oversight

Rental Housing: Inefficiencies From Combining Moderate Rehabilitation and Tax Credit Subsidies

Published by the Government Accountability Office on 1990-06-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   1_Jnitd   States   Gt?neral   Accounting   Office               -___
    -----   ,
                   Report to the Chairman, Subcommittee                                         __ :
    G;AO           on HUD/Mod Rehab Investigati.on,                                             ’
                   Committee on Banking, Housing and
                   Urban Affairs, U.S. Senate
I




                   RENTAL HOUSING
\
    eJUIIC* 1 WO

u
1
1
                   Inefficiencies From
                   Combining Moderate
                   Rehabilitation and Tax
                   Credit Subsidies
                                                                         ._.              ,‘
                                                                                          I!!




                                                                       IIIIIlllllII
                                                                          141684
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20648
                                                                                                -
                   Resources, Community, and
                   Economic Development Division

                   B-236205

                   June 19,199O

                   The Honorable Bob Graham
                   Chairman, Subcommittee on HUD/Mod
                     Rehab Investigation
                   Committee on Banking, Housing and Urban
                     Affairs
                   United States Senate

                   Dear Mr. Chairman:

                   You requested information on the financial implications of combining
                   subsidies under the Department of Housing and Urban Development’s
                   (HUD) Moderate Rehabilitation Program with the Department of the
                   Treasury’s Low-Income Housing Tax Credit Program. For eight housing
                   projects for which sufficient data were available, we agreed to (1) esti-
                   mate the cash flows (cash proceeds) that developers/owners realized by
                   combining mortgage loans secured by Moderate Rehabilitation Program
                   rental subsidies with the proceeds from low-income housing tax credits
                   and (2) estimate how many additional rental units could have been sub-
                   sidized had the same level of federal assistance been provided through
                   the Section 8 Certificate or Voucher Programs.


                   Developers for the eight projects generally realized cash proceeds that
Results in Brief   greatly exceeded their costs for acquiring and rehabilitating the proper-
                   ties. These proceeds ranged from about $3,800 to $13,700 per unit and
                   represent 11 to 34 percent of the projects’ acquisition and development
                   costs. Developers generated the proceeds by selling their ownership
                   interests in the projects along with the related tax credits and then com-
                   bining these proceeds with mortgage loans secured by moderate rehabil-
                   itation rental subsidies.

                   We believe that federal housing resources were used inefficiently on
                   these projects for two reasons. First, by combining subsidies under the
                   Moderate Rehabilitation Program with low-income housing tax credits,
                   project developers received more assistance than needed to ensure the
                   projects’ financial viability or to compensate them for their limited
                   financial risk. Second, the use of both of these programs was questiona-
                   ble because the projects were located in areas with ample vacant units.
                   Rents in these areas were generally well below the established rents for
                   the eight projects; thus, housing certificates or vouchers could have been
                   provided at lower per-unit costs to the government. We estimate that


                   Page 1                                         GAO/RCEB90-168   Rental Housing
                                                                                                   !A


             B-230206                                                                                   I




             more than twice as many housing units could have been subsidized for
             the same cost to develop these projects had Section 8 certificates or
             vouchers been made available and used.

             Recent legislative changes prohibit joint use of the Moderate Rehabilita-
             tion and Tax Credit Programs, and require that state agencies develop
             and use allocation plans to distribute tax credits. In conjunction with
             these changes, we believe that HUD and state agencies should ensure that
             these subsidies are targeted to areas in actual need of additional rental
             housing units and not to areas where suitable available units exist.


             On August 2 and September 29, 1989, we testified before the Senate
Background   Committee on Banking, Housing, and Urban Affairs regarding our pre-
             liminary analysis of cash flows to the developers of the eight projects
             discussed in this report1 On February 27, 1990, we testified before your
             Subcommittee on HUD/Mod Rehab Investigation on our detailed findings
             concerning one of the projects, Sierra Pointe, located in Clark County,
             Nevada.2 Each of these hearings explored the effects of combining fed-
             eral subsidies provided under the Moderate Rehabilitation and Tax
             Credit Programs,

             The Moderate Rehabilitation Program was initiated to preserve and
             upgrade the supply of rental units for low-income families. The program
             provides incentives for owners and developers to make improvements to
             existing structures so they can be brought up to HUD’Slivability stan-
             dards. Under the program, owners agree to upgrade substandard rental
             housing in exchange for guaranteed rental subsidies for 15 years. A
             recent legislative change revised the minimum required expenditure for
             improvements from $1,000 to $3,000 per unit.

             Once a project is selected for the program and rehabilitated, the owner
             enters into a rental contract that specifies rents for units in the project.
             Within specified limits, the rents are set at a level high enough to oper-
             ate the project and service the debt associated with rehabilitating the
             project. The low-income family generally pays rent equal to 30 percent
             of its adjusted income, and HUD subsidizes the difference between this
             amount and the contract rent.

                      veloper Cash Flows Under HUD’s Section 8 Moderate Rehabilitation Program (GAO/T-
                     68, Aug. 2, 1989) and Improving the Efficiency of Federal Housing Subsidies (GAO/T-
             RCED-89-72, Sept. 29, 1989).
             “Use of Housing Subsidies (GAO/T-RCED-90-34, Feb. 27,199O).



             Page 2                                                        GAO/RCED-90-168   Rental Housing
 \                 B23020S




                   Low-income housing tax credits were initially authorized in the Tax
                   Reform Act of 1986 as a 3-year program to provide incentives for pri-
                   vate investment in low-income housing at a time when many prior tax
                   benefits for real estate development, such as accelerated depreciation,
                   were eliminated. Credit allocation agencies in each state were charged
                   with establishing an allocation process to parcel out tax credits to indi-
                   vidual projects. In late 1989, legislation was passed that extended the
                   Tax Credit Program through calendar year 1990, and placed greater
                   responsibility on state credit allocation agencies for administering the
                   program. This legislation also prohibited using the Tax Credit Program
                   in combination with the Moderate Rehabilitation Program. (App. I pro-
                   vides more detail on the Moderate Rehabilitation and Tax Credit
                   Programs.)


                   We estimate that the developers of the eight projects we reviewed gener-
Developers’ Cash   ated cash proceeds that exceeded their acquisition/rehabilitation   costs
Flows Greatly      by 11 to 34 percent. These proceeds ranged from about $287,500 for a
Exceeded Project   36-unit project to about $2.2 million on a 352-unit project. Proceeds per
                   unit ranged from about $3,800 to $13,700.
costs
                   Developers generated these proceeds by combining mortgage loan funds
                   secured by Moderate Rehabilitation rental subsidies with the proceeds
                   from investors seeking low-income housing tax credits. Federal subsidies
                   were provided by different administering agencies such as HUD, state tax
                   credit allocation agencies, and local governments, with little or no cen-
                   tralized oversight of the total benefits package provided to any individ-
                   ual project. (App. II summarizes the estimated cash proceeds to
                   developers for each of the projects reviewed)

                   Developers assumed less risk than is usually encountered in private
                   development activities because under the Moderate Rehabilitation Pro-
                   gram, rental income was guaranteed for 15 years. In addition, because
                   the mortgage loans were government insured, developers could maxi-
                   mize their borrowing capacity and thereby minimize their own cash
                   investment. We could not identify any standards or guidelines governing
                   allowable returns on investment for developing these types of properties
                   with government financial assistance. However, we believe that devel-
                   opers of the projects we reviewed, by combining benefits from both the
                   Moderate Rehabilitation and Tax Credit Programs, generally received
                   more federal subsidies than necessary to ensure the projects’ financial
                   feasibility, given that certain normal project risks were minimized.



                   Page 3                                          GAO/RCED-SW-168   Rental Housing
                                                                                                   1
                     B-236206




                     In an April 1989 report,3 HUD’S Office of the Inspector General (OIG)
                     noted that the rehabilitation costs upon which the rental subsidies were
                     based were improperly inflated, which led to excessive rental subsidy
                     payments from HUD. According to the report, excessive subsidies for the
                     eight projects we reviewed could total as much as $25 million over the
                     15-year life of the subsidies.


                     It would have been more economical to rely on existing rental housing
Inefficient Use of   subsidized by Section 8 certificates and/or vouchers rather than devel-
Housing Subsidies    oping the eight projects we reviewed. Certificates and vouchers subsi-
                     dize the rent payments of low-income households in existing, privately
                     owned housing by paying a portion of recipients’ actual rents. The Mod-
                     erate Rehabilitation and Tax Credit Programs are designed to provide
                     for an adequate supply of low-income housing units, ideally in markets
                     with a shortage of suitable rental units. In housing markets with an ade-
                     quate supply of rental units, but where the problem is one of
                     affordability, then the use of the existing housing supply with tenant-
                     based Section 8 housing certificates or vouchers becomes a preferred,
                     and less costly form of assistance. In the markets where the eight
                     projects were located, most or all of the authorized certificates or vouch-
                     ers were being effectively used by tenants that needed low-income
                     housing.

                     This is best explained by an example used in our February 27, 1990,
                     testimony before your Subcommittee. The 160-unit Sierra Pointe project
                     in Clark County, Nevada, had a $596-per-month rent established for
                     two-bedroom units based on the costs associated with project rehabilita-
                     tion under the Moderate Rehabilitation Program. Subsidies at this rent
                     level, when adjusted for inflation and combined with awarded tax cred-
                     its, will total about $23 million over the 15-year subsidy period. In con-
                     trast, other two-bedroom units in Clark County were renting for about
                     $426 per month. Subsidizing rents with certificates for 160 units and
                     adjusting for inflation would have required only about $9 million over
                     15 years.

                     Looking at the situation another way, about 387 families could have
                     been assisted for the same amount of federal subsidy ($23 million)
                     required to assist 160 families at Sierra Pointe. This represents an
                     increase of about 142 percent, or 227 additional households. The same
                     situation existed, to different degrees, at the other seven projects we

                     :sHUD OIG Report 89-TS-103-0006, Apr. 26, 1989.




                     Page 4                                            GAO/RCED-90-168   Rental Housing
    ,                                               B-236206




                                                    reviewed. Table 1 summarizes, for the projects reviewed, the additional
                                                    units that could have been subsidized for the same government invest-
                                                    ment using Section 8 certificates or vouchers, assuming they were
                                                    available.


Table 1: Additional Units That Could Have Been Subsidized Using Section 8 Certificates/Vouchers
                                                                                                          Additional units      -
Project name                     Project location
                             ..__--..                                   Actual    Using Sec. 8      Number                 Percent
i4es.t Dade         . -~ ..-~---.-Dade County, Fla. --                     122            166            44                       36
sun G&d&            ~-          Tulsa, Okla.                               207            370           163                       79
Sierra Vista                    Denver, Cola.        ___-                  209            583           374                      179
Pebble Creek                    Arlington,
                              _- ..- _--     Tex.
                                               --_     ---_                352            565           213                       61
Gait. Gardens                   Las Vegas, Nev.                            166            412           246                      148
Wind&g         ~. _     .---. ~~Tulsa,   Okla.
                                   _.~______________.                      202            390           188                       93
Cleveland Gardens               Las Vegas, Nev.             .______--       36             91            55                      153
Sierra
._     Pointe                   Clark County, Nev.
                               .---~-                                      160            387           227                      142
Total           -                                                        1,454          2,964         1,510                      104


                                                    It should be noted that the greater efficiency of the Section 8 certifi-
                                                    cates/vouchers in these instances was due to the rental housing markets
                                                    where the projects were located. Our data show that in each market
                                                    area, there were probably as many as several thousand vacant units.
                                                    Five of the projects were in markets characterized by the Congressional
                                                    Research Service as weak to very weak, i.e., with vacancy rates ranging
                                                    from 12 to 18 percent. While we could not go back in time to determine
                                                    the actual condition of available units in these markets, we believe it is
                                                    reasonable to assume that a sufficient number of suitable units would
                                                    have been available to house the residents of the eight projects.


