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.