Multifamily Housing: Issues Related to Mark-to-Market Program Reauthorization

A letter report issued by the General Accounting Office with an abstract that begins "The Office of Multifamily Housing Assistance Restructuring (OMHAR) administers the mark-to-market program, which was created to preserve the affordability of low-income rental housing while reducing the long-term costs of Section 8 project-based assistance. Legislative authorization for both the mark-to-market program and OMHAR is scheduled to terminate on September 30, 2001. If the legislative authority for the mark-to-market program provided for in Subtitle A of the Multifamily Assisted Housing Reform and Affordability Act of 1997 is allowed to expire, the Department of Housing and Urban Development (HUD) estimates it will have to reduce the rents to market levels of well over 1,000 properties without having the tools to mitigate the potential effects of such reductions. If the reduced rents do not provide sufficient revenues to cover the properties' operating expenses, mortgage payments, and repair needs, owners may be forced to reduce expenditures for maintenance or other operating expenses or may default on their mortgages. Such action could result in deteriorating property conditions and substantial claims against the Federal Housing Administration insurance fund, which, in turn, could adversely affect property residents and lead to a decrease in the supply of affordable housing. Transferring authority for the mark-to-market program to HUD's Office of Housing could potentially help facilitate the handling of some mark-to-market related functions that have required coordination between OMHAR and the Office of Housing. While the mark-to-market program has brought about successful and restructurings resulting in Section 8 savings at a number of properties, the requirement that rents be reduced to market has increased the risk of physical and financial problems at other properties.