                                                    The Congress and HUD have taken steps to better control subsidies under
Recent Reforms to                                   the Moderate Rehabilitation and Tax Credit Programs in response to sit-
Housing Subsidy                                     uations illustrated by the eight projects we reviewed. In general, moder-
Programs                                            ate rehabilitation and tax credit subsidies had in the past been awarded
                                                    with little regard for the total amount of combined benefits. In many
                                                    instances, rental subsidies under the Moderate Rehabilitation Program
                                                    were awarded up to the maximum amount allowed by regulation. Simi-
                                                    larly, tax credits were awarded up to the maximum amount allowable on
                                                    a “first-come, first-served” basis rather than on the needs or merits of
                                                    individual projects.




                                                    Page 5                                         GAO/RCED-90-168   Rental Housing
                     R-236206




Public Law 101-239   One step that the Congress took to control housing subsidies was passing
                     Section 7108 of the Omnibus Budget Reconciliation Act of 1989 (P.L.
                      101-239, Dec. 19, 1989), which extended the Tax Credit Program
                     through calendar year 1990 and prohibited using tax credits in combina-
                     tion with the Moderate Rehabilitation Program. The act also placed
                     greater responsibility on state credit allocation agencies for administer-
                     ing tax credits.

                     State allocating agencies are now required to prepare allocation plans
                     for selecting projects to receive tax credits. The agencies also must iden-
                     tify other financial assistance being provided to a project and take this
                     into consideration in deciding the amount of tax credits to be awarded.

                     The allocation plans prepared by the states will establish the priorities
                     used in selecting projects to receive credits. Local housing needs will be
                     translated into credit priorities considering location, housing needs, and
                     other factors. The objective is to ensure that credit allocations are made
                     to the most worthy projects in amounts needed for project feasibility
                     and long-term viability.

                     Under the revised program, all project funding sources and uses must be
                     disclosed to and reviewed by the state credit allocation agency. The allo-
                     cation agency is to determine first if there is a shortfall in project fund-
                     ing, and award credits on the basis of the amount needed to complete
                     project financing within allowable program limits.


Public Law 101-235   Section 127 of the Department of Housing and Urban Development
                     Reform Act of 1989 (P.L. 101-235, Dec. 151989) made several changes
                     designed to improve the efficiency of the Moderate Rehabilitation Pro-
                     gram. Among these was a requirement that program subsidies be
                     awarded on a competitive basis.

                     As of May 15,1990, HUD had not requested continued funding of the
                     program or drafted regulations to implement the new Moderate Rehabil-
                     itation Program requirements. However, as part of HUD’S homeless pro-
                     gram efforts, moderate rehabilitation subsidies in fiscal year 1990 will
                     be used for single-room occupancy units for the homeless and instances
                     involving natural disasters.


                     A basic purpose of the Moderate Rehabilitation and Tax Credit Pro-
Conclusions          grams is to provide for an adequate supply of housing units for low-


                     Page 6                                          GAO/RCED-90-168   Rental Housing
  )
                       B-280205




                       income households. In the past, developers have combined these benefits
                       to generate cash flows that greatly exceeded their property acquisition
                       and rehabilitation costs. Recent legislative changes address this prob-
                       lem. However, as illustrated by the cases we reviewed, these programs
                       also have been used in housing markets with a surplus of available
                       units. In such market areas, more households could have been served if
                       they had been provided with Section 8 certificates or vouchers to help
                       them afford to rent vacant units that already existed.

                       Certificates and vouchers are generally a more efficient means of pro-
                       viding housing to low-income households in areas where there is an ade-
                       quate supply of suitable vacant units renting at or below the area’s fair
                       market rents.

                       Recent program changes have addressed the problems associated with
                       the combined use of moderate rehabilitation and tax credit subsidies and
                       have sought to improve the allocation of these benefits. However, in
                       implementing these and future program changes, the Congress, state
                       credit allocation agencies, and HUD may wish to give special attention to
                       ensuring that these programs are used only in markets where an insuffi-
                       cient number of suitable rental units are available.


                        Tax credits are used to produce low-income housing units either through
Matters for             new construction or rehabilitation of existing units. Accordingly, the
Consideration by the   “Congress may wish to consider restricting the use of tax credits gener-
Congress                ally to areas where vacancy rates are low for suitable units renting at or
                        below the area’s fair market rents, The Congress could further require
                        that any deviation from this policy by a state credit allocation agency be
                        documented and subject to review by an authorized representative of
                        the federal or state government.


                       Our review was conducted between September 1989 and February 1990
                       in accordance with generally accepted government auditing standards.
                       We gathered pertinent data on eight selected projects that received both
                       Moderate Rehabilitation Program subsidies and low-income housing tax
                       credits. In analyzing the data on these projects, we consulted with a
                       variety of individuals recognized for their expertise in project develop-
                       ment, real estate finance, and low-income housing tax credits. We also
                       obtained information from and discussed our analyses with cognizant
                       officials at HUD, PHAS where the projects are located, and state tax credit
                       allocation agencies. As requested, we did not obtain official comments


                       Page 7                                          GAO/RCED-90-168   Rental Housing
on our draft report from the parties involved in these projects. (Further
details on our scope and methodology are in app. III.)

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 7 days from
the date of this letter. At that time, we will send copies to the Secretary,
HUD; the Director of the PHAS and state tax credit allocation agencies
where the eight projects are located; and other interested parties.
Should you require any additional information on this report, please
contact me at (202) 275-5525. Major contributors to this report are listed
in appendix IV.

