Microsimulation Modeling as a Policy Tool: Application to HUD-Insured Multifamily Rental Housing

This article addresses concerns about the future condition, subsidy costs, and impacts on tenants of multifamily rental properties with mortgages insured by the U.S. Department of Housing and Urban Development (HUD). To address the complex HUD program rules and their dynamic interaction with owner choices, a perfect-foresight microsimulation accounting model was developed and applied to a representative sample of properties. The model takes into account the HUD program rules and owner behavior and the manifold combinations possible over the years as HUD funds are or are not available and as owners make decisions about continuing to operate a property, making repairs, and disposing of the property. One interesting interim result is that total federal costs over a 20-year window appear surprisingly constant under a variety of federal policies about subsidies and foreclosure rules, owing in part to tradeoffs between providing subsidy funds and delaying the costly process of foreclosure and reinstatement of a property.