	Introduction

The Department of Housing and Urban Development (HUD) has provided housing assistance for low-income households through numerous programs. In exchange for assistance from HUD, owners agreed to provide affordable housing to tenants for a period of time, anywhere from 20 to 50 years depending on the program. Efforts to maintain the affordability of the remaining HUD-assisted properties as their affordability restrictions come to an end are often referred to as "assisted housing preservation." This report focuses on assisted housing preservation efforts involving six specific HUD programs, three of which provided financing assistance to private owners through low-interest loans and/or mortgage insurance, and three of which provided rental assistance to owners. In some cases, property owners received both financing and rental assistance from HUD. The primary programs that used these incentives were the Section 202 loan program, the Section 221(d)(3) BMIR program, and the Section 236 program, each named for the section of the housing acts under which they were created. However, in order to attract developers to the Section 236 program, some contracts enabled owners to prepay their mortgages after 20 years. In addition, some tenants in Section 236 housing have their rents subsidized. Congress stopped providing funding for LMSA in FY1994. Under the Housing Preservation Program , HUD entered into project-based Section 8 contracts with owners of HUD-assisted multifamily properties (including Section 221(d)(3) and Section 236 insured mortgages) at risk of leaving the affordable housing stock as an incentive to owners keep their properties affordable. Financing Assistance: Mortgage Prepayment and Maturation

The federal affordability restrictions on assisted housing come to an end when owners prepay their mortgages (if prepayment is an option), when the mortgages mature, or if HUD chooses to terminate its contract with a housing provider. However, if the property is in poor condition, then the owner may not have the option to renew the contract, as HUD may choose not to renew. In some cases, families do not receive tenant protection or enhanced vouchers when affordability agreements end. While these laws are no longer in effect, the properties that went through their preservation processes are still governed by the agreements that were established at the time. Rental Assistance

			Section 8 Expiring Contracts, Renewals, and the Multifamily Assisted Housing Reform and Accountability Act (MAHRA)

Both ELIHPA and LIHPRHA were primarily focused on the stock of housing eligible for mortgage prepayment; neither law addressed another threat to the assisted housing stock identified in the 1987 Preservation Task Force report: the cost of renewing project-based rental-assistance contracts. A third possible cost may be providing incentives to owners to encourage them to maintain affordability or to sell to a purchaser who will. Roughly 42% are owned by for-profit owners. In recent years, particularly as concern about maturing mortgages has grown, there have been calls from low-income housing advocates, tenants'-rights organizations, and property owners to adopt policies that encourage preservation and expand the set of preservation tools available to HUD. Generally, when owners have received preservation incentives in the past they have been required to extend any affordability restrictions (for between five and 30 years, depending on the incentive) and, in some cases, renew any expiring rental-assistance contracts. Funding could also be provided for direct grants or loans to help preservation entities purchase and rehabilitate a property. In addition, the Administration has proposed a Rental Assistance Demonstration that is meant, in part, to preserve Rental Assistance Payment (RAP) program and Rent Supplement-subsidized units.
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 rental-assistance 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, HUD actions to promote preservation, and proposed legislation.