Sincerely yours,




John M. Ols, Jr.
Director, Housing and Community
   Development Issues




Page 8                                          GAO/RCED-90-168   Rental Housing
Page 9   GAO/RCED-90-168   Rental Housing
                                                                                               ,l
Contents


Letter                                                                                                1

Appendix I                                                                                       12
Description of the      Moderate Rehabilitation Program
                        Tax Credits for Low-Income Housing
                                                                                                 12
                                                                                                 14
Moderate
Rehabilitation and
Tax Credit Programs
Appendix II                                                                                      16
Estimated Cash
Flow-Sources and
Applications of Funds
Appendix III                                                                                     25
Objectives, Scope,and
Methodology
Appendix IV                                                                                      27
Major Contributors to
This Report
Tables                  Table II. 1: Estimated Cash Flow-Sources and                             17
                            Applications of Funds, Project 1, Windsong
                        Table 11.2:Estimated Cash Flow-Sources and                               18
                            Applications of Funds, Project 2, Sierra Pointe
                        Table 11.3:Estimated Cash Flow-Sources and                               19
                            Applications of Funds, Project 3, Cleveland Gardens
                        Table 11.4:Estimated Cash Flow-Sources and                               20
                            Applications of Funds, Project 4, Sierra Vista
                        Table 11.5:Estimated Cash Flow-Sources and                               21
                            Applications of Funds, Project 5, West Dade
                        Table 11.6:Estimated Cash Flow-Sources and                               22
                            Applications of Funds, Project 6, Baltimore Gardens
                        Table 11.7:Estimated Cash Flow-Sources and                               23
                            Applications of Funds, Project 7, Pebble Creek
                        Table 11.8:Estimated Cash Flow-Sources and                               24
                            Applications of Funds, Project 8, Sun Garden



                        Page 10                                      GAO/XKXD&%le8   Rental Housing
I,
     Contents




     Abbreviations

     BSPRA      Builders’ and Sponsors’ Profit and Risk Allowance
     FMR        Fair Market Rent
     GAO        General Accounting Office
     HUD        Department of Housing and Urban Development
     OIG        Office of Inspector General
     PHA        public housing agency/authority


     Page 11                                        GAO/RCED-90-108   Rental Housing
Appendix I                                                                               I’

Description of the Moderate Rehabilitation and
Tax Credit Progmms

                 The Section 8 Moderate Rehabilitation Program was established by the
Moderate         Housing and Community Development Amendments of 1978 and imple-
Rehabilitation   mented initially in fiscal year 1979. Recent revisions to the program
Program          were made in December 1989 via the Department of Housing and Urban
                 Development Reform Act. The program is designed to provide financial
                 assistance to private parties to upgrade low-income rental properties in
                 their early stages of deterioration, to restore them to standard condition,
                 and to maintain them at that level. The objective of the program is to
                 preserve the supply of affordable housing where needed. The program
                 focuses on rehabilitating existing properties in the earlier stages of dete-
                 rioration because this is less costly than providing needed units through
                 new construction or by substantially rehabilitating units after years of
                 neglect.

                 The Department of Housing and Urban Development (HUD) initially iden-
                 tified three specific departmental goals that the Moderate Rehabilitation
                 Program could help to meet: (1) complementing a local government’s
                 efforts to preserve or revitalize a neighborhood, (2) assisting lower
                 income families in areas where private rehabilitation is decreasing the
                 amount of moderately priced rental housing, and (3) increasing freedom
                 of housing choice by providing assisted housing in areas for low-income
                 and minority families. State or local officials, such as those in public
                 housing agencies (PHAS), are to determine which objective or combina-
                 tion of objectives is most appropriate to address their housing needs,
                 and whether the program should be targeted to specific neighborhoods.

                 Under the Moderate Rehabilitation Program, an owner agrees to rehabil-
                 itate his/her property up to HUD'S Housing Quality Standards, or other
                 higher standards, such as those in local building codes. In return, the
                 owner is guaranteed rent subsidies for 15 years through a Housing
                 Assistance Payments Contract with the local PHA. The contract rent is
                 based on previous rent or on what the owner needs in order to own,
                 manage, and maintain the property, and the debt service associated
                 with rehabilitation of the property. The contract rents can be as high as
                  120 percent of established Existing Fair Market Rents (FMRS) at the time
                 that the owner and HUD enter into the agreement. Thereafter, the owner
                 can request contract rent increases annually to cover increased operat-
                 ing expenses. HUD establishes Existing FMRS for all counties in the nation
                 that reflect the average rent (45th percentile) for a standard, modest
                 unit in the locality. The FMR is to be reviewed by HUD at least annually
                 and revised as required.




                 Page 12                                         GAO/RCED-90-168   Rental Housing
,




    Dmcrlpthn   ot the Moderate   RehaMtation
    and Tax Credit Program




    Generally, any type of rental housing which requires rehabilitation cost-
    ing at least $3,000 per unit (formerly $1,000 per unit) to meet HUD'S
    housing standards is eligible. However, since December 1989, eligibility
    has been limited to projects consisting of no more than 100 units. Reha-
    bilitation work typically performed under the program includes install-
    ing new roofs; electrical rewiring; plumbing repairs and upgrades;
    heating system improvements; and repair of ceilings, interior walls, and
    foundations.

    The Section 8 Existing Housing Programs are composed of the Moderate
    Rehabilitation Program and the Section 8 Certificate and Voucher Pro-
    grams. All are funded by HUD and administered by state or local PHAS
    throughout the country. PHAS certify families’ eligibility for assistance,
    issue housing assistance certificates and vouchers to eligible families,
    assist certificate and voucher holders in finding adequate housing units
    in the private market, and inspect housing units to ensure that they
    meet HUD'S housing quality standards.

    Household eligibility criteria and computation of subsidies are similar
    for all Section 8 subsidies. Eligible families are principally very low-
    income households earning up to 50 percent of the median income for
    the area in which they live, and are selected from waiting lists main-
    tained by the local PHA.

    With the certificate or voucher, the family shops for a unit that meets
    HUD'S housing quality standards. For certificate holders, the monthly
    rent must be equal to or less than the Existing FMR for the area. HUD
    pays the difference between the actual rent and 30 percent of the house-
    hold’s qualifying income.

