properties that reached mortgage maturity over the
past 10 years are still serving low-income tenants.
HUD Does Not Offer Protection for Unassisted Tenants in Properties with
Maturing Mortgages:
There is no statutory requirement for HUD to offer tenants special
protections, such as enhanced vouchers, when a HUD mortgage matures.
However, tenants who receive rental assistance in properties with
maturing mortgages would be eligible for enhanced vouchers under rental
assistance programs such as project-based Section 8.
Of the 2,328 subsidized properties with mortgages scheduled to mature
through 2013, 480--containing 45,011 units--do not have rental
assistance contracts (see table 2). While the remaining 1,848
properties are subsidized with rental assistance, not all units within
the properties are covered. According to HUD data, about 30 percent of
the units in these properties are not covered--a total of 57,552 units
with tenants who do not receive rental assistance. Altogether then, the
tenants in a total of 102,563 units are not protected under the rental
assistance programs. Of these, 101,730 units under Section 202, Section
221(d)(3) BMIR, and Section 236 could face higher rents after mortgage
maturity when the rent restrictions under these programs are lifted.
Table 2: Subsidized Properties with HUD Mortgages Scheduled to Mature
through 2013, by Rental Assistance Program:
Number of properties:
Financing program: HUD subsidized mortgage: Section 236;
Number of properties: None: 166;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 1,123;
Number of properties: Rental assistance program[A]:
Rent Supplement: 40;
Number of properties: Rental assistance program[A]:
Other[B]: 4;
Number of properties: Total: 1,333.
Financing program: HUD subsidized mortgage: Insured;
Number of properties: None: 166;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 1,123;
Number of properties: Rental assistance program[A]:
Rent Supplement: 40;
Number of properties: Rental assistance program[A]:
Other[B]: 4;
Number of properties: Total: 1,333.
Financing program: HUD subsidized mortgage: Noninsured[C];
Number of properties: None: 0;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 0;
Number of properties: Rental assistance program[A]:
Rent Supplement: 0;
Number of properties: Rental assistance program[A]:
Other[B]: 0;
Number of properties: Total: 0.
Financing program: HUD subsidized mortgage: Section 221(d)(3) BMIR;
Number of properties: None: 294;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 206;
Number of properties: Rental assistance program[A]:
Rent Supplement: 2;
Number of properties: Rental assistance program[A]:
Other[B]: 0 ;
Number of properties: Total: 502.
Financing program: HUD subsidized mortgage: Section 202;
Number of properties: None: 20;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 14;
Number of properties: Rental assistance program[A]:
Rent Supplement: 5;
Number of properties: Rental assistance program[A]:
Other[B]: 2;
Number of properties: Total: 41.
Financing program: HUD unsubsidized mortgage: Section 221(d)(3);
Number of properties: None: 0 ;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 403;
Number of properties: Rental assistance program[A]:
Rent Supplement: 28;
Number of properties: Rental assistance program[A]:
Other[B]: 0;
Number of properties: Total: 431.
Financing program: HUD unsubsidized mortgage: Section 221(d)(4);
Number of properties: None: 0 ;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 14;
Number of properties: Rental assistance program[A]:
Rent Supplement: 0 ;
Number of properties: Rental assistance program[A]:
Other[B]: 0 ;
Number of properties: Total: 14.
Financing program: HUD unsubsidized mortgage: Section 231;
Number of properties: None: 0 ;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 6;
Number of properties: Rental assistance program[A]:
Rent Supplement: 1;
Number of properties: Rental assistance program[A]:
Other[B]: 0 ;
Number of properties: Total: 7.
Financing program: HUD unsubsidized mortgage: Noninsured rent
supplement;
Number of properties: None: [D];
Number of properties: Rental assistance program[A]:
Project-based Section 8: [D];
Number of properties: Rental assistance program[A]:
Rent Supplement: [D];
Number of properties: Rental assistance program[A]:
Other[B]: [D];
Number of properties: Total: [D].
Total;
Number of properties: None: 480;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 1,766;
Number of properties: Rental assistance program[A]:
Rent Supplement: 76;
Number of properties: Rental assistance program[A]:
Other[B]: 6;
Number of properties: Total: 2,328.
Percent of total;
Number of properties: None: 21%;
Number of properties: Rental assistance program[A]:
Project-based Section 8: 76%;
Number of properties: Rental assistance program[A]:
Rent Supplement: 3%;
Number of properties: Rental assistance program[A]:
Other[B]:
