Skip Navigation

This analysis was conducted by the Congressional Budget Office for hearings held by the Subcommittee on Housing and Community Development of the House Committee on Banking, Finance and Urban Affairs. It was prepared by Wilhelmina A. Leigh and Carla Pedone of the Human Resources and Community Development Division, under the supervision of Nancy Gordon and Bruce Vavrichek. Questions may be addressed to Wilhelmina A. Leigh.

Between 1961 and 1973, the federal government agreed to subsidize, and in most cases to insure, the mortgages on about 5,600 rental housing projects under the Below Market Interest Rate (BMIR) program of Section 221(d)(3) and the Section 236 program.¹ As a result, about 700,000 low- and moderate-income families are now housed at reduced rents. Although the mortgages are generally subsidized for 40 years, in certain instances project owners were given permission to prepay their mortgages any time after the first 20 years and thereby end the restriction that they lease their units to lower-income tenants at controlled rents. As the twentieth anniversary dates on the first of these projects have approached, concern is being expressed about whether the government should respond to the loss of a potentially significant number of these units from the assisted housing stock and, if so, what form the response should take.

This paper deals with three topics:

• The nature of the housing programs involved;
  
  
• The extent to which mortgages can be prepaid and the maximum possible resulting loss in subsidized housing units; and
  
  
• Issues and options facing the Congress in determining whether and, if so, how to respond.

This document is available in its entirety in PDF.

1. These programs--like most housing programs--are commonly referred to by the section number of the federal housing statute that created them, in most cases the National Housing Act of 1934 as amended over the years.