Evaluation of the Mark-to-Market Program
(August 2004, 280 p.)
This Mark-to-Market (M2M) Program was authorized by Congress
to address concern about the rising costs of rent subsidies
in HUD’s Section 8 multifamily housing program. The
goal of the study is to evaluate the overall implementation
of the program, including both its cost-effectiveness and
its degree of success in addressing the needs of key stakeholders:
the owners and residents of Section 8 properties. The Section
8 program pays rental subsidies to owners of multifamily properties
that provide rental units to low-income households. The level
of rent subsidy for each property was based on initial rents
that were established when the properties entered the program
in the late 1970s through the mid 1980s. Rents were often
set above local market levels to compensate for the costs
of Section 8 administration, the higher construction costs
occasioned by using Davis-Bacon wage rates, and special features
for the elderly. It should also be kept in mind that new construction
is expensive by definition, and in this period, costs were
driven up by high inflation. would eventually be unsupportable
within HUD’s budget limitations.
To contain the rising costs of rental subsidies while preserving
the viability of the properties, the M2M program authorizes
HUD to reduce rents to market levels on Section 8 properties
financed with HUD (FHA) insured mortgages. The primary mechanisms
for maintaining the financial viability of the properties
is to write-down and/or reduce the FHA mortgage to a level
that can be supported by the lower rents. These rental adjustments
and mortgage restructurings would be negotiated as existing
Section 8 contracts expired in the late 1990s and early 2000s.
A primary programmatic goal was the preservation of affordable
housing. In addition to an overview of the M2M program and
the structure and objectives of the evaluation, the M2M report
also looks at more quantitative elements, such as:
- The level of M2M activity and the characteristics of the
properties that participated or chose not to participate;
- Estimates of the quantifiable costs and benefits of the
program;
- Improvements over the life of the program in the efficiency
with which it moves projects through the restructuring process;
and
- Preliminary data on the post-M2M financial performance
and physical condition of projects that have been restructured.
The M2M report presents our assessment of the Office of Multifamily
Housing Assistance Restructuring (OMHAR) as an organizational
strategy, as well as the effects of the M2M process on owners
and tenants. Additional discussion focuses on lessons for
future M2M-type efforts to manage HUD’s portfolio of
assisted multifamily properties.
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