Search Penny Hill Press

Wednesday, January 26, 2011

Preservation of HUD-Assisted Housing

Maggie McCarty
Specialist in Housing Policy

Libby Perl
Specialist in Housing Policy

The term “assisted housing preservation” refers to public policy efforts to maintain the affordability of rental properties financed or subsidized by the Department of Housing and Urban Development (HUD) but owned by private for-profit or nonprofit organizations. Beginning in the late 1950s, HUD extended mortgage and/or rental assistance to owners, in exchange for which the owners agreed to make their units affordable to low- and, in some cases, moderate-income tenants. The agreements to maintain affordability, sometimes called “affordability restrictions,” were to last between 20 years and 50 years depending on the program. When these affordability restrictions come to an end, owners have the option to stop providing affordable housing to tenants. In some, but not all, cases, tenants living in units that are leaving the assisted housing stock receive housing vouchers that are meant to prevent their displacement.

Properties at issue in assisted housing preservation were developed through various programs. HUD provided mortgage assistance or direct loans to owners through the Section 202 loan program and the Section 236 and Section 221(d)(3) Below Market Interest Rate (BMIR) mortgage insurance programs, all named for the sections of the housing acts under which they were created. HUD also subsidized tenant rents through programs such as the Rent Supplement program, the Rental Assistance Payment program, and the Section 8 project-based rentalassistance program. In some cases, owners received both mortgage financing assistance and rental assistance.

Property owners that received mortgage financing assistance can end their federal obligation to provide affordable housing early by prepaying their mortgages (in some cases), or end it when the mortgage terms come to an end. Owners that entered into rental-assistance contracts with HUD can choose not to renew their contracts when they end. In some cases, HUD can choose to terminate assistance contracts with owners when properties are in poor physical or financial condition. In the past, Congress attempted to reduce the number of property owners that leave HUD-assisted housing programs by restricting owners’ abilities to prepay their mortgages. However, these laws (known by their acronyms, ELIHPA and LIHPRHA) faced legal challenges and are no longer in effect. Currently, the primary preservation tool available to HUD is the ability to restructure debt and rental assistance in Section 8 contracts, as authorized by the Multifamily Assisted Housing Reform and Accountability Act (MAHRA).

There have been several proposals to expand the tools available to HUD to help preserve assisted housing. Recent proposals would, in general, focus on incentives to owners to remain in HUD programs or to encourage “preservation purchasers” to buy the properties and maintain affordability. However, any new incentives will require additional funding. In a limited funding environment, questions regarding preservation include whether all properties can and should be preserved, and, if not, which should be the highest priority.

This report introduces the concept of assisted housing preservation, provides background information, and discusses current public policy issues and proposed legislation, including H.R. 4868, the Housing Preservation and Tenant Protection Act, which was reported out of the House Financial Services Committee, but not enacted before the end of the 111
th Congress; and S. 118, the Section 202 Supportive Housing for the Elderly Act, which was enacted by the 111th Congress.

Date of Report: January 3, 2011
Number of Pages: 57
Order Number: R41182
Price: $29.95

Follow us on TWITTER at or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.