Summary: About 8,600 privately owned multifamily properties with federally insured mortgages totaling nearly $18 billion received federal rental subsidies for all or some of their apartments under the Department of Housing and Urban Development's (HUD) Section 8 program. For subsidized apartments, HUD pays the difference between the rent and 30 percent of the household's income. The rents at many properties exceed market levels, resulting in high subsidies. To reduce costs and address other problems, HUD has proposed adjusting the rents to market levels and writing down mortgages as needed to allow the properties to operate at market rents. In essence, HUD's proposal recognizes a reality that has persisted for some time--namely, that many of the properties in the insured Section 8 portfolio are worth far less than their mortgages suggest. This report examines the (1) problems affecting the properties in HUD's insured Section 8 portfolio and HUD's plans for addressing them, (2) results and reasonableness of a study done by Ernst & Young assessing the effects of HUD's proposal on the properties in the portfolio, and (3) key issues facing Congress as it assesses HUD's proposal.
