Many federally subsidized housing programs provide assistance to tenants in multifamily complexes owned by private owners. These programs are usually subsidized through insured, assigned, or noninsured below-market-interest-rate mortgages or through Section 8 Project-Based Rental Assistance (PBRA). Other common programs include the Section 236 and Section 221(d)(3) mortgage programs, Rent Supplement program, Section 202 senior housing program, Section 8 Loan Management Set Aside program, and the Section 8 New Construction, Moderate Rehabilitation, and Substantial Rehabilitation programs. The subsidies for these programs are tied to the unit, unlike the Section 8 tenant-based voucher program in which the subsidy travels with the tenant. If the tenant is evicted or moves from the unit, the tenant no longer receives a subsidy. In addition to applicable regulations,1 HUD Handbook 4350.3 for multifamily housing controls the operations of these varied programs.2
Over the past few years, the nation has lost more than 100,000 units from the privately owned but federally assisted HUD multifamily housing stock through prepayments of HUD-backed mortgages and Section 8 opt-outs and terminations. These units were originally subsidized with HUD-insured mortgages such as Section 236 or with project-based Section 8 assistance to make the units affordable to low-income persons. The expiration of long-term use restrictions that require rents to be affordable for low-income families has escalated the crisis in preserving affordable housing.
Upon expiration of the restrictions, the owners decide whether to remain in the program or to refuse contract renewal and “opt-out.” In 1997, Congress adopted the Mark to Market (M2M) program to incentive Section 8 multifamily landlords to renew their contracts by offering a mortgage restructuring option.
Some legal services programs have successfully challenged prepayments and Section 8 opt-outs to try to preserve low-income housing in their community.3 Some of the most common legal challenges include improper notice of prepayment, existence of state law mandating preservation of low-income housing, and fair housing challenges.
- 1See generally 24 C.F.R. §§ 880–891 (Section 8 PBRA programs); 24 C.F.R. §§ 221, 236 (referenced mortgage programs).
- 2U.S. Dep’t of Hous. & Urb. Dev., Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs (2013).
- 3215 Alliance v. Cuomo, 61 F. Supp. 2d 879 (D. Minn. 1999).