    Voucher holders may rent a unit either below or above the established
    area IWR. HUD pays the difference between the payment standard based
    on the FMR and 30 percent of the households qualifying income. If the
    actual rent is below the FMR, the family can keep the difference. If the
    actual rent is above the FMR, the family must pay the difference. All
    types of rental housing can be used, including mobile homes, group
    houses, and cooperatives.

    As discussed previously, HUD and the owner agree on a contract rent for
    units under the Moderate Rehabilitation Program. This contract rent can
    be as much as 120 percent of the FMR for the area. HUD pays the differ-
    ence between the contract rent and 30 percent of an eligible household’s
    income.


    Page 13                                         GAO/RCED-30-163   Rental Housing
                       Appendix I
                       Description of the Moderate   Rehabilitation
                       and Tax Credit Progran~




                       The Low-Income Housing Tax Credit Program was authorized in the Tax
Tax Credits for Low-   Reform Act of 1986 as a 3-year program to provide an incentive for
Income Housing         investors to own and rehabilitate low-income housing. In December
                       1989, the program was revised and extended through December 31,
                       1990. Before 1986, low-income housing owners were entitled to other
                       incentives such as favorable depreciation, and special treatment of con-
                       struction period interest and taxes. With passage of the 1986 act, those
                       incentives were replaced with low-income housing tax credits. Since the
                       credit was established, it has emerged as the primary tax incentive for
                       stimulating low-income housing production and rehabilitation.

                       The program is administered by the U.S. Treasury Department. Subject
                       to eligibility criteria, it provides a lo-year tax credit to property owners
                       for each unit set aside for at least 15 years for low-income use.

                       Three different categories and two different levels of low-income hous-
                       ing tax credits are available, depending on the type of property
                       involved. When initially implemented, a g-percent annual credit was in
                       place for 10 years for new construction or substantial rehabilitation
                       where there was no federal subsidy. A 4-percent credit was also in place
                       for new construction or substantial rehabilitation when combined with a
                       federal subsidy, and a separate 4-percent credit was in place for the
                       acquisition of existing property that was used for low-income housing.
                       The percentages were applied to a qualified base of allowable acquisi-
                       tion, construction, or rehabilitation costs.

                       For properties placed in service after 1987, however, these percentages
                       were redefined. Through the use of an appropriate discount rate, the 9-
                       percent rate was replaced by 70 percent of the present value of the
                       property amortized over 10 years. Similarly, the 4-percent credits were
                       replaced by 30 percent of the present value of the property similarly
                       amortized.

                       The criterion determining whether a property qualifies for the 70- per-
                       cent present value or 30-percent present value credit applicable to new
                       construction or substantial rehabilitation is whether other federal subsi-
                       dies are also used to finance the project. For the tax credit program,
                       federal subsidies include any tax-exempt financing, below-market fed-
                       eral financing, or federally supplied financing, such as a state loan made
                       with a federal grant at a rate below the applicable federal rate. As ini-
                       tially allowed under the Tax Credit Program, federal rental payments
                       under the Moderate Rehabilitation Program were not treated as a sub-
                       sidy. Therefore, any financial assistance received through the Moderate


                       Page 14                                          GAO/RCED-90-168   Rental Housing
Appendix I
Description of the Moderate   Rehabilitation
nnd Tax Credit Programs




Rehabilitation Program was excluded from the determination of how
much tax credit was awarded to a project. Accordingly, Moderate Reha-
bilitation Program rental subsidies were combined with both full acqui-
sition and rehabilitation tax credits to finance a single project. This later
was prohibited, however, in the December 1989 amendments to the tax
credit legislation.

The low-income housing tax credit program includes a state allocation
system. A project must qualify for the credit on the basis of require-
ments in the U.S. Tax Code but, in addition, the owner must apply to the
state in which the project is located. The state tax credit allocation
agency has the authority to grant all or part of the tax credits
requested, up to the limit of the state’s total tax credit allocation.

The state allocation is made pursuant to a state limit, or cap, of 93.75
cents (formerly $1.25) per resident. For example, a state with about 4
million residents would have about $3.75 million (0.9375 x 4 million)
worth of credit authority per year. Accordingly, that state could allocate
credit authority for projects where the total credits taken in a year by
all owners that applied are $3.75 million. When multiplied by the lo-
year credit period, there would actually be a total of about $37.5 million
in tax credits that could be allocated in that state for that year.

Individuals, corporations, partnerships, and nonprofit entities are eligi-
ble to receive low-income housing tax credits. However, passive activity
rules limit the amount of taxes that can be offset by the credits for cer-
tain groups of taxpayers. The maximum tax credit that an individual
can use is $8,250. On the other hand, most corporations can use the tax
credit without being subject to the $8,250 limit.

Nonprofit entities that have no tax liabilities can benefit from the cred-
its by selling them to entities, such as corporations and other investors.
In fact, because of the limitations on using the credits directly, and
because the credits provide dollar-for-dollar reductions in tax liability,
interests in credit-eligible projects are commonly sold by all types of
owners to investors through syndicators. In this way, the owner con-
verts future tax credits into cash, usually received within 3-4 years of
project inception.




Page 15                                          GAO/RCED-90-168   Rental Housing
Appendix II

Ii&mated Cash Flow-Sources and
Applications of F’unds

              The following estimates have been refined since our testimony of
              August 2,1989, before the Senate Committee on Banking, Housing, and
              Urban Affairs (GAO/T-RCED-89~6s).   These refinements now reflect devel-
              opment and cost reviews that have been completed for all projects
              (except Pebble Creek) as part of the final mortgage endorsement pro-
              cess. Costs have been certified and allowable adjustments made. Accord-
              ingly, many figures such as cash investment, development costs, and
              Builders’ and Sponsors’ Profit and Risk Allowance (FSPRA) are now
              actual figures instead of estimates from HUD project files. Disallowed or
              undocumented project costs or undisclosed sources of funds are not
              reflected. Because Pebble Creek had not been finally endorsed as of the
              date of this report, cost figures are still based on estimates from HUD
              project files.




