Target Efficiency of State Home Ownership Programs

Abstract

The United States government has promoted home ownership for over 50 years. The U. S. tax code provides a tax exemption on income earned on state and local mortgage revenue bonds issued to finance home ownership subsidy programs. The president's tax proposals to Congress would eliminate federally tax-exempt mortgage revenue bonds (MRBs). A total of 45 state housing finance agencies (HFAs) issue MRBs and impose income limits on program participants even without a federal requirement to do so. In 1983, a U.S. General Accounting Office report concluded that most MRB-financed single-family housing programs aided higher-income households in the majority. This author's study found, however, that the majority of assistance went to low- and moderate-income households. One-third of the HFAs did provide a majority of assistance to higher-income households. The study conducted for this article determined that the income limit imposed on program participants was an effective control on the degree to which low- and moderate-income households were program beneficiaries. The existence of legislative and executive oversight powers did not, however, have a significant impact on single-family program performance. National income limits or income-limit guidelines could result in greater target efficiency in home ownership programs.