Foreign Housing Guaranty Program

Financial Condition Is Poor and Goals Are Not Achieved Gao ID: NSIAD-95-108 June 2, 1995

Since 1961, the Agency for International Development's Housing Guaranty Program has guarantied more than $2.7 billion in loans in 44 countries for home construction, mortgages, home improvements, urban infrastructure, and other shelter projects. A fundamental program goal is to increase housing for low-income families in developing countries by motivating local institutions to provide investment capital and other resources. However, Congress should consider terminating the program because it has failed to spur private-sector investment in low-income housing in developing countries, its benefits often go to higher-income persons, and its loan defaults may ultimately cost the U.S. government as much as $1 billion. Moreover, program assistance has gone increasingly to creditworthy developing nations that have ready access to international financing. GAO summarized this report in testimony before Congress; see: Foreign Housing Guaranty Program: Goals Are Not Achieved and Financial Condition Is Poor, by Frank C. Conahan, Senior Defense and International Affairs Advisor to the Comptroller General, before the Subcommittee on International Economic Policy and Trade, House Committee on International Relations. GAO/T-NSIAD-95-181, June 28, 1995 (11 pages).

GAO found that: (1) the profile of participating countries, as well as the types of projects funded have significantly changed since the program was introduced in early 1961; (2) the Housing Guaranty Program has lost millions annually, with a $1-billion total net program cost to the U.S. government; (3) the Housing Guaranty Program has not increased domestic investment capital because local entrepreneurs have failed to see the feasibility of investing in low-income shelter projects; (4) AID relies on unvalidated reports from borrowers to monitor the use of loan funds, and it cannot ensure that these funds actually benefit low-income families; (5) AID has not designed performance indicators to measure the program's progress in stimulating private investments and providing shelter to low-income families; and (6) Congress has authorized new loan guaranties and has appropriated about $50 million to cover probable loan default costs associated with the Housing Guaranty Program.

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.

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