              Page 16                                        GAO/RCED-B&l68   Rental Housing
                                     Appendix J.I
                                     Estlmated Cash Flow-Sounxs          and
                                     Applications of Funds




Table 11.1:Estimated Caah Flow-
Source8 and Applications of Funds,   Sources of Funds
Project 1, Windsong                  1 Mortgage Loan                                                      $5,811,300
                                     2 Tax Credit Proceedsa                                                2,1?4,623
                                     3 Owners Cash lnvestmentb                                               320,086
                                     4 Total Sources of Funds                                                                     $8,306,009
                                     Application of Funds
                                     5   Acquisition Costs (from HUD Form 2264)                           $2,464,500
                                     6   Development Costs                                                 3,679,525
                                     7   Development FeeC                                                    735,905               --
                                     8   Estimated Escrows and Prepaid expenses
                                         (1.5% of Mortgage Loan)                                               87,170
                                     9 Gross Total Applications                                            6,967,100
                                     10 Less: BSPRAd                                                         (348,139)
                                     11 Net Total Applications      of Funds                                                       $6,618,916
                                     Proceeds to Developer at Completion of
                                       Development
                                     12 Estimated Proceeds to Developer (4-11+7-3)                                                 $2,102,912
                                     13 Estimated Proceeds to Developer Per Unit
                                       (202 Units)                                                                                      $10,410
                                     aCash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication   proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $5369,440.

                                     bEstimated cash requirements at final endorsement.    For this project, owner also provided $58,113 in
                                     letters of credit or certificates of deposit.
                                     ‘Estimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.

                                     dBSPf?A = Builders and Sponsors Profit and Risk Allowance.




                    Y




                                     Page 17                                                             GAO/RCED-90-168       Rental Housing
                                     Appendix     II
                                     Estimated C&ehFlow-9ources and
                                     Applkatiom        of Funds




Table 11.2:Estimated Cash Flow-
Source8 and Applications of Funds,   Sources of Funds
Project 2, Sierra Pointe             1 Mortgage        Loan                                                      $7,401,300
                                     2 Tax Credit      Proceedsa                                                  2,344,286
                                     3 Owners      Cash lnvestmentb                                                 506,901
                                     4 Total Sources of Funds                                                                          $10,252,487
                                     Application of Funds
                                     5 Acquisition      Costs (from HUD Form 2264)                               $3,700,000
                                     6 Development        Costs                                                   4,125,056
                                     7 Development        Fee=                                                      825.011
                                     8 Estimated Escrows and Prepaid              expenses
                                       (1.5% of Mortgage Loan)                                                      111,020
                                     9 Gross Total Applications                                                  8,761,087
                                     10 Less: BSPRAd                                                               (383,855)
                                     11 Net Total Applications of Funds                                                                  $8,377,232
                                     Proceeds to Developer at Completion of
                                       Development
                                     12 Estimated       Proceeds   to Developer      (4-11+7-3)                                          $2,193,365
                                     13 Estimated       Proceeds   to Developer      Per Unit
                                       (160 Units)                                                                                           $13,709

                                     Vash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication    proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $5,788,360.
                                     bEstimated cash requirements at final endorsement.           For this project, owner also provided $74,013 in
                                     letters of credit or certificates of deposit.

                                     CEstimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.

                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance.




                                     Page 18                                                                   GAO/RCED9@168         Rental Housing
                                     Appendix II
                                     JSdmated Cash F’low-Sourcea         and
                                     Applicatiotllr of Funda




Table 11.3:Estimated Cash Flow-
Source8 and Applications of Funds,   Sources of Funds
Project 3, Cleveland Gardens         I Mortaaae Loan                                                      $1,214.100
                                     2 Tax Credit Proceed9                                                   362,941
                                     3 Owners Cash lnvestmentb                                                73,229
                                     4 Total Sources of Funds                                                                      $1,650,270
                                     Application of Funds
                                     5   Acauisition Costs (from HUD Form 2264)                              $650.000
                                     6   Development Costs                                                    683,102
                                     7   Development FeeC                                                     136,620
                                     8   Estimated Escrows and Prepaid expenses
                                         (15% of Mortnane LoanY                                                 18,212
                                     9 Gross Total Applications                                            1,407,934
                                     10 Less: BSPRAd                                                           (61,773)
                                     11 Net Total Applications      of Funds                                                        $1,426,161
                                     Proceeds to Developer at Completion of
                                       Development
                                     -12 Estimated Proceeds to Developer (4-11+7-3)                                                   $287,500
                                      13 Estimated Proceeds to Developer Per Unit
                                        (36 Units)                                                                                      $7,986
                                     aCash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication   proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $696,160.
                                     bEstimated cash requirements at final endorsement.    For this project, owner also provided $12,141 in
                                     letters of credit or certificates of deposit,

                                     ‘Estimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.

                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance.




                                     Page 19                                                             GAO/WED-ml69         Rental Housing
                                     Appendix II
                                     Estimated Cash Flow--&urces         and
                                     Applications of Fuuds




Table 11.4:Estimated Cash Fiow-
Sources and Applications of Funds,   Sources of Funds
Project 4, Sierra Vista              1   Mortaaae Loan                                                    $6,549,000
                                     2   Tax Credit Proceedsa                                              2,078,602
                                     3   Owners Cash lnvestmentb                                             464,220
                                     4 Total Sources of Funds                                                                     $9,091,822
                                     Application of Funds
                                     5   Acauisition Costs (from HUD Form 2264)                           $2.909.105
                                     6   Development Costs                                                 4,012,240
                                     7   Development FeeC                                                    802,448
                                     8   Estimated Escrows and Prepaid expenses
                                         (1.5% of Mortgage Loan)                                               98,235
                                     9 Gross Total Applications                                            7,822,028
                                     10 Less: BSPRAd                                                         (363,020)
                                     11 Net Total Applications of Funds                                                           $7,459,008
                                     Proceeds to Developer at Completion of
                                       Deveiooment
                                     12 Estimated Proceeds to Developer (4-I 1+7-3)                                                $1,971,042
                                     13 Estimated Proceeds to Developer Per Unit
                                       (209 Units)                                                                                      $9.431
                                     aCash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication   proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $5132,350.
                                     bEstimated cash requirements at final endorsement,    For this project, owner also provided $65,490 in
                                     letters of credit or certificates of deposit.

