Analysis of Multifamily Rehabilitation Subsidy Costs Using Section 167 (k) of the Internal Revenue Code

摘要

This study estimates the potential subsidy costs to the Government of a rental housing rehabilitation program using Section 167 (k) of the Internal Revenue Code (IRC). Before it expired at the end of 1983, Section 167 (k) encouraged private owners and investors to rehabilitate housing for occupancy by low - income families by providing a 5 - year amortization of up to $20,000 per unit of rehabilitation expenditures instead of the 15 - year capital recovery ordinarily permitted under the IRC's Accelerated Cost Recovery System (ACRS). After briefly describing the 167 (k) program, the study uses 1980 Annual Housing Survey data to estimate the universe of multifamily units that are potential candidates for Section 167 (k) rehabilitation. Per unit Government subsidy costs are estimated for two rehabilitation approaches: Section 167 (k) and regular ACRS. The potential one - time subsidy costs of a Section 167 (k) rehabilitation program were defined and calculated in two ways -- as incremental costs or costs which exceed those that would result from implementing the same rehabilitation work with normal ACRS and total costs or those calculated with regard to costs associated with ACRS. The study found that the one - time incremental subsidy costs of a large - scale Section 167 (k) rehabilitation program could range between a low of $210 million and a high of $329 million. Potential one - time total subsidy costs could be between a low of $891.5 million and a high of $1,400 million. Both would be incurred over a 25 - year period. Tables and references are supplied.