                                     CEstimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.
                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance




                                     Page 20                                                             GAO/RCED-90-168       Rental Housing
                                     Appendix II
                                     Estimated Cash Flow-Sourcee          and
                                     Applications of Funds




Table 11.5:Estimated Cash Fiow-
Source8 and Applications of Funds,   Sources of Funds
Project 5, West Dade                 1 Mortgage        Loan                                                      $4,181,100
                                     2 Tax Credit      Proceed@                                                     544,034
                                     3 Owners
                                     --              Cash lnvestmentb                                               271,610
                                     4 Total Sources of Funds                                                                            $4,997,544
                                     Application of Funds                                                                                            -
                                     5 Acauisition      Costs (from HUD Form 2264)                               $2.457.000
                                     6 Development        Costs                                                   1,937,353
                                     7 Development
                                     ----                FeeC                                                       387,471
                                     8 Estimated Escrows and Prepaid              expenses
                                          (1.5% of Mortgage Loan)c                                                    62,717
                                     9 Gross Total Applications                                                  4,844,541
                                     IO Less: BSPRA”                                                               (193,043)
                                     11 Net Total Applications of Funds                                                                  $4,851,498
                                     Proceeds to Developer at Completion of
                                       Development
                                     12 Estimated       Proceeds   to Developer      (4-11+7-3)                                             $461,907
                                     ---
                                     13 Estimated       Proceeds   to Developer      Per Unit
                                         (122 Units)                                                                                          $3,786

                                     Vash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted          at 10% per year. Actual tax
                                     credits awarded were $1,345,270.

                                     bEstimated cash requirements at final endorsement.           For this project, owner also provided $41,811 in
                                     letters of credit or certificates of deposit,

                                     ‘Estimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.

                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance.




                                     Page 21                                                                   GAO/RCED-96-168      Rental Housiug
                                     Appendix II
                                     Estimated Cash Flow-Sources         and
                                     Applications of F’unds




Table 11.6:Estimated Cash Flow-
Source8 and Application8 of Funds,   Sources of Funds
Project 0, Baltimore Gardens         1 Mortgage Loan                                                      $5,975,000
                                     2 Tax Credit Proceedsa                                                1,362,404
                                     3 Owners Cash lnvestmentb                                                456,279
                                     4 Total Sources of Funds                                                                      $7,793,603
                                     Application of Funds
                                     5 Acquisition Costs (from HUD Form 2264)                             $3,715,000
                                     6 Development Costs                                                    2,656,477
                                     7 Development FeeC                                                       531,295
                                     8 Estimated Escrows and Prepaid expenses
                                       (1.5% of Mortgage Loan)                                                 89,625
                                     9 Gross Total Applications                                            6,992,397
                                     10 Less: BSPRAd                                                         (242,998)
                                     11 Net Total Applications of Funds                                                           $6,749,399
                                     Proceeds to Developer at Completion of
                                       Development
                                     12 Estimated Proceeds to Developer (4-11+7-3)                                                 $1 ,119,300
                                     13 Estimated Proceeds to Developer Per Unit
                                       (166 Units)                                                                                      $6,742
                                     aCash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 U.S.C. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication   proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $3,363,960.
                                     bEstimated cash requirements at final endorsement.    For this project, owner also provided $59,750 in
                                     letters of credit or certificates of deposit.

                                     CEstimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.

                                     dt3SPRA = Builders and Sponsors Profit and Risk Allowance.




                                     Page 22                                                             GAO/RCED-90-168      Rental Housing
                                     Appendix II
                                     Estimated Cash Flow-Sourcee          and
                                     Applications of Funds




Table 11.7:Ertlmated Cash Flow-
Sources and Applications of Funds,   Sources of Funds
Project 7, Pebble Creek              1 Mortgage        Loan                                                    $8,129,700
                                     2 Tax Credit      Proceed@                                                 2.358.437
                                     3 Owners     Cash lnvestmentb                                                505,471
                                     4 Total Sources of Funds                                                                        $10,993.608
                                     Application of Funds
                                     5 Acquisition      Costs (from HUD Form 2264)                             d%ooo,ooo
                                     6 Development        Costs                                                 4,533,008
                                     7 DeveloDment        FeeC                                                    453.301
                                     8 Estimated Escrows and Prepaid              expenses
                                       (1.5% of Mortgage Loan)                                                    121,946
                                     9   Gross Total Applications                                              9,108,265
                                     10 Less: BSPRAd                                                             (397,917)
                                     11 Net Total Applications of Funds                                                               $8,710,338
                                     Proceeds to Developer at Completion of
                                         DeVelODrWIt
                                     12 Estimated       Proceeds   to Developer     (4-l 1+7-3)                                        $2,231,100
                                     13 Estimated       Proceeds   to Developer      Per Unit
                                       (352 Units)                                                                                          $6.338

                                     aCash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 U.S.C. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $.5,823,300.

                                     bEstimated cash requirements at final endorsement.         For this project, owner also provided $487,782 in
                                     letters of credit or certificates of deposit.
                                     CEstimated amount on the basis of standard industry practice. Developers fee is estimated at 10% of
                                     development cost based on state tax credit agency policy.
                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance




                                     Page 23                                                                 GAO/RCED-90-168      Rental Housing
                                                                                                                                             .
                                     Appendix      II
                                     Estimated Cash Flow-Sources           and
                                     Applicatlom        of Funds




Table 11.8:Eatlmated Ca8h Flow-
Sources and Applications of Funds,   Sources of Funds
Project 8, Sun Garden                1 Mortgage         Loan                                                     $5,730,200
                                     2 Tax Credit Proceed@                                                        1,996,747
                                     3 Owners       Cash lnvestmentb                                                278,612
                                     4 Total Sources of Funds                                                                            $8,005,559
                                     Application of Funds:
                                     5 Acquisition       Costs (from HUD Form 2264)                              $2,559,700
                                     6 Development         Costs                                                  3,641,917
                                     ?-Development         FeeC                                                     728,383
                                     8 Estimated   Escrows and Prepaid             expenses
                                        (1.5% of Mortgage Loan)                                                       85,953
                                     9 Gross Total Applications                                                  7,015,953
                                     10 Less: BSPRAd                                                               (358,105)
                                     11 Net Total Applications of Funds                                                                  $6,657,848
                                     Proceeds to Developer at Completion of
                                       Development
                                     12 Estimated        Proceeds   to Developer     (4-11+7-3)                                           $1,797,482
                                     13 Estimated        Proceeds   to Developer      Per Unit
                                       (207 Units)                                                                                               $8.683
                                     ‘Cash value of tax credit proceeds result from developer sale of ownership interest in project. Tax credit
                                     data are not subject to 26 USC. 6103. Assumptions regarding value of tax credits as follows:

                                     (1) Syndication    proceeds equal 45% of awarded credits.

                                     (2) Credit proceeds disbursed to project owner over 3 years, discounted at 10% per year. Actual tax
                                     credits awarded were $4,930,240.

                                     bEstimated cash requirements at final endorsement.           For this project, owner also provided $51,302 in
                                     letters of credit or certificates of deposit.

                                     ‘Estimated amount on the basis of standard industry practice. Developers fee is estimated at 20% of
                                     development cost based on state tax credit agency policy.
                                     dBSPRA = Builders and Sponsors Profit and Risk Allowance.




                   Y




                                     Page 24                                                                   GAO/RCEb90-168       Rental Housing
Apperull; III

Objectives, Scope,and Methodology


                The Chairman, Subcommittee on HUD/Mod Rehab Investigation, Senate
                Committee on Banking, Housing and Urban Affairs, asked us to review
                certain housing projects which had received both Moderate Rehabilita-
                tion Program subsidies and low-income housing tax credits. We were
                asked to (1) develop estimates of the cash flows to developers/owners
                who combined Moderate Rehabilitation Program rental subsidies with
                the proceeds from low-income housing tax credits and (2) determine
                how many additional rental units could have been subsidized if vouch7
                ers and certificates had been used instead. We gathered pertinent data
                on eight Moderate Rehabilitation Program projects that had received
                both types of financial assistance. We selected projects that had been
                placed in service since passage of the initial tax credit legislation in
                1986. As requested, we selected only projects that also had been
                financed with HUD-insured mortgage loans.

                Three of the projects-Sierra    Pointe in Clark County, Nevada; Baltimore
                Gardens in Las Vegas, Nevada; and Pebble Creek Apartments in Arling-
                ton, Texas-were specifically identified by the Chairman for our
                review. We selected the other five projects from a group that had been
                identified by HUD’S Office of Inspector General. We selected these five
                projects because all necessary information was readily available. The
                five projects were: Windsong and Sun Garden in Tulsa, Oklahoma;
                Cleveland Gardens in Las Vegas, Nevada; Sierra Vista in Denver, Colo-
                rado; and West Dade in Dade County, Florida.

                In evaluating these projects, we consulted with a variety of individuals
                recognized for their expertise in project development, real estate
                finance, and low-income housing tax credits. We discussed our analyses
                with cognizant officials at HUD, PHAS where the projects are located, and
                state tax credit allocation agencies in each project state. As requested,
                we did not obtain official comments on a draft of this report. We con-
                ducted our work during the period September 1989-February 1990 in
                accordance with generally accepted government auditing standards.

                In estimating the cash flows to developers, we developed pro-forma
                schedules to identify the sources and applications of funds for each of
                the projects, The sources of funds were determined on the basis of a
                review of project records maintained by HUD and the mortgage insurers,
                and discussions with officials at financial institutions who have syndi-
                cated tax credits for similar projects. The amount of tax credit awarded
                to each project was obtained directly from the cognizant state tax credit
                allocation agencies. The applications of funds were estimated on the



                Page 26                                        GAO/RCED-90-108   Rental Housing
Appendix III                                                            :
                                                                        1
Objectives, Scope, and Methodology




basis of project records and discussions with experts regarding standard
industry practice in developing these kinds of projects.

The experts with whom we consulted in developing our estimates agree
that our estimates provide a fair and reasonable basis for estimating
cash proceeds received by the developers.

In estimating the number of additional units that could have been subsi-
dized if vouchers or certificates had been used instead of moderate reha-
bilitation subsidies and tax credits, we calculated the present value of
the rent subsidies and tax credit proceeds to each project. The present
value of the combined financial assistance was conservatively estimated
by assuming (1) an annual increase in the moderate rehabilitation sub-
sidy of 1 percent per year for each of the 16 years the subsidy is pro-
vided and (2) a lo-percent discount rate for the duration of the
assistance period. This amount was compared with the present value of
the average annual certificate and voucher subsidy per household in the
area where the project was developed and at the time the project was
placed into service.




Page 26                                       GAO/RCED-90-168   Rental Housing
Apper@if; IV
    /
Major Contributors to This Report


                        Dennis W. Fricke, Assistant Director
Resources,              Richard M. Greene, Evaluator-in-Charge
Community, and          Patrick Doerning, Operations Research Analyst
Economic
Development Division,
Washington, D.C.

                        Margaret Armen, Senior Attorney
Office of the General
Counsel, Washington,
D.C.




(385193)                Page 27                                         GAO/RCED-!40-168   Rental Housing
j    ._._   .-.-   . .   .” ..- _--.   ----“-        -                                                